Visa and Mastercard: Earnings figures are solid, but the market is more focused on narratives and fund flows

Overview

This report is an earnings preview and investment view update published by Bernstein ahead of Visa and Mastercard's upcoming earnings releases. The report argues that near-term operating data "look good": U.S. consumer spending, bank card issuance data, gasoline prices, and airfare factors support nominal payment volumes; however, stock performance has been weak, not because of any clear deterioration in fundamentals, but because V/MA's low-volatility, steady-growth characteristics make them funding shorts in AI infrastructure and cyclical trades.

Core views

The core views of the report are: first, V/MA's first-quarter data are broadly solid, with improving consumer spending and higher gasoline prices providing tailwinds; second, the Middle East war and travel disruptions create a modest headwind to cross-border revenue, but the impact is estimated at about 50bps and may not alter the medium-term fundamental outlook; third, Visa's pricing changes, Token fees, and major sporting events are expected to support second-half revenue; fourth, market concerns over AI agent commerce, stablecoins, and regulation are exaggerated, and Bernstein believes AI agent commerce remains in the early stage while stablecoins represent more of a partnership and incremental opportunity than transaction volume loss; fifth, the most important long-term question is whether VAS value-added services can extend the growth runway.

Analysis framework

The report cross-validates short-term earnings, valuation, narrative risks, and long-term growth drivers by combining bank consumer spending data, Fiserv SpendTrend, Bank of America Consumer Checkpoint, gasoline prices, cross-border flights and tourism spending, FX volatility, Visa fee schedules, valuation multiples, and historical earnings revisions.

Methodology notes

• Valuation methodPE Multiple

  Price-to-earnings multiple valuation

  Visa's target price is based on FY27E 30x PE and FY27 GAAP EPS of $14.87; Mastercard's target price is based on FY27E 31x PE and FY27 EPS of $22.65, with reference to relative valuation versus the S&P 500 and their own historical valuations.

• Earnings previewLeading indicators of consumption and payment volumes

  Use bank consumption, airfares, gasoline prices, and payment network nominal exposure to assess short-term revenue momentum

  The report views the acceleration in bank first-quarter consumption, Fiserv consumer spending growth, BofA household card spending growth, and rising gasoline prices as supportive factors for V/MA U.S. purchase volumes.

• Thematic risk analysisAI agent commerce, stablecoins, regulation, and VAS framework

  Differentiate between short-term narrative pressure and long-term business opportunities

  The report believes AI agent commerce is still in the product-market-fit stage in the short term, stablecoins are more likely to create opportunities through card issuance, cross-border, settlement, and VAS, regulation remains a valuation overhang, and the durability of VAS growth is the more important long-term debate.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Visa Inc (US.V)

  Core covered name; Bernstein rates it Outperform with a $450 target price.

  Strengths

  U.S. consumer resilience, nominal payment volume supported by gasoline prices, DCS and Token fee adjustments, Olympics- and FIFA-related marketing services, and growth in Tokenization and VAS.

  Weaknesses

  Cross-border travel is temporarily affected by Middle East disruptions, while its low-volatility steady growth profile is being used as a funding short for AI infrastructure trades in the current market.

  Comparison

  Valuation is compressed relative to the S&P 500, at about 21x 2027E PE; like Mastercard, it has stable earnings revisions and the scale advantages of a payment network.

  Risks

  Regulation, DOJ litigation, CCCA, merchant fee disputes, Europe's EPI/Wero, declining cross-border travel, FX volatility, and cybersecurity or operational disruptions.

• Mastercard Inc (US.MA)

  Core covered name; Bernstein rates it Outperform with a $710 target price.

  Strengths

  Scale of the payment network, high VAS revenue mix, stable earnings revisions, partnership opportunities related to stablecoins and Tokenization, and long-term growth potential in cross-border and value-added services.

  Weaknesses

  The Capital One-Discover debit migration creates about a 60bps transaction volume headwind, though the near-term revenue impact is muted by performance obligations.

  Comparison

  At about 23x 2027E PE, the report believes its relative valuation is at a historical low; like Visa, fundamentals are stable but near-term performance is pressured by fund flows and narratives.

  Risks

  Regulation and litigation, competition from domestic payment networks or alternative payment methods, slowing cross-border growth, macroeconomic slowdown, lower FX volatility, and cybersecurity risk.

Key data

• V/MA year-to-date performanceAbout -12%The report states that Visa and Mastercard are down about 12% year to date, with relative valuation multiples compressing over the same period.
• 2027E valuationVisa about 21x; Mastercard about 23xThe report says both are near the cheapest range since the Durbin/GFC era.
• Leading indicators for U.S. payment volumesU.S. consumption volumes accelerated by more than 100bps in the first quarterBank earnings imply U.S. payment volumes accelerated versus the fourth quarter, about 50bps above market consensus expectations.
• Fiserv SpendTrendOverall consumer spending growth of about 6.0% in 1Q26This accelerated from 4.3% in 4Q25, while airfare/ticket prices also returned to growth.
• BofA household card spendingUp 3.4% YoY in 1Q26Higher than 1.8% in 4Q25/3Q25, with March growth at 4.3%.
• Gasoline pricesUp about 42%-45% YTD, about 27% YoYThe report believes V/MA has exposure to nominal consumption, with gasoline possibly accounting for a single-digit share of U.S. card spending.
• Middle East cross-border travel disruptionAbout 50bps revenue impact in the first quarterMiddle East-related tourism spending accounts for about 12% of total tourism spending, while international flight volumes in March were about -3% YoY.
• Visa pricing adjustmentExpected FY26 second-half revenue tailwind of about 1.5%-2%DCS fees were raised and service scope expanded starting April 1, 2026, while the European Token Facilitation Fee also came into effect.
• VAS revenue mixMore than 25% for Visa; about 40% for MastercardThe report believes VAS is the key variable for extending the growth runway but is harder to model.
• X402 transaction volumeCumulative below $50mnThe report uses this data to show that machine-to-machine payments are currently extremely small in scale and insufficient to disrupt payment networks in the short term.

Impact & implications

For investors, the implication of the report is that near-term earnings risk for V/MA is relatively manageable, and valuations already reflect substantial concerns around regulation, AI substitution, stablecoins, and fund rotation; if market style rotates from high-volatility AI infrastructure trades back toward stable cash flow and low-volatility compounding assets, V/MA's relative appeal may recover. It is worth noting that near-term stock catalysts may not come from a single-quarter earnings beat, but rather from easing regulatory risk, a recovery in cross-border trends, improved visibility into VAS growth, and investors reassessing the value of Tokenization and stablecoin partnerships.

Risks

• Regulatory or legal issues such as the U.S. Credit Card Competition Act, a 10% interest rate cap, the DOJ's lawsuit against Visa, MDL litigation, and Europe's EPI/Wero may continue to pressure valuations.
• The Middle East war and international tensions may further weaken cross-border travel, tourism spending, and cross-border payment revenue.
• A global economic slowdown may drag on payment volumes and consumer spending growth.
• Domestic payment networks, ACH, P2P, digital wallets, or other alternative payment methods may compete with network brands and transaction volumes.
• If stablecoins, AI agent commerce, or machine-to-machine payments evolve rapidly in business model terms, they may change the allocation of the existing payment value chain.
• Cyberattacks, technology failures, or major security incidents may create operational and reputational risk.
• Lower FX volatility may reduce cross-border transaction processing fee revenue.

What to watch

• The upcoming first-quarter earnings releases, purchase volume, cross-border volume, and management guidance from Visa and Mastercard.
• Whether U.S. consumer spending, the tax refund season impact, gasoline prices, and airfare trends continue to support nominal payment volumes.
• Whether Middle East-related flights and tourism spending continue to drag on cross-border revenue in the second quarter.
• How Visa's April 2026 DCS and Token-related fee adjustments actually flow through to revenue in the second half.
• The timing of the contribution from the Olympics and FIFA to Visa's marketing services within other revenue.
• The actual impact of the Capital One-Discover debit migration on Mastercard's transaction volumes and revenue.
• Whether regulatory developments such as the CCCA, the 10% interest rate cap, the DOJ lawsuit, and Europe's EPI/Wero ease or worsen.
• The speed at which AI agent commerce moves from the discovery stage toward a closed-loop transaction model, and Tokenization penetration in agent transactions.
• Progress in partnerships, acquisitions, and on-chain payment orchestration between stablecoin companies and payment networks.
• The sustainability of VAS revenue growth and the market's acceptance of its modellability.