Visa Inc. (NYSE:V) has reported earnings per share (EPS) of $2.41 for the first quarter of fiscal 2024, surpassing the Consensus Estimate of $2.33 by 3.4%. The bottom line has experienced an 11% year-over-year increase.

In the quarter under review, net revenues showed a year-over-year improvement of 9%, reaching $8.6 billion. This top-line performance exceeded the consensus estimate by 1.5%.

The positive quarterly results are attributed to the growth in payments volume, cross-border volume, and processed transactions. Visa’s overall performance benefited from robust consumer spending and a reduction in overall expenses, although this upside was offset to some extent by an increase in client incentives.

Key Drivers in Q1

Payments volume for Visa increased by 8% year over year on a constant-dollar basis in the fiscal first quarter. The expansion was driven by operations across Europe, CEMEA, and LAC regions.

Processed transactions, reflecting those processed by Visa, grew by 9% year over year to 57.5 billion, slightly missing the estimated 57.6 billion.

Cross-border volume for Visa, on a constant-dollar basis, rose by 16% year over year in the quarter under review. Excluding transactions within Europe, cross-border volume still increased by 16% year over year on a constant-dollar basis, enhancing the company’s international transaction revenues.

Operational Performance in Q1

Service revenues reached $3.9 billion, reflecting an 11% year-over-year growth in the December quarter due to improved payment volumes, surpassing the estimate of $3.8 billion.

Data processing revenues increased by 14% year over year to $4.4 billion, beating the Consensus Estimate of $4.3 billion and our estimate of $4.2 billion.

International transaction revenues amounted to $3.02 billion, marking an 8% year-over-year improvement in the fiscal first quarter.

Other revenues rose by 18% year over year to $692 million, beating the Consensus Estimate of $678 million and our estimate of $648.9 million.

Factors of Concern

Analysts express concerns about uncertainty surrounding government contracts, particularly with the U.S. Army and the UK’s NHS.

CEO Alex Karp’s statement that the company lacks a monetization strategy and focuses on gaining market share in the AI industry raises apprehensions, especially given the intense competition in the AI space from tech giants like Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Google (NASDAQ:GOOGL).

Outlook and Financial Position

Visa’s long-term debt amounted to $20.7 billion, up 1.2% from the fiscal 2023 year-end level.

The company generated net cash from operations of $3.6 billion in the fiscal first quarter, reflecting a 13.4% year-over-year decline.

Visa rewarded $4.4 billion to shareholders through share buybacks and dividends in the December quarter, with authorized funds of $26.4 billion remaining under its repurchase program as of Dec 31, 2023.

Business Update

Visa completed the acquisition of Pismo on Jan 16, 2024, aiming to enhance its core banking and issuer processing capabilities across various card types.

Fiscal Outlook

For fiscal 2Q24, net revenues are expected to witness upper mid to high single-digit growth on an adjusted constant-dollar basis.

Fiscal 2024 is anticipated to see low double-digit growth in net revenues and operating expenses on an adjusted constant-dollar basis.

Amortization of acquired intangible assets is projected at around $175 million or 7 cents per share, and acquisition-related costs are expected to be roughly $115 million or 5 cents per share.

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