Citi: Visa transaction growth remains solid, but client renewal costs weigh on profit growth

How robust is payment demand growth?

In the fourth quarter of fiscal 2026, Visa’s global payments volume rose approximately 9.5% year over year on a constant-currency basis, US payments volume rose 10%, and processed transactions rose 10%. As of 21 October, both US payments volume and processed transactions were up 10% year over year; trends remained stable into the new fiscal year beyond the World Cup-related benefits in the fourth quarter.
Excluding intra-Europe transactions, cross-border payments volume grew 14% year over year on a constant-currency basis, up from 12% in the third fiscal quarter. Cross-border travel payments volume rose 13%, while cross-border e-commerce grew 17%, both accelerating from the previous quarter.
However, transaction growth did not fully translate into revenue growth: international transaction revenue rose 8% year over year to 4.1 billion US dollars in the fourth fiscal quarter, below the growth rate of cross-border payments volume. Lower exchange-rate volatility than a year earlier and changes in the mix of clients, products and regions were the main reasons for the gap.

In the fourth fiscal quarter, value-added services revenue rose 31% year over year on a constant-currency basis to approximately 4 billion US dollars, accounting for approximately 31% of total revenue; full-year fiscal 2026 revenue was approximately 14 billion US dollars, up 30%. Transaction activity, pricing, demand for consulting and the recent acquisition Prisma together drove growth.
Visa expects value-added services revenue growth to slow to a range from just above 20% to the mid-20% range in fiscal 2027. Citi believes geographic expansion and growth in cybersecurity services will continue to help the company broaden its revenue sources beyond traditional consumer payments.

Client incentives rose 21% year over year to 5.1 billion US dollars in the fourth fiscal quarter, as newly signed agreements began to be reflected in costs. Client business representing approximately 25% of payments volume is due for renewal in fiscal 2027, up from approximately 20% in fiscal 2026; incentive spending is expected to remain high as Visa seeks to retain clients, weighing on net revenue growth.
The company hopes to complete as many renewals as possible in the first half of fiscal 2027. Together with a higher comparison base, this leads Citi to expect faster incentive growth in the first half; pricing benefits are more weighted toward the second half, so near-term revenue growth will provide limited support to the operating margin.
Visa expects adjusted earnings per share to grow approximately 10% to the low teens year over year in fiscal 2027, below the 16% recorded in fiscal 2026. In addition to client incentives, a higher tax rate, increased non-operating expenses and investments in agentic commerce and stablecoins will also limit profit expansion.

Visa expects adjusted net revenue to grow in the low 10% range year over year on a constant-currency basis in fiscal 2027, with adjusted operating expenses growing slightly more slowly than revenue. The company expects an effective tax rate of approximately 19%, higher than in fiscal 2026 mainly because some tax benefits will no longer continue.
Citi lowered its fiscal 2027 adjusted constant-currency net revenue growth forecast from 11.4% to 10.8%, and its adjusted earnings per share forecast from 15.04 US dollars to 14.97 US dollars, representing year-over-year growth of 12.8%.
Citi maintained its Buy rating and 440 US dollar target price. The target implies a price-to-earnings multiple of 25.1 times its calendar 2028 earnings forecast, slightly above the five-year average next-fiscal-year multiple of 24.4 times.