Here's our initial take on Mastercard's (NYSE: MA) first-quarter financial results.
Key Metrics
| Metric |
Q1 FY24 |
Q1 FY25 |
Change |
vs. Expectations |
| Revenue |
$6.3 billion |
$7.3 billion |
+14% |
Beat |
| Earnings per share |
$3.22 |
$3.59 |
+11.5% |
Beat |
| Gross dollar volume (change % in local currency) |
$2.3 trillion |
$2.4 trillion |
+9% |
n/a |
| Total Mastercard-branded cards |
2.97 billion |
3.2 billion |
+8% |
n/a |
Appearance of Slow Earnings Growth Is Deceptive
Another quarter brought another period of low-teens revenue growth for Mastercard. It's one of the largest issuers of credit, debit, and other payment cards and the operator of the networks those cards run on. Revenue was up 14% to $7.3 billion, while gross dollar volume was up 9% (on a currency-neutral basis) to $2.42 trillion.
Mastercard continues to see solid growth in total cards being used too. Active cards surpassed 3.5 billion in the quarter, up 6% over the past year, while switched transactions increased 9% to 40.1 billion. In other words, the company continues to see strong and growing demand for its cards and access to its payments network, and cardholders are using their cards more often and for larger transactions.
One more look at revenue and where it's growing: Payment network revenue was up 13%, while value-added services and solutions revenue was up 16%. This part of the business is helping drive better profitability. It's also worth noting that on a currency-neutral basis, net revenue was up 17%.
Further down the operating statement, you'll note that net income increased at 11% on a GAAP basis and 15% adjusted. Both are lower rates than revenue growth and not typical of what we usually see and expect from Mastercard. However, a quick look at the operating statement allays those concerns. Operating expenses increased 13%, in line with revenue growth, while operating income was up 15% and pre-tax income was up 13%.
Immediate Market Reaction
As investors have come to expect, Mastercard shares were up modestly ahead of the market open following the earnings release. Its results were slightly better than expected (as they often are), and management was optimistic in its guidance, which was not adjusted substantially in lieu of the ongoing tariff and trade negotiations that sent the U.S. economy into negative growth in the first quarter.
What to Watch
Mastercard's business, of course, is leveraged to the global economy, and in the first quarter, the ongoing impacts of the trade dispute between the U.S. and the rest of the world had not fully begun. As we move further into periods in which tariffs could impact consumer spending patterns globally, there is some near-term reason for caution.
But as CEO Michael Miebach reminded us in his comments on the quarter, Mastercard is a "diversified, resilient business" that's built to navigate these sorts of environments and thrive on the other side.
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Jason Hall has positions in Mastercard. The Motley Fool has positions in and recommends Mastercard. The Motley Fool has a disclosure policy.
