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Written by Leo Sun for The Motley Fool->
Visa’s Q2 earnings crushed analysts’ estimates.
It raised its full-year guidance and launched a new $20 billion buyback.
Visa (NYSE: V), the world's largest card payment network operator, posted its latest earnings report on April 28. For the second quarter of fiscal 2026 (which ended on March 31), Visa's revenue rose 17% year over year to $11.23 billion, exceeding analysts' estimates by $480 million and marking its strongest revenue growth since 2022. Its adjusted EPS rose 20% to $3.31 and also cleared the consensus forecast by $0.22. Do those impressive numbers indicate it's time to buy Visa's stock?
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Visa doesn't issue any of its own cards. It only partners with banks and financial institutions that issue the cards and handle the accounts. It generates most of its revenue by charging merchants "swipe fees" (usually 1%-3%) to access its payment network. Its biggest competitor, Mastercard (NYSE: MA), uses the same business model.
That streamlined business model enables Visa and Mastercard to expand faster than American Express (NYSE: AXP), which issues its own cards from its own bank. To boost its revenue, it's rolling out more value-added cybersecurity, fraud prevention, data analytics, and tokenization services. It's also been expanding its network of AI agents, which help consumers make purchases without going through traditional checkout platforms, and using stablecoins to accelerate its cross-border payments. Those upgrades will increase the stickiness of its ecosystem and help it stay relevant even as AI tools and cryptocurrencies reshape the fintech market.
Visa's business model is resilient, but it isn't immune to inflation, which curbs consumer spending. Government regulators and merchant groups have also repeatedly pressed Visa, Mastercard, and American Express to reduce their swipe fees.
However, those headwinds aren't throttling Visa's near-term growth. Instead, it raised its full-year revenue and EPS guidance and launched a new $20 billion share repurchase program.
From fiscal 2025 to fiscal 2028, analysts expect Visa's revenue and EPS to grow at CAGRs of 11% and 18%, respectively. Its stock still looks reasonably valued at 25 times this year's earnings, and it pays a forward dividend yield of 0.8%. Its low payout ratio of 22% should give it plenty of room for future dividend hikes.
Visa's stock has already quadrupled over the past decade, but it should remain a reliable, evergreen investment for the foreseeable future. It will still face pressure to lower its fees, but its scale gives it tremendous leverage against its merchants -- most of whom are willing to pay those expenses to access Visa's massive network of 4.9 billion cards.
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American Express is an advertising partner of Motley Fool Money. Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Express, Mastercard, and Visa. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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