Executive Summary / Key Takeaways

• Diversified Growth Engine: Visa is successfully transforming beyond traditional card payments, with its "new flows" (commercial and money movement solutions) and "value-added services" now exceeding 30% of net revenue, driving consistent double-digit top-line growth.
• Technological Leadership: The company's significant investments in AI, tokenization, and stablecoin capabilities are enhancing security, driving efficiency, and unlocking new revenue streams across its expanding "Visa-as-a-Service" stack.
• Resilient Financial Performance: Visa delivered strong Q3 2025 results with net revenue up 14% and non-GAAP EPS up 23% year-over-year, supported by robust payments volume and effective cost management, demonstrating its business model's durability amidst macroeconomic uncertainty.
• Strategic Market Wins: Despite intense competition and regulatory scrutiny, Visa continues to secure major client renewals and expand partnerships globally, leveraging its comprehensive product suite and unparalleled network reach.
• Shareholder Returns & Outlook: With substantial free cash flow generation, Visa is committed to significant capital returns through increased dividends and share buybacks, while its FY 2025 outlook signals continued strong revenue and EPS growth.

The Evolution of Global Commerce: Visa's Foundational Role

Visa Inc. has evolved from its founding in 1958 into a global payments technology powerhouse, operating one of the world's largest electronic payments networks, VisaNet. This proprietary infrastructure provides essential authorization, clearing, and settlement services across more than 200 countries and territories. Unlike a financial institution, Visa does not issue cards or extend credit; instead, it serves as the critical intermediary connecting consumers, merchants, and financial institutions worldwide.

A pivotal strategic shift, articulated in February 2020, redefined Visa's growth trajectory. The company embarked on a mission to diversify its revenue streams by focusing on three core pillars: consumer payments, new flows (non-consumer payments), and value-added services. This strategy aimed to reduce reliance on traditional card fees and tap into broader money movement opportunities. By the end of fiscal year 2024, Visa successfully surpassed its ambitious goal, with new flows and value-added services contributing over 30% of its net revenue, cementing its position as a high-margin fintech platform. This strategic pivot has been instrumental in driving total quarterly volume on its network from $3 trillion in Q1 2020 to over $4 trillion by Q1 2025, reflecting a profound shift towards digital payments in regions previously dominated by cash.

Technological Edge: The Core of Visa's Competitive Moat

Visa's enduring market leadership is deeply rooted in its technological differentiation and relentless innovation. At its heart is VisaNet, a robust network renowned for its 99.999% uptime and capacity to process over 65,000 transactions per second. This foundational technology offers tangible benefits, including approximately 10-15% faster average transaction processing speeds compared to competitors like Mastercard in shared markets, ensuring seamless and reliable money movement globally.

A cornerstone of Visa's digital strategy is tokenization. Since the first Visa token was issued around 2015, the company has rapidly scaled this technology, reaching nearly 15 billion tokens by Q3 2025, with over 50% of global e-commerce transactions now tokenized. This widespread adoption has yielded significant quantifiable benefits: a 6 percentage point higher approval rate and a 30% reduction in fraud rates on tokenized transactions. Tokens also serve as a critical platform for innovation, enabling features like FIDO pass keys via Click to Pay for simplified e-commerce checkout. Visa monetizes this technology through services like token credential enrichment, which automatically updates card details for merchants, and issuer-focused services that provide a heatmap of consumer tokens across the ecosystem.

Visa is aggressively leveraging Artificial Intelligence (AI) across its operations and product offerings. The December 2024 acquisition of Featurespace for $946 million significantly bolstered its real-time AI payments protection capabilities, integrating the advanced ARIC Risk Hub into its suite of fraud prevention tools. Visa has embedded AI into over 100 products, investing $3.5 billion in modernizing its data platform, which annually helps block over $40 billion in attempted fraud. New initiatives like Visa Intelligent Commerce are exploring AI agents for shopping, with over 30 partners testing in a live sandbox, aiming for general availability later this year. Furthermore, Visa Protect for A2A payments, an AI-based fraud detection solution, is being piloted on 10 new RTP networks in 2025, including efforts to reduce fraud on Pix transactions in Brazil.

In the evolving landscape of digital currencies, Visa is proactively engaging with stablecoins. The company supports the GENIUS Act, believing stablecoins can address critical payments problems, particularly in emerging markets with volatile local fiat currencies and for cross-border money movement (B2B and remittances). Visa has deployed stablecoin-linked cards globally, enabling crypto users to spend over $25 billion in various cryptocurrencies since 2020. The Visa Tokenized Asset Platform is designed to help financial institutions issue their own stablecoins, with BBVA piloting an Ethereum-based stablecoin. Visa also offers multichain and multi-coin stablecoin settlement on its network, recently adding EURC and partnering with Paxos for USDG and PYUSD, with support for Stellar and Avalanche blockchains. This allows Visa to accept 4 stablecoins on 4 blockchains, representing 2 currencies convertible to over 25 traditional fiat currencies, demonstrating its commitment to interoperability and future-proofing its network.

Competitive Landscape: A Network of Networks in a Dynamic Market

Visa operates within a highly competitive global payments ecosystem, facing direct competition from other major payment networks and digital payment providers, as well as indirect threats from emerging fintechs and blockchain-based solutions.

Direct Competitors:

• Mastercard (MA): Visa's closest peer, Mastercard holds an approximate 25-30% global market share compared to Visa's 40-45%. While Mastercard has shown strong revenue growth (10-12%) and net profit margins (45-50%), Visa consistently outperforms in scale and profitability. Visa's operating margins of 65-70% surpass Mastercard's 55-60%, and its ROE of 40-45% is significantly higher than Mastercard's 25-30%. VisaNet's efficiency contributes to 10-15% lower operating costs per transaction compared to Mastercard in some areas. However, Mastercard has been more aggressive in R&D (10-15% of revenue vs. Visa's 8-10%), potentially enabling faster innovation in certain areas.
• American Express (AXP): Primarily focused on premium credit cards and travel, American Express holds a 10-15% U.S. market share. Its closed-loop system contrasts with Visa's network-agnostic approach. AXP's revenue growth (8-10%) and operating margins (20-25%) are considerably lower than Visa's, reflecting its higher cost structure due to extensive rewards programs. While AXP boasts strong customer retention, Visa's superior scalability and financial health position it better for broad market expansion.
• Discover Financial Services (DFS): A U.S.-centric player with 5-10% market share, Discover's revenue growth (6-8%) and net margins (20-25%) lag Visa's. Its limited international presence and higher debt levels make it less agile than Visa.
• PayPal Holdings (PYPL): A leader in online transactions (15-20% share), PayPal competes in digital payments. While PayPal's platform can be 10-15% faster for peer-to-peer transactions, Visa offers more secure, enterprise-level processing with 25% lower fraud rates.

Indirect Competitors and Emerging Threats:
The payments landscape is also being shaped by fintechs like Block (SQ) and blockchain solutions (e.g., Ripple), which can offer 20-30% cheaper transaction options and 50% faster settlement times. These emerging alternatives, particularly in the account-to-account (A2A) space, pose a potential challenge to traditional card networks. Visa's strategic response is to embrace these new technologies and payment rails, integrating them into its "network of networks" via initiatives like Visa A2A and stablecoin settlement capabilities. This proactive approach aims to transform potential threats into opportunities for expansion and monetization.

Visa's competitive advantages are built on its formidable network effects, proprietary technology, and global scale. These attributes translate into significant pricing power and recurring revenue streams. The company's ability to consistently win major client renewals and expand partnerships, as evidenced by recent agreements with Grupo Promerica, SMCC, Al Rajhi, Standard Chartered, RBC (RY), US Bank (USB), and Intesa Sanpaolo, underscores its strong competitive positioning. These wins often involve expanding beyond traditional consumer payments into new flows and value-added services, demonstrating Visa's multifaceted value proposition.

Strategic Execution and Operational Excellence

Visa's strategic pillars are yielding tangible results across its business segments:

Consumer Payments

This segment continues to expand its foundational base. Total credentials grew 7% year-over-year in Q3 2025, marking the ninth consecutive quarter of at least 7% growth. The "Tap to Everything" strategy is driving cash digitization and habituation, with global Tap to Pay penetration reaching 78% of face-to-face transactions. In the U.S., 75 cities now boast 60% or higher Tap to Pay penetration, up from 30 cities last year, with New York City and San Francisco exceeding 85% and 80% respectively. Tap to Phone added a record 3 million transacting devices in Q3 2025, while Tap to Add Card is expanding rapidly with over 275 issuers globally, significantly reducing provisioning fraud compared to manual entry. The Flex Credential, offering multiple payment options from one Visa credential, is gaining traction with a pipeline of over 200 client opportunities, including Klarna's launch in the U.S. and Europe.

Commercial and Money Movement Solutions (CMS)

This "new flows" segment is a key growth driver. In Q3 2025, CMS revenue rose 13% year-over-year in constant dollars, with commercial payments volume up 7%. Visa Direct, positioned as the world's largest money movement platform by transactions, volumes, and endpoints, saw transactions grow 25% year-over-year to 3.3 billion. Strategic partnerships are expanding its reach, such as ADIB in the UAE using Visa Direct for remittances and Paysend extending its use cases to gig economy payouts and accounts payable flows. Visa is also making inroads in vertical-specific solutions for businesses, exemplified by Sunny, a healthcare fintech issuing Visa prepaid disbursement cards, and Octopus Energy adopting Visa's Fleet 2.0 solution in Europe.

Value-Added Services (VAS)

VAS continues to be a powerful engine of revenue growth, accelerating to 26% year-over-year in constant dollars in Q3 2025. This growth is broad-based across its four portfolios:

• Issuing Solutions: Pismo, Visa's core banking and issuer processing platform, is expanding into Europe (e.g., ABN Amro's BUUT, Lunar) and Australia (EML Payments), benefiting from Visa's client relationships.
• Acceptance Solutions: Visa is deepening relationships with merchants and acquirers. ShopeePay expanded its agreement geographically, and Careem Pay is utilizing CyberSource and account verification. New product offerings like the reimagined Authorize.net (launching next quarter in the U.S. with AI capabilities) and Unified Checkout (piloting in Q4) aim to streamline payment acceptance for businesses of all sizes.
• Risk and Identity Solutions: The acquisition of Featurespace and its ARIC Risk Hub is enhancing fraud protection, with TSYS transitioning billions of transactions to this next-gen SaaS platform.
• Advisory and Other Services: Visa Consulting and Analytics continues to see strong demand, helping clients with strategy, data analysis, and digital enablement, as seen with AEON Financial Service and Caixa in Brazil.

Financial Performance: A Story of Resilient Growth

Visa's financial performance reflects its robust business model and effective execution. For the three months ended June 30, 2025 (Q3 FY25), net revenue reached a record $10.17 billion, a 14% increase year-over-year. This was better than expected, driven by strong underlying business drivers and lower-than-anticipated client incentives. Non-GAAP diluted earnings per share (EPS) surged 23% year-over-year to $2.98. For the nine months ended June 30, 2025, net revenue grew 11% to $29.276 billion, and non-GAAP EPS increased 16% to $8.49.

The company's revenue components demonstrate balanced growth:

• Service revenue grew 9% in Q3, driven by a 5% increase in nominal payments volume and strategic pricing.
• Data processing revenue rose 15% in Q3, fueled by a 10% growth in processed transactions and pricing adjustments.
• International transaction revenue increased 14% in Q3, reflecting a 13% rise in nominal cross-border volumes (excluding intra-Europe) and favorable currency volatility.
• Other revenue saw a significant 32% jump in Q3, primarily from growth in advisory and other value-added services.
• Client incentives, while growing 13% in Q3, were lower than expected due to deal timing shifts and one-time reductions from expanded client relationships. Management emphasizes that incentives are a tool to achieve mutual goals and drive net revenue growth.

Profitability remains a hallmark of Visa's business. The company's gross profit margin stands at a healthy 59.14% (TTM), operating profit margin at 62.21% (TTM), and net profit margin at 52.16% (TTM), all indicative of its efficient, asset-light model. Operating expenses increased 13% (non-GAAP) in Q3, primarily due to higher personnel costs (including mark-to-market adjustments for deferred compensation, which are EPS neutral) and ongoing investments in technology and growth initiatives.

Visa maintains a strong liquidity position. Cash provided by operating activities increased to $16.821 billion for the nine months ended June 30, 2025. The company actively returns capital to shareholders, repurchasing 40 million shares for $13.2 billion during the nine-month period and declaring $3.5 billion in dividends. In April 2025, the Board authorized an additional $30 billion share repurchase program, underscoring confidence in future cash flow generation. The issuance of €3.5 billion ($3.9 billion) in senior notes in May 2025 further strengthens its financial flexibility for general corporate purposes, including refinancing existing debt.

Outlook and Forward-Looking Strategy

Visa's management expresses confidence in its ability to sustain strong growth, even while acknowledging macroeconomic uncertainties. For the fiscal fourth quarter of 2025, adjusted net revenue growth is expected to be in the high single to low double digits, generally aligning with the first half of FY25 nominal net revenue growth of approximately 10%. Adjusted operating expenses are projected to grow in the high single to low double digits, reflecting continued strategic investments. Adjusted EPS growth for Q4 is anticipated in the high single digits.

For the full fiscal year 2025, while the guidance ranges remain unchanged, Visa now expects its net revenue and EPS growth to be stronger than previously anticipated, driven by its year-to-date performance. The company's outlook is based on the assumption that the macroeconomic environment remains generally consistent with current trends. Cross-border volumes are expected to continue their Q4 2024 trend, with e-commerce growing slightly faster than travel. Pricing benefits in FY25 are expected to be similar to FY24 but with a back-half weighting, aligning with a backloaded product pipeline. Client incentives are projected to grow significantly higher in FY25 due to a substantial increase in renewal activity, impacting over 20% of payment volume.

Looking ahead to fiscal year 2026, Visa is contemplating various economic scenarios but remains confident in its diverse business model, consumer resilience, and clear strategy to build the future of payments and drive long-term growth. The company's strategic focus on expanding its "Visa-as-a-Service" stack, enabling anyone in the money movement business to build on its platform, is central to its long-term vision.

Risks and Challenges

Despite its strong position, Visa faces several pertinent risks and challenges:

• Litigation and Regulatory Scrutiny: The company is involved in significant legal proceedings, including the U.S. Department of Justice lawsuit (which Visa views as meritless), the ongoing interchange multidistrict litigation (with $1.5 billion in additional accruals in 9M FY25), and various European merchant litigations. These legal battles introduce uncertainty regarding potential losses and could impact financial results. The company's U.S. litigation escrow account held $2.7 billion as of June 30, 2025, to address certain claims.
• Macroeconomic Headwinds: While consumer spending has shown resilience, broader economic uncertainty, currency fluctuations, and potential impacts from tariffs could affect payments volume and cross-border activity.
• Competitive Pressures: The payments industry is highly dynamic, with competition from traditional networks, fintech innovators, and emerging technologies like stablecoins. While Visa is actively integrating these new technologies, the pace of adoption and competitive responses could influence market share and profitability.
• Client Incentives Volatility: The timing and magnitude of client incentives can fluctuate based on deal timing and client performance, potentially impacting net revenue growth.

Conclusion

Visa stands as a compelling investment opportunity, rooted in its unparalleled global network, relentless innovation, and strategic diversification. The company's journey from a traditional card network to a "hyperscaler" payments technology platform, driven by its "Visa-as-a-Service" stack, positions it to capture vast opportunities in consumer payments, new flows, and value-added services. Its technological leadership in tokenization, AI-driven fraud prevention, and proactive engagement with stablecoins not only fortifies its competitive moat but also unlocks new avenues for growth and monetization.

Despite ongoing litigation and macroeconomic uncertainties, Visa's financial performance remains robust, characterized by consistent revenue growth, high profitability, and strong cash flow generation, which fuels substantial shareholder returns. The company's strategic wins and ability to expand partnerships globally underscore its enduring competitive strength. For discerning investors, Visa offers a unique blend of stability, growth, and technological leadership, making it a cornerstone for long-term portfolio appreciation in the evolving digital payments landscape.