Visa's third-quarter revenue unexpectedly fell short of Wall Street's expectations, as high borrowing costs limited consumer spending.
According to the Futu Securities News App, Visa (V.US), the world's largest payment processor, reported third quarter revenue that fell short of analysts' expectations due to high borrowing costs that limited consumer spending, leading to a more than 3% decline in the stock price in after-hours trading.
Data showed that Visa's net revenue was $8.9 billion, lower than analysts' expectations of $8.92 billion. This is the first time since early 2020 that the company has reported revenue below market expectations.
To curb inflation, the Federal Reserve has raised interest rates to their highest level since the 2008 global financial crisis, which has left low-income Americans struggling to make ends meet.
"In the US, although the growth of high-consumption groups remained stable compared to the past few quarters, we have seen a slight slowdown in the growth of low-consumption groups," said CFO Chris Suh to analysts.
Its competitor, credit card giant American Express (AXP.US), also reported lower-than-expected second quarter revenue last week.
"Visa's pricing in March was perfect, but since then, with concerns about unemployment, repayment and loan defaults, and disposable income for consumers continuing to intensify, Visa's pricing has fallen," said Michael Ashley Schulman, Chief Investment Officer of Running Point Capital Advisors.
"However, corporate and consumer spending still has room to grow, especially as Fed rates decline," Schulman added.
Measured in fixed exchange rates, Visa's payment volume grew by 7%, while cross-border payment volume excluding transactions within Europe increased by 14%, indicating strong demand for international travel.
Visa's third-quarter profit was $4.87 billion, or $2.40 per share, compared to $4.16 billion, or $2.00 per share, in the same period last year. Excluding one-time items, Visa's adjusted earnings per share were $2.42, in line with expectations.
Looking ahead, the company expects net revenue growth rate to be in the "low double digits" for the fourth quarter ending September 30, compared to 10.6% in the same period last year. The company also reiterated its annual profit and revenue growth forecasts.