By Utkarsh Shetti
July 30 (Reuters) – Mastercard posted a second-quarter profit that surpassed Wall Street expectations on Thursday, boosted by robust transaction volumes driven by steady consumer spending.
Despite fears that geopolitical tensions and the resulting economic uncertainty would dent consumer appetite for spending, shoppers have shown resilience.
The stable consumer behavior is supported by a still-strong labor market and continued wage growth, while transaction values have risen due to elevated inflation driven by oil spikes from the U.S.-Iran war.
High-income households are accounting for a bulk of the spending, as they continue to make discretionary purchases, whereas lower-income families are largely paring back.
Spending is holding up across both these income lines, Mastercard’s outgoing CFO Sachin Mehra told Reuters in an interview, adding that experiences were also driving a larger share of consumption since the pandemic owing to pent-up demand.
Mastercard’s gross dollar volume – the value of all transactions processed on its platform – jumped 8% in the second quarter to $2.9 trillion.
Its adjusted profit per share came in at $5.04, compared with analysts’ average expectation of $4.77, according to data compiled by LSEG.
Net revenue climbed 14% to $9.3 billion, also topping estimates.
“Mastercard’s 2Q results were solid and comfortably ahead of guidance and expectations,” J.P. Morgan analyst Tien-tsin Huang said in a note.
Shares of the company were up 2.6%.
STRONG QUARTER FOR NETWORKS
Payment networks’ results are looked at closely for signals on the health of the economy, given their role in facilitating a significant chunk of transactions on their networks.
Earlier this week, peer Visa topped profit expectations for the quarter, buoyed by strong volumes from the FIFA World Cup. American Express, whose customer base is widely seen as more affluent, also beat Wall Street profit estimates and raised its full-year revenue forecast.
Despite disruptions over the Middle East, the World Cup offered a short-term boost to travel demand, as higher-income customers continued to spend on travel and entertainment.
“Impacts from the instability in the Middle East moderated throughout the second quarter and were less severe than we anticipated,” Mehra said on the post-earnings call.
The company’s cross-border volumes, a metric that tracks spending on cards outside the country they were issued in, climbed 12% in the second quarter.
Its revenue in the value-added services and solutions segment increased 20%.
Mastercard has leaned on the unit to drive stronger growth from services such as fraud detection and cybersecurity, alongside its data offerings that provide spending insights and merchant analytics.
The firm is reshuffling its organizational structure to sharpen focus on customer-related operations, while also reportedly exploring divestment opportunities.
(Reporting by Utkarsh Shetti in Bengaluru; Editing by Shinjini Ganguli)
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