U.S.A.! U.S.A.!: The U.S. showed out during Q2 with card PV growth nearing 10%, suggesting the secular story may have more room to play out than previously thought. On the other hand, select European markets were highlighted as being softer, including the U.K. (by GPN) and Germany (by KLAR).

Big Deal(s): Stripe and Advent International are in talks to acquire PYPL and Silver Lake emerged as a potential suitor for Workday (WDAY). While I have no idea if these deals actually get done, the intent signifies potential value across payments, fintech, and payroll and HCM.

E-Com Strength: Braintree’s growing mid-teens, Worldpay low-DDs (even after absorbing the negative impact from Middle East airlines), SHOP 30%, and ADYEN mid-20s. Who’s exactly losing?

Middle East Conflict: With few exceptions, the Middle East conflict had a smaller-than-expected impact on travel volumes during Q2 with other corridors picking up the slack. Still, rolling the impact forward resulted in modest guidance cuts for GPN and FOUR.

AI: Data + customer trust + AI = a winning formula for some payments and fintech companies? I’m not ready to claim AI winners, but there’s little evidence to suggest payment companies are destined to be AI losers.

Pedal Down on Buyback. Although it backed off somewhat from Q1, I still estimate the aggregate quarterly buyback amount was up approximately 30% in Q2 vs. the quarterly average of 2025.

Below is a recap of earnings for the companies I follow most closely, in alphabetical order:

Adyen (ADYEN)

Synopsis: ADYEN moved the ball forward by delivering H1 results consistent with expectations, continuing to sign marquee clients, expanding the scope of its relationship with other key clients (like TOST), and introducing (or acquiring) products that move ADYEN beyond processing to a role as a commerce partner for enterprises and platforms.

Most Important KPI(s): FXN net revenue increased 22% in Q2, up 2-points from Q1. For H1, FXN net revenue grew 21%, at the midpoint of its 20-22% guidance. Adjusting for FX, I suspect H1 processed volume grew 25-26%, a bit better than 23-24% growth during 2025. Reflecting the acquisitions of Talon.One and Orb, ADYEN raised its FXN net revenue growth guidance by 1-point (to 21-23%) but lowered its EBITDA margin guidance by 1-point.

Best Part(s) of Earnings: While not overstating its impact, the signing of OpenAI as a client is a proof point that ADYEN is not ‘falling behind’ Stripe among AI-native companies. Processed volume growth of 26% (likely to be similar on an FXN basis) during Q2 is really impressive at ADYEN’s scale, suggesting no let-up in ADYEN’s market share gains.

Worst Part(s) of Earnings: ADYEN’s EBITDA margin declined slightly year-over-year despite gaining leverage on people-related costs (up 15% vs. reported net revenue growth of 19%) as other operating expenses grew 31.5%, or 28% excluding one-time acquisition costs. IT costs, bad debt, and miscellaneous expenses were the primary drivers of the significant increase.

Under The Radar: North American net revenue grew 30% on an FXN basis during H1, up from 26% in H2 2025, suggesting ADYEN’s investments in the highly competitive market are paying off.

Valuation: ADYEN trades at about 20x on an EV-to-2026 EBITDA basis, an attractive level in my opinion and a discount to other high-growth payments and fintech peers, including Shopify (75-80x) and Toast (33x).

American Express (AXP)

Synopsis: Despite raising revenue guidance (now up 10% vs. 9-10% previously), AXP maintained its EPS outlook, opting to direct top-line upside into customer acquisition and technology investments while also absorbing higher-than-expected rewards and partner costs. Billed business growth benefited from a strong domestic spending environment yet still trailed peers due to ongoing commercial weakness where AXP recently launched a modern expense management platform and plans a series of product refreshes to better compete with upstarts like Brex, Divvy, and Ramp.

Most Important KPI(s): FXN revenue grew 10%, similar to Q1, and at its aspirational long-term target. Discount revenue, AXP’s largest source, and anchor of its spend-centric business model, increased 8% FXN, up 1-point from Q1. FXN billed business grew 9% similar to Q1 (up 70-bps pre-rounding).

Best Part(s) of Earnings: U.S. consumer billed business grew 11% during Q2, reflecting low-teens (13%) growth in travel and entertainment spend. Credit quality remained excellent with the net write-off rate stepping down 10-bps to an industry-leading 2.2%.

Worst Part(s) of Earnings: Variable customer engagement (VCE) costs represented 44.6% of revenue, up 260-bps vs. the prior year period. For the full year, AXP now expects VCE to be 44-45% of revenue, up from its prior target of approximately 44%. U.S. commercial billed business grew less than 5% during Q2, much slower than low double-digit growth for V and MA.

Under The Radar: H1 results benefitted from some non-recurring items, including a reserve release and an indeterminable amount of favorable items, causing other expense to fall by $334MM. If I adjust for these, I estimate H1 pre-tax profit margin would be down by approximately 2-points vs. last year.

Valuation: At about 18.5x NTM EPS, AXP trades at a premium to its pre-pandemic average of the mid-teens, a rarity for mature payments and companies.

BILL Holdings (BILL)

Synopsis: BILL’s FQ4 results exceeded expectations but the company offered a cautious initial FY27 revenue outlook reflecting recent go-to-market changes (selling the platform, not individual solutions), deemphasizing custom solutions for specific bank partners, and headwinds from reduced acceptance of its spend-and-expense (S&E) product at a small number of merchants. Moving forward, BILL will reduce S&E revenue by rewards costs to arrive at net revenue. On this basis, net revenue growth plus non-GAAP operating profit as a percentage of net revenue, BILL expects to be a rule of 40 company exiting FY27.

Most Important KPI(s): TPV of $98.2B increased 14% (up 2-points) with AP/AR TPV growing 13% (up 2.5-points). Core revenue (which excludes interest on client funds) increased 16%, at the high-end of its 13-16% guidance but consistent with YTD results.

Best Part(s) of Earnings: Despite a softer top-line outlook, BILL’s FY27 non-GAAP EPS guidance was comfortably ahead of consensus. Excluding interest on client funds, BILL’s non-GAAP operating margin is expected to expand nearly 6-points in FY27 with about 4-4.5-points (or $80MM in savings) coming from the reduction-in-force and the remaining 1.5-2-points from additional operating leverage. As of its earnings date (August 19), BILL had repurchased $600MM of its shares since the $1B authorization in May, or 14% of its outstanding shares.

Worst Part(s) of Earnings: BILL expects mid-term core revenue growth of ‘low-DDs to mid-teens’, below FY26 core revenue growth of 16%. The monetization rate for AP/AR fell due to a greater mix of lower yielding ACH volume. While BILL expects to generate $125MM of GAAP net income during FY27, interest on client funds is expected to be $138MM.

Under The Radar: Although BILL is seeing good adoption of its AI products and features by customers, AI is driving significant internal efficiencies, including reducing loss rates for its invoice financing program by approximately half.

Valuation: BILL expects to generate $125MM of GAAP net profit during FY27. If we add back amortization of acquired intangible asset expense of approximately $60MM ($47MM net of tax), it implies $172MM of normalized net profit. On 104MM shares, this implies EPS of approximately $1.65. At $48 per share, this translates to about 28-29x NTM EPS.

Block (XYZ)

Synopsis: XYZ delivered another beat-and-raise quarter, but it failed to impress the market. Why? I think it could be a number of things: (somewhat) stalled momentum for primary banking actives (PBAs) and commerce enablement volume growth at Cash App (in direct contrast to CHYM), slowing consumer lending growth (expected), and elevated losses with an unclear view of the trend in loss rates across XYZ’s different lending products. Still, absolute growth rates are attractive and valuation remains undemanding, in my view.

Most Important KPI(s): Square GPV grew 13% on a constant currency basis, up 2-points from Q1, with nearly 10% U.S. growth and a 25% increase internationally. Cash App gross profit grew 31%, down 7-points from Q1, reflecting the start of more difficult comparisons due to the ramp of Borrow approximately one year ago.

Best Part(s) of Earnings: At 19%, Cash App’s commerce enablement volume growth (excluding Cash App Business) remains robust. In fact, on the call, the CFO stated that Cash App Card volume (the largest part of Cash App commerce enablement volume) was growing more than 20% despite the product being a decade old and it being the fourth largest debit portfolio in the U.S. Square continues to build momentum with gross profit growth set to improve in H2 and converge with GPV growth as it laps the processing partner headwind from a year ago.

Worst Part(s) of Earnings: Everything has slowed a bit at Cash App: PBAs up 17% vs. 22% two quarters ago, commerce enablement volume excluding Cash App Business up 19% vs. 21% in both of the prior two quarters, and total inflows up 13% vs. 15% two quarters ago. Losses roughly doubled from a year ago despite a marked slowdown in consumer lending origination growth. There is a lack of visibility into specific loss rates for XYZ’s varied lending products.

Under The Radar: While XYZ positions itself as an AI leader, I am not seeing the same impact for customers from AI-enabled features as shared by peers. As an example, TOST and SHOP are disclosing specific numbers for Toast IQ Grow and Sidekick, respectively, suggesting traction and favorable outcomes. Although I may be missing it or am simply too hard on XYZ, I do not believe the same can be said for XYZ with Managerbot and Moneybot.

Valuation: Trading at just 13.5x on an EV-to-2026 EBITDA basis, XYZ remains ‘cheapest’ among high-growth payments and fintech peers (TOST at 33x, ADYEN at 20x, and SHOP at 75-80x), suggesting further upside potential if XYZ can execute on the medium-term financial goals. The evidence, so far, suggests they can, so I believe shares deserve to move higher.

Broadridge Financial (BR)

Synopsis: BR’s closed sales bounced back during FQ4, outperforming its recently lowered guidance by nearly $40MM, easing concerns. FY closed sales of $305MM were up 6%, bringing them approximately in-line with the midpoint of BR’s original guidance. For the upcoming FY, BR is forecasting results consistent with its historical growth algorithm: 6-8% recurring revenue growth, 8-12% EPS growth, and over 100% FCF conversion.

Most Important KPI(s): Equity positions (that generate revenue) were up 12% during FY26, level with FY25, led by continued strength in managed accounts. Fund positions grew 6%, down only 1-point from FY25. Organic recurring revenue growth was 6% during FY26, in-line with BR’s 10-year average (with a range of 4-9%). Recurring revenue backlog ended FY26 at $470MM, up 9% from FY25, providing strong visibility into BR’s near-term outlook.

Best Part(s) of Earnings: Position growth, the primary driver of long-term growth in Broadridge’s regulatory and communications franchise, shows no signs of meaningful slowing. Although BR is starting FY27 with a closed sales outlook similar to FY26 ($290-330MM), BR’s pipeline ended FY26 up one-third over FY25, giving BR a high level of confidence in achieving its closed sales outlook.

Worst Part(s) of Earnings: The SEC’s new proposed e-delivery rule is likely to create a modest headwind to BR’s recurring revenue growth when it is implemented over a 2-3 year period.

Under The Radar: Although tokenized securities pose an unknown risk to BR, it is actively building a hybrid model to reach registered, beneficial, and tokenized shareholders, solving a potentially complex problem for issuers, its specialty.

Valuation: At <16x NTM EPS, Broadridge trades at a meaningful discount to its low-to-mid 20s average over the past decade. I continue to believe that is just too low for a business with a virtual monopoly in proxy distribution and a highly complementary regulatory and communications franchise that together represent close to 70% of profits.

Chime (CHYM)

Synopsis: Adoption of Chime Prime, CHYM’s most premium membership tier (reserved for customers making $3k of qualifying monthly direct deposits and offering 5% cash back on spending at self-selected merchant categories), resulted in a material inflection in CHYM’s total spend volume growth during Q2 following several quarters of slowing growth. The market sent shares significantly higher on the results, deservedly so, in my opinion.

Most Important KPI(s): Card purchase volume of $38.0B increased 17%, a 5-point improvement from Q1. Including outside instant transfers, volume growth was 20%, also 5-points higher than Q1. Overall, revenue grew 27%, up 2-points from Q1.

Best Part(s) of Earnings: Chime Prime is attracting new higher-earning members and convincing existing members to direct more of their spend to CHYM. MyPay loss rates fell even further to 0.9%. CHYM is raising limits for MyPay loans and widening eligibility. Although this may result in moderately higher loss rates, it is likely to be accretive to CHYM’s transaction profit growth. Shortly before the earnings announcement, CHYM announced a 10% reduction-in-force. This, coupled with better top-line momentum, is likely to result in meaningfully higher profitability for CHYM over the near-term.

Worst Part(s) of Earnings: Rewards costs came in higher-than-expected as members focused spending on their cash-back category, like gasoline, limiting the flow-through of volume upside.

Under The Radar: CHYM is seeing strong traction with its enterprise offering (announced a 320k employee customer and a 35k employee retailer most recently), setting the stage for it to become a ‘meaningful’ contributor to member growth in FY27.

Valuation: Based on my modeling, I believe CHYM can do around $500MM of GAAP EBITDA in FY27, implying an EV-to-EBITDA multiple above the mid-20s. While I admittedly ‘missed the boat’ on CHYM t lower levels, I am not inclined to chase the stock at these levels.

Corpay (CPAY)

Synopsis: CPAY’s strategy to reorient its business towards corporate payments continues to bear fruit as it delivered another quarter of double-digit organic revenue growth bolstered by highly accretive M&A to drive significant EPS growth. CPAY continues to be one of the most underappreciated compounders in payments.

Most Important KPI(s): Organic revenue grew 10%, down 1-point from Q1. Corporate Payments, which now make up about 40% of CPAY’s revenue, grew organically by 18% excluding float income.

Best Part(s) of Earnings: New sales were up 30% with 40% growth in Corporate Payments. Retention in Corporate Payments is closer to 96-97%, above CPAY’s corporate average of about 93%. AvidXchange’s (which CPAY owns 33% of and TPG the rest) EBITDA more than doubled in Q2, a step-up from 50% growth during Q1, once again demonstrating CPAY’s ability to significantly enhance the earnings power for acquired companies.

Worst Part(s) of Earnings: H2 EBITDA margins are expected to be slightly below the prior year’s, reflecting ongoing investments to sustain CPAY’s attractive organic growth rate. U.S. vehicle payments growth slowed due to a reallocation of sales investments to Corporate Payments.

Under The Radar: CEO Ron Clarke noted some deal multiples are moving back into a realistic range (from presumably being too high), suggesting additional accretive M&A opportunities for CPAY.

Valuation: At a mid-teens NTM P/E (burdened for SBC), CPAY’s valuation remains imminently reasonable for a company that can sustain DD organic revenue growth rate in larger and less competitive payments markets.

Fiserv (FISV)

Synopsis: Following the surprise departure of Mike Lyons, new CEO Takis Georgakopoulos started his tenure at FISV by lowering top and bottom-line expectations for 2026, reflecting weaker macro conditions in Argentina, slower conversions and product launches, and an incremental $100MM investment in FISV’s technology infrastructure, especially Financial Solutions. No changes were made to the 2026-2029 outlook provided at FISV’s May 2026 investor day, but it now starts off a lower base.

Most Important KPI(s): Organic revenue fell 5% with a 1% decline in Merchant and an 8% contraction for Financial Solutions. While Q2 appears to mark the bottom, as expected, the rebound in H2 will not be as strong as anticipated, prompting FISV to lower its FY organic revenue guidance to a 0.5% decline at the midpoint, down 2.5-points. With the lowered revenue guidance and incremental technology investment, FISV reduced its adjusted operating margin outlook by over 250-bps, reflecting a nearly 8-point decline from 2024.

Best Part(s) of Earnings: Underlying Clover volume growth remained relatively steady at 11%. FISV’s FCF conversion over the LTM was >100%. Although anecdotal, FISV noted a ‘dramatic’ increase in its enterprise pipeline reflecting its platform modernization.

Worst Part(s) of Earnings: A further reset calls into question whether the problems at FISV have been fully identified, especially considering the incremental $100MM technology investment. Recurring revenue grew only 2% in Q2, suggesting acceleration is needed to reach FISV’s 4-6% growth target for 2026-2029.

Under The Radar: In conjunction with the results, FISV’s new CEO signaled a broader portfolio review, which may result in additional actions to streamline its footprint, including exiting non-leadership positions.

Valuation: FISV trades at 7x NTM EPS. Although low, it represents a slight premium to peer GPN (6x).

Global Payments (GPN)

Synopsis: Citing the continuation of the Middle East conflict, GPN lowered its FY26 organic net revenue growth outlook to 4-5% from approximately 5% previously, framing it as ‘de-risking’ the H2 outlook. The market agreed and largely looked past it, preferring to focus on the potential for accelerating organic revenue growth in FY27.

Most Important KPI(s): Organic revenue grew 4%, down 50-bps from Q1, but reflecting an approximately 1-point headwind from the Middle East conflict and lower tax payments, suggesting underlying momentum may have picked up a bit, not surprising given the strong North American backdrop.

Best Part(s) of Earnings: GPN firmly backed an expectation for accelerating organic revenue growth in 2027, citing the lapping of the Middle East headwind, contribution from recently signed and converted enterprise and platform deals, and a growing impact from Genius. That being said, GPN was quick to point out that it takes a fair amount to ‘move the needle’ so one should not expect material acceleration. As of today, while I think it can be 6%, I believe the starting guide for organic revenue growth in FY27 will be 5-6%.

Worst Part(s) of Earnings: GPN continues to record significant charges that make ‘adjusted’ earnings and FCF differ significantly from current cash earnings power. The onus is on GPN to significantly close the gap in the two numbers over the next handful of quarters. The U.S. card market grew at its fastest rate in some time (outside of the pandemic). Even that was not enough for GPN to overcome the Middle East headwind.

Under The Radar: Excluding non-core parts (partners no longer making merchant referrals, non-core portfolios from Worldpay, and a managed services relationship for a departing portfolio), organic revenue growth was 5.5% in Q2 and 6% for H1, suggesting a slightly stronger underlying business.

Valuation: GPN trades at little more than 6x NTM EPS, reflecting a significant amount of skepticism about its ability to sustain MSD organic revenue growth. If they can build confidence in FY27 acceleration, I believe there is ample room for the multiple to expand.

Jack Henry (JKHY)

Synopsis: JKHY delivered strong results in FY26: organic revenue increased more than 7%, underlying margins expanded 90-bps, and FCF conversion was 101%. JKHY is signing more, and larger, core banking customers and selling them more solutions upfront, setting the table for continued revenue momentum. To that end, JKHY expects another year of approximately 7% organic revenue growth and is cautiously optimistic they can exceed their initial guidance for 20-40-bps of underlying margin expansion, as they have done during the past couple of fiscal years.

Most Important KPI(s): Organic revenue grew 6.6% in FQ4, above expectations. In FY26, JKHY won 58 core deals, up from 51 a year ago. 59% of FY26 core wins included digital banking and card processing, higher than 39% in FY25. Non-GAAP operating margin rose more than 90-bps to 24%.

Best Part(s) of Earnings: JKHY expects 58-65 core wins during FY27, up from 58 in FY26. While the disruption at FISV (JKHY’s primary competitor for community banks and credit unions) is contributing to strong sales performance, JKHY noted it is taking share from everyone, not just FISV. Reflecting that momentum, JKHY reported that core wins QTD (50 days) have already outpaced the entire Q1 in FY26 (92 days).

Worst Part(s) of Earnings: Despite the pick-up in core wins, it has not translated into a material acceleration for organic revenue growth…yet. For FY27, the midpoint of JKHY’s guidance calls for 6.8% organic revenue growth, down 50-bps from FY26 and about 80-bps below JKHY’s 5-year average of 7.6%. While JKHY is cautiously optimistic it can do better than its forecast for 20-40-bps of underlying margin expansion during FY27, it faces heightened investment requirements for a number of items (cyber, AI, data center consolidation), potentially limiting upside.

Under The Radar: After stagnating for several years, JKHY has delivered underlying margin expansion of 60, 70, and 90-bps during FY24, FY25, and FY26, respectively. While there is not one single magic bullet, JKHY has credited AI with driving efficiencies across its organization, making them a potential low-key ‘AI winner’.

Valuation: At 23x NTM EPS, JKHY is less expensive than it has been in the past, but is in no way cheap, especially compared to other similarly attractive businesses across payments and fintech.

Mastercard (MA)

Synopsis: Similar to V, MA reported solid results for the June quarter on the back of strong domestic spending and a smaller-than-anticipated headwind from the Middle East conflict. MA raised its FY26 organic net revenue growth outlook to the higher-end of ‘high-end’ of low double-digits.

Most Important KPI(s): Organic net revenue grew 12%, same as Q1. FXN global PV increased 10%, up 1-point from Q1. Switched transactions grew 9%, similar to Q1. FXN cross-border volume grew 12%, down 1-point from Q1.

Best Part(s) of Earnings: Excluding the Capital One conversion, U.S. switched volume growth was 10% during the first 4 weeks of July, up 2-points from Q2, suggesting sustained underlying domestic momentum for MA. Cross-border assessment revenue increased 20% for MA in Q2, comparatively higher than V’s 6% growth rate for international transaction revenue, suggesting a more favorable mix of cross-border spend for MA.

Worst Part(s) of Earnings: MA’s European purchase volume growth slowed to 10.5% FXN in Q2, down from more than 15% a year ago, falling below V’s European growth rate for the first time in at least several quarters. While strong at 18%, MA’s FXN VAS net revenue growth trails V’s growth by a significant margin, narrowing MA’s net revenue growth outperformance relative to V.

Under The Radar: MA now switches 72% of transactions made by cards carrying its logo(s), up from approximately 55% in 2018. Not only does increased switch penetration boosts MA’s economics, it feeds MA’s enormous data trove, enabling more sophisticated VAS.

Valuation: Over the past decade, Mastercard has traded at a 4-point premium to Visa on an NTM P/E basis. It currently sits at about 1.5-points.

Paycom Software (PAYC)

Synopsis: PAYC reported excellent Q2 results and bumped up its FY guidance, still leaving room for upside if current momentum persists. While CEO Chad Richison typically has little to say on calls, this quarter he let the results do all the talking.

Most Important KPI(s): Recurring revenue grew 11%, up 2-points from Q1, despite a much more challenging comp (Q2 2025 recurring revenue growth was nearly 12.5% vs. 7% during Q1 2025). Average client fund balances were up 9%, a 1-point improvement from Q1.

Best Part(s) of Earnings: H1 recurring revenue grew 10%, better than the 8-9% forecast for the FY (raised from 7-8%). While comps get a little bit tougher in H2, it certainly appears like there’s upside potential to the current forecast. PAYC expects FCF to exceed $650MM in FY26, a 60% increase from FY25. Since the start of 2026, PAYC has repurchased nearly 20% of its outstanding shares paying about $127 per share, significantly below the current price of $222.

Worst Part(s) of Earnings: Given PAYC’s limited quarterly disclosures (they provide a more complete view annually), it is difficult to ascertain the exact source of upside: is it client growth, cross-sell, improved retention, or pricing? Or a combination of all four?

Under The Radar: According to PAYC, its data center investments are yielding significant savings. Last year, PAYC spent $100MM to prep its data centers to host its own AI models. This year, those investments have resulted in R&D savings of about $100MM and an additional $30MM in savings by processing IWant queries.

Valuation: I believe PAYC can generate more than $950MM of GAAP EBITDA in FY26, implying an EV-to-EBITDA multiple of about 11.5x. That could prove to be an attractive valuation if PAYC can accelerate recurring revenue growth to the DDs.

PayPal (PYPL)

Synopsis: Against the backdrop of a rumored bid by Stripe and Advent International (Advent), PYPL delivered decent Q2 results as branded online checkout stabilized, BNPL growth accelerated, and transaction margin dollars (TM$) benefited from a reserve release. As part of his new strategy, CEO Enrique Lores plans a more significant push into financial services for PYPL, including credit. While this makes sense given PYPL’s consumer-facing assets, it places PYPL in direct competition with other lend-centric fintechs.

Most Important KPI(s): TM$ excluding interest on client funds grew 3% during Q2, similar to Q1, and better than the LSD decline anticipated. Branded online checkout TPV grew 2%, also level to Q1. Branded experiences [online plus in-store (debit and tap-to-pay)] TPV grew 6%, up 1-point from Q1.

Best Part(s) of Earnings: Braintree volume maintained its mid-teens growth rate during Q2. BNPL volume growth accelerated to 26%, up 3-points and at the higher-end of BNPL peers. PYPL raised its FY outlook for TM$ excluding interest on client funds (up 2% now vs. ‘roughly flat’ previously) and branded online checkout (up LSD now vs. ‘slightly positive to up LSD’ previously).

Worst Part(s) of Earnings: Normalizing for the reserve release ($27MM), TM$ excluding interest on client funds would have been up about 1.5% in Q2, still anemic. PYPL’s investments in incentives to drive consumer habituation are now expected to be less than the original 3-point headwind, contributing to the guidance upside. The increase in EPS guidance is partially attributable to a lower tax rate.

Under The Radar: PYPL plans to reinvest a significant portion of its $1.5B in gross savings from its multi-year restructuring program. Reflecting this, PYPL increased its opex guidance for FY26, now expecting 7-8% growth vs. 3% previously.

Valuation: PYPL is trading above the rumored buyout bid by Stripe and Advent of $60.50 per share. Based on recent comparable transactions, I believe a price in the $73 range is reasonable.

Shift4 Payments (FOUR)

Synopsis: Despite delivering solid Q2 results (11% organic GRLNF growth, higher including Global Blue) FOUR shares sold-off significantly as they lowered their FY26 top and bottom-line guidance due to a continuation of the Middle East conflict (adding a $25MM headwind for Q3, but none for Q4), a less favorable FX outlook ($20MM incremental headwind), and the added interest expense from its recent debt raise. While there seemed to be confusion and disappointment following the report, my analysis suggests H2 guidance embeds a continuation of low-DD organic GRLNF growth after accounting for the ‘moving parts’.

Most Important KPI(s): Organic GRLNF increased 11%, in-line with Q1. FOUR’s blended spread of 65-bps during Q2 was up approximately 3-bps over the prior year. FOUR’s adjusted EBITDA margin fell 4-points from the prior year period to about 45.5%.

Best Part(s) of Earnings: After accounting for FX movements, underlying organic GRLNF growth improved by approximately 1.5-points from Q1.

Worst Part(s) of Earnings: Given seasonally weaker FCF during Q2, FOUR repurchased only a modest amount of stock, despite attractive prices, citing a constrained balance sheet. To make matters worse, after conceptually discussing bolt-on M&A as a potential use of its (limited) excess capital, FOUR disclosed an acquisition in its 10-Q after the fact. Some people may have been expecting a larger impact from the World Cup. That simply did not materialize as FOUR cited a typically busy summer schedule for its stadium customers.

Under The Radar: Despite a $15MM headwind from the Middle East conflict, pro-forma Global Blue GRLNF grew by an estimated HSD rate in Q2 suggesting underlying growth in the mid-teens with strong inbound travel to the U.S. and Asia outperformance contributing.

Valuation: At around $47 per share, FOUR trades at 9x the midpoint of its non-GAAP EPS ($5.25) estimate. If I burden EPS for SBC expense and recurring acquisition and restructuring costs, it reduces non-GAAP EPS by about $1.50, implying normalized EPS of $3.75 and a P/E of 12.5x, very low for a company delivering low-DD organic revenue growth. The question is can they sustain it? If so, the stock should be much higher.

Shopify (SHOP)

Synopsis: After stumbling following last quarter’s (somewhat) cautious outlook, and a general SaaS sell-off, SHOP reasserted itself with strong Q2 results and excellent Q3 guidance. SHOP is positioning the product catalog from its long tail of online merchants as highly valuable in an agentic world. While that may or may not be the case, after all there is little agentic commerce taking place now, what is not in dispute is SHOP’s current performance is exceptional.

Most Important KPI(s): FXN GMV grew 30%, marking a fifth consecutive quarter of growth between 29-30%. Gross profit increased 30% on an FXN basis for the second consecutive quarter, significantly exceeding guidance for growth in the mid-20% range.

Best Part(s) of Earnings: SHOP’s payments penetration improved 320-bps year-over-year, a slight improvement from Q1. Capital revenue of $91MM increased nearly 50% vs. the prior year. As in past quarters, SHOP’s GMV growth remains best-in-class with strength across geographies, products, and channels.

Worst Part(s) of Earnings: There was little to critique in SHOP’s Q2 results, but if forced to, I would flag the modest decline in subscription gross margin, owing to elevated, but not rising, costs to power AI features for merchants, including Sidekick.

Under The Radar: Despite increasing payments penetration, which is a lower margin revenue stream, SHOP’s merchant gross margin expanded on a year-over-year basis for a second consecutive quarter with SHOP noting generally higher payments gross margins in international markets where debit is more prevalent and interchange rates are structurally lower. Additionally, SHOP is seeing strong growth in high-margin products like capital within its merchant business.

Valuation: Burdened for SBC expense, I estimate Shopify trades at an EV-to-2026 EBITDA multiple of approximately 75-80x. While SHOP is an extraordinary business, it currently carries the price tag to go along with that designation.

Toast (TOST)

Synopsis: TOST continued its solid momentum during Q2 with 28% recurring gross profit growth, 9.5k net location adds (a quarterly record and up 1k over last year’s Q2), and 22% GPV growth. New markets (international, enterprise, and food and beverage retail) are on track to reach $200MM of ARR by the end of FY26, approximately doubling from a year ago.

Most Important KPI(s): GPV growth of 22% was steady with the prior two quarters. TOST’s payment net take rate of 49.8-bps expanded about 1-bps from a year ago. SaaS ARPU on an ARR basis increased 5% from a year ago, marking the seventh consecutive quarter in the 4-6% range.

Best Part(s) of Earnings: TOST is seeing good traction with Toast IQ Grow, its agentic-powered marketing platform for restaurants, and it is on track to become the fastest product to reach $10MM of ARR. TOST disclosed that its core SMB restaurant business is growing recurring gross profit at 20% with a greater than 40% adjusted EBITDA margin.

Worst Part(s) of Earnings: TOST raised its FY26 adjusted EBITDA guide by less than the Q2 beat as it plans to fully reinvest a $10MM tariff refund it received during Q2. As expected, advanced purchases of hardware components depressed FCF during Q2 and will eventually flow through to lower hardware gross margins in 2027. Although GPV growth remained strong at 22%, it failed to accelerate from Q1, despite what was arguably a better domestic spending environment.

Under The Radar: TOST’s work on its hardware supply chain will result in a lower-than-expected negative impact during FY26 and FY27 and boost hardware gross margins over the long-term.

Valuation: TOST has regained its premium valuation, trading at an EV-to-2026 EBITDA multiple of approximately 33x when adjusted EBITDA ($837MM) is burdened for SBC ($238MM), pushing TOST back into the ‘too expensive’ category, in my opinion.

Visa (V)

Synopsis: V delivered steady results with organic net revenue up 12% in FQ3 and 13% FYTD. As a result, V upped its FY26 organic net revenue growth outlook to the ‘low-end of low-teens’ from ‘low-double-digit to low-teens’ despite a slightly larger headwind from lower FX volatility. VAS continued its extraordinary run, growing 34% FXN in FQ3 (high-20% organic). VAS now represents nearly one-third of V’s net revenue.

Most Important KPI(s): Organic net revenue grew 12% during FQ3, down 3-points from the March quarter due to a step-up in client incentive growth and comping against a period of high FX volatility during the prior year. FXN global PV increased 10%, up 1-point. FXN cross-border volume grew 13%, also up 1-point due to 3-points of acceleration in cross-border e-commerce volume growth. Processed transactions increased 10%, once again up 1-point from the March quarter.

Best Part(s) of Earnings: Outside of pandemic-impacted periods, U.S. payment volume growth was the strongest since FY19 with V noting acceleration across consumer cohorts (low income and higher spend bands) and merchant categories (discretionary and non-discretionary). Although some of this was due to non-recurring factors (the World Cup, shifting of Prime Day, and higher gas prices), the underlying spending environment remains constructive, which is a plus for V given its larger exposure to the U.S. relative to MA. The U.S. is also among the most profitable payments markets.

Worst Part(s) of Earnings: Marketing and advisory continues to be the fastest growing part of V’s VAS business. Although not disclosed specifically, I believe it may be among the lowest margin businesses for V and an outsized contribution from the Olympics and World Cup during FY26 could set up a more difficult comparison in FY27. After adjusting for strong VAS performance, V’s payment network net revenue appears to have increased only 5-6% FXN during FQ3 due to a more difficult client incentive comparison.

Under The Radar: With the launch of a new solution combining the best parts of V’s legacy debit processing business and Pismo’s modern banking platform, V is making a full court press for small and mid-sized banks and fintechs, potentially encroaching on territory held by companies like Jack Henry and Marqeta.

Valuation: After touching 22-23x earlier in the year, V’s NTM P/E has rebounded to >25x, still about 2-points below its long-term average, which seems fair in my opinion.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting, or subscribing!

Disclosure: As of August 20, 2026, of the stocks mentioned in this report and across payments and fintech, I am long Visa, Global Payments, Intuit, Block, Adyen, Shift4 Payments, Paychex, Mastercard, and Broadridge Financial. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

After taking a few days to go through Q2 results and guidance, there are still things that aren’t perfectly clear to me (which I’ll touch on later), but underlying growth expectations for H2 look relatively solid at around 10%. As far as why the big decline in the share price? I’m guessing it’s a combination of many things, including optics around a guidance ‘cut’ (although other payment companies made similar changes to revenue guidance with only modest share price impact), heightened expectations for a sizable World Cup benefit that simply did not materialize, the possibility of an additional cut to Q4 numbers if the Middle East conflict persists (for now, only a Q3 impact is included), underwhelming share repurchase activity during Q2, and the ‘mishandled’ M&A disclosure. As a shareholder, I am of course disappointed with how FOUR’s stock has performed, especially since there have been some unforced errors regarding things under the company’s control, like disclosure, in my opinion. At the end of the day, this is a business with lots of moving parts. Global Blue by itself seems overly complicated. Some investors, like myself, are willing to dig in and do the work, but I do not have the utmost confidence in my conclusions based on the complexity of the business. It is no surprise others may simply throw up their hands and walk away. I don’t blame them. For me, I’m still contemplating. While I won’t make an emotional decision and ‘sell at the bottom’, I also don’t have the appetite to babysit this stock indefinitely.

The purpose of this update is to go through my math on the company’s organic GRLNF calculation and what Shift4’s guidance implies for H2. While there are other aspects to the company’s guidance, my main concern is organic GRLNF growth, because I believe it is the most important metric the company reports.

Background

There are four transactions influencing the comparability of Shift4’s financial results. First, and most significantly, is the Global Blue acquisition, which closed July 3, 2025. The second and third are the acquisitions of Smartpay and Bambora, which closed November 4, 2025, and March 2, 2026, respectively. Finally, Shift4 divested a business during Q4 2025, resulting in proceeds of $24MM recognized on its 2025 statement of cash flows. Beginning in 2026, Shift4 has included a reconciliation of total and organic GRLNF at the end of its shareholder letter. I do not believe the impact of FX is contemplated in this calculation of organic GRLNF growth. Later, I will attempt to account for the impact of FX.

Without further ado, here is my math:

My key assumptions are as follows:

• In 2025, Global Blue’s pro-forma revenue was $626MM (10-K). Based on a disclosure in the shareholder letter, network and pass-through fees represented approximately 8% of Global Blue revenue during Q3 2025. Assuming network and pass-through fees accounted for a similar percentage of Global Blue revenue across the year implies about $574MM of Global Blue GRLNF in 2025.

• For Global Blue TFS, my Q1 2025 estimate of $98MM is based on the $102MM reported in Q1 2026 and the 4% pro-forma growth rate disclosed by FOUR. Using similar logic, my Q2 2025 estimate is $108MM based on pro-forma growth of 8% to $117MM during Q2 2026. The Other portion of Global Blue revenue represents acquiring, dynamic currency conversion (DCC), and post-purchase solutions (PPS) and is included in Payments and Subscription and Other revenue categories for FOUR. In Q3 2025, FOUR reported $26.5MM of Other revenue for Global Blue. My estimates for Global Blue’s Other revenue over the rest of 2025 builds up to $574MM of GRLNF inclusive of my TFS estimates.

• In Q3 2025, total Global Blue GRLNF was $159MM inclusive of about $3MM generated overt the 2-3 days that FOUR did not own it (from July 1-3).

• In its first quarter of full contribution, Q2 2026, I estimate Smartpay and Bambora contributed $28MM of GRLNF. For the remainder of 2026, I assume these businesses follow a similar seasonal pattern to a typical payments business.

• For the Middle East headwind, I assume a $5MM impact in Q1 (FOUR disclosed a $4-6MM range), a $15MM impact during Q2 (slightly below the $20MM guided impact), and a $25MM impact in Q3.

• Finally, my focus is on the performance of pro-forma Global Blue plus Legacy Shift4 GRLNF.

My key takeaways are as follows:

• Adjusting for the $15MM Middle East impact during Q2, organic GRLNF growth was quite strong at 12.6%. Global Blue’s Q2 2026 GRLNF of $145MM increased 7% despite the $15MM headwind. Excluding it results in mid-to-high teens underlying Global Blue GRLNF growth, a notable step-up from MSD growth in Q1. FOUR noted strong U.S. to Europe travel, strong performance in Asia, and better-than-expected same-store sales trends for both restaurants and lodging as contributors to Q2 outperformance.

• Q3 and Q4 guidance implies underlying GRLNF growth of about 10%, a modest stepdown from Q2. While some may read ‘deceleration’ into the H2 guide versus Q2, it’s possible conservatism and incremental FX headwinds are the primary contributing factors. Finally, one shouldn’t ‘miss the forest for the trees’ and recognize double-digit organic revenue growth is commendable, especially given FOUR’s discounted valuation.

• Finally, if we look at the midpoint of FOUR’s original GRLNF guide of $2.550B, the $45MM decline to the current midpoint ($2.505B) includes a $45MM Middle East headwind and a $20MM FX headwind, suggesting underlying performance has been $20MM better-than-expected through H1.

FX Impact

The final piece of the puzzle for FOUR is FX, which may be the most open to interpretation. According to FOUR, prior guidance for reported GRLNF growth of 26-31% (28.5% at midpoint) included 24-29% (26.5% at midpoint) FXN growth, implying a 2-point tailwind from FX, or $40MM based on $1,981MM of GRLNF in 2025. Now, reported GRLNF is expected to grow 25-28% (26.5% at midpoint) with 24-27% (25.5%) FXN growth, implying a 1-point FX tailwind, or $20MM. To the best of my knowledge, FOUR did not disclose an FXN growth range for guidance prior to Q2. It also said on multiple occasions that the financial translation benefit from a weakening U.S. dollar creates a greater headwind to TFS demand. So, presumably the recent strengthening of the U.S. dollar, which hurts translation and creates a $20MM GRLNF headwind in H2, is going to help TFS demand, which is not necessarily accounted for in guidance? Admittedly, confusing.

In thinking about how to incorporate an FX impact into my calculations above, I believe the best way is to look at the EUR-to-USD exchange rate, which I believe is the most important currency pair for FOUR. Here is how it plays out from 2025 to 2026, assuming the most recent 1.156 exchange rate holds for the remainder of 2026:

As the table shows, the Q1 translation benefit was significant, followed by a slight tailwind during Q2, and what looks to be a largely neutral impact in Q3 and Q4. The current 1.156 EUR-to-USD exchange rate compares to about 1.175 at the time of the Q1 20206 report (May 7). Doing a simple calculation and assuming 75% of the $20MM tailwind was recognized in Q1, followed by $5MM in Q2, and no impact in H2, yields the following:

Here, we find the ramp from Q1 to Q2 even more meaningful (5-points vs. 3-points) and H2 implies a slightly lower FXN slowdown (1.5-points vs. 2.5-points).

Conclusion. Despite the moving parts of FOUR’s business, underlying GRLNF growth appears to be guided toward 10% during H2, largely in-line with H1. Skeptics can point to the inconsistency over gauging the FX impact, and, to me, that’s entirely fair.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting, or subscribing!

Disclosure: As of August 9, 2026, of the stocks mentioned in this report and across payments and fintech, I am long Visa, Global Payments, Intuit, Block, Adyen, Shift4 Payments, Paychex, Mastercard, and Broadridge Financial. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Q2 2026 Results

• Pro-forma non-GAAP net revenue of $3.159 billion increased 1.5% on a reported basis with a slightly more than 2% ($65M) headwind from dispositions, which, to the best of my knowledge, consists solely of the Payroll business sale completed last October. According to GPN, normalized growth was 4% versus my calculation of 3.6-3.7% (potential rounding). The FX impact was largely neutral. The ME conflict had an approximately 1-point impact with a smaller impact (perhaps 30-bps) from lower IRS tax payments processed.

• On a pro-forma basis, GPN’s adjusted operating profit increased 3% with 50-bps of margin expansion. Adjusting for dispositions, adjusted operating margin expanded by 70-bps, suggesting the Payroll business was more profitable than the remaining business. To be fair, the disclosures here are a little confusing with declines in each segment-level margin (some significant) offset by a decline in corporate and other (-14%), which fell by 290-bps as a percentage of revenue.

• EPS of $3.46, up 12%, slightly exceeding consensus of $3.44.

• GPN generated $687M of adjusted FCF in Q2, representing 74% of adjusted net profit. Although an improvement from the last two quarters, acquisition and transformation-related costs excluded from the calculation remain significant ($292M, down from $1.1B and $553M during Q1 and Q4). During the quarter, GPN repurchased 8M shares for $550M implying a price of $69/share. Across share buyback and dividends, GPN continues to expect to return $2B to shareholders in 2026. FCF conversion is seasonally higher in H2. For the full year, GPN still expects to convert more than 90% of adjusted net profit to adjusted FCF, with adjustments moving down through 2027.

GPN introduced new segment disclosure post-Worldpay:

• SMB represents a combination of GPN’s owned vertical software (i.e., ACTIVE, K-12/higher-ed from Heartland, property management from Zego), including its flagship Genius platform for restaurants and retail, as well as non-integrated processing solutions for merchants acquired through dealers, financial institutions, and independent sales organizations (ISOs). The company has a significant presence in the U.S., Canada (legacy GPN), and the U.K (legacy GPN and Worldpay). with other geographies including central and eastern Europe (EVO Payments), Mexico (EVO Payments) and Asia-Pacific (legacy GPN). GPN’s vertical software, including Genius, likely represents a minority of the segment but is growing faster while the other, larger portion grows at a GDP-type rate, in my opinion. In Q2, SMB revenue was flat on a reported basis, reflecting the disposition of the Payroll business. Adjusting for this, organic growth was 4%. GPN referenced stronger growth in North America, which is not surprising given the more favorable spending backdrop, with weakness in the U.K. While the company continues to tout favorable Genius statistics (bookings up 25% quarter-over-quarter and new customer yields up 75% year-over-year), the overall contribution remains modest, suggesting a meaningful impact on the segment’s performance will take some time.

• Enterprise represents clients with over $50M of annual volume. Part of that is card-present (slower growing, with a significant presence in places like U.S. grocery stores) and the other, more attractive part is the global e-commerce business. Reported and organic revenue grew 7% during Q2. The ME conflict had a 4-point impact suggesting underlying growth of 11%. E-commerce revenue grew low-double digits. If we assume online airline bookings were the primary area of impact from the ME conflict, then it would suggest underlying e-commerce revenue growth was in the mid-teens.

• Platforms has two components, an integrated channel and embedded payments. As the name suggests, GPN integrates payment processing into partnered software in the integrated channel. It‘s more full-service acquiring, generating higher yields for GPN. In embedded payments, GPN provides a wholesale-type processing solution to payment facilitators (software and marketplaces) that control the relationship with merchants and take more risk and provide more services. GPN generates lower yields in embedded payments. Reported and organic revenue grew 7% during Q2. According to GPN, the embedded channel represents about 20% of Platforms and is growing revenue close to 20% suggesting the integrated channel is growing MSDs or lower. As a result of this dynamic, volume growth (10% in Q2) is outpacing revenue growth (7%).

Bullish Points: (1) Excluding non-core parts of the business (partners no longer making referrals, non-core portfolios from Worldpay, and a managed services relationship for a departing portfolio), revenue growth was about 5.5% during Q2 and 6% for H1; (2) at a mid-teens growth rate, the global e-commerce appears to be performing quite well, especially given competition from Stripe, Adyen, Braintree and Checkout; and (3) GPN was firm in its belief that 2027 should see accelerating revenue growth (more on that later).

Bearish Points: (1) A stronger spending backdrop in North America was unable to offset the headwinds from the ME conflict, resulting in a slight reduction to organic revenue guidance, which is never good; and (2) GPN’s adjusted FCF number continues to be highly suspect given the level of add-backs.

2027 Organic Revenue Growth Outlook

I see a path to approximately 6% organic revenue growth during 2027 based on: (1) modest near-term underlying acceleration in Enterprise and Platforms organic revenue growth; (2) modest acceleration in SMB organic revenue growth (4% to 4.5%) starting in H2 2027 as Genius starts to become more meaningful; (3) lapping ME headwinds (a 4-point headwind to the Enterprise segment and 1-point overall) in Q2 2027; and (4) a slowing decline in non-core revenue.

• Enterprise implies underlying acceleration to approximately 12% organic revenue growth by Q2 2027 from 11% in Q2 2026, largely due to business that has already been signed but has yet to convert.

• Platforms acceleration of 0.5% starting in Q3 2026, reflecting an increasing mix of faster growing embedded payments revenue. I assume growth slows back to 7% by H2 2027.

• I assume there will be no change in SMB organic revenue growth over the next four quarters with a modest step-up in H2 2027 due to a more meaningful contribution from Genius.

• My model assumes no change in the ME, only that it’s lapped in Q2 2027. A full return of flight activity would presumably result in upside to my estimates.

• I assume non-core revenue declines 19% in 2026 and low double-digits in 2027. This is my attempt at conservatism, but I admittedly do not have strong visibility into this line item.

Key Objectives

I believe GPN must do the following over the next 18 months in order for the stock to continue to move higher:

• Successfully deliver on its de-risked organic revenue growth outlook for H2 2026 (4.5%)

• Generate accelerating revenue growth in 2027, preferably 6% or greater

• Provide more disclosure around the Genius platform, including at least volume and revenue statistics (similar to Fiserv)

• Narrow the gap significantly between GAAP FCF and adjusted FCF by the end of 2027, if not sooner

Thoughts On The Stock

This was not the quarter and guide I had hoped for from GPN, but it wasn’t necessarily overly disappointing either. The ME impact had been well telegraphed after all, so it shouldn’t have taken anyone by surprise. A less than 1% decline shows it did not, and sentiment might be out of the basement for the time being. At the new midpoint of its 2026 EPS guide, GPN trades at <6.5x. I continue to believe there’s appreciable upside for the stock if GPN can deliver on its commitments, namely the ones I laid out earlier: 6% organic revenue growth in 2027 and a significant narrowing in GAAP to adjusted FCF. Of course, that’s TBD, and GPN’s track record has not necessarily been stellar. In full disclosure, I slightly trimmed my position at the open today (from 2,000 to 1,950 shares). There are two tranches of GPN stock I own: the first, and much larger portion, was acquired in the 2022-2023 time frame, with an average cost basis of around $100-110; the second, smaller portion, was acquired on the day the Worldpay acquisition was announced, below $70. I view this morning’s sale as a small unwind of that post-Worldpay acquisition buy, as my thesis that the company was (and is) not going to blow-up has largely played out. I still consider GPN a core position but would not preclude additional trims if the stock continues to move higher ahead of, or without, corresponding objectives being completed.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting, or subscribing!

Disclosure: As of August 5, 2026, of the stocks mentioned in this report and across payments and fintech, I am long Visa, Global Payments, Intuit, Block, Adyen, Shift4 Payments, Paychex, Mastercard, and Broadridge Financial. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

As of today, Amex’s discount has widened back to 32%. Although I believe Amex’s re-rating was absolutely deserved, to close the valuation gap with Visa and Mastercard further, but never completely, Amex must accomplish two things: (1) resume share gains of the U.S. credit card market; and (2) sustain profitable growth. Based on its most recent report, I believe results are mixed with much work left to do. The purpose of this update is to: (1) examine progress against my objectives, weighing all the evidence, including YTD results; and (2) review my estimates for Amex, including fair value.

Resume share gains of the U.S. credit card market

Background. The U.S. credit card market is the largest payment card market in the world (outside of China). It is also the most lucrative for issuers with fat interchange rates, record high APRs (21%), and recently stable loss rates. Outside of the pandemic’s recovery phase, Q2’s volume growth rate of 9.8% was the strongest since Q3 2018, suggesting a secular-led slowdown remains in the future. Therefore, it is no surprise the market is highly competitive, especially for affluent Americans who generate most of the spending but also consume an increasing amount of rewards, including points, cash back, and experiences. Amex’s share of the U.S. credit card market peaked in 2013 at slightly less than 27%. In 2025, it was 19.2%. In addition to its loss of Costco in 2016, the key contributors to Amex’s share decline are increasing competition in the affluent segment and, more recently, struggles among middle market companies in the U.S. commercial card market, where Amex is defending a significant presence. In order to support growth and a potentially higher multiple, I believe it is imperative for Amex to resume share gains, or, at the least, stabilize losses.

Verdict: Amex is falling short with share loss picking up recently:

However, it’s not that black and white. The composition of Amex’s U.S. spend differs from Visa and Mastercard. Over the twelve months ending March 31, 2026, 43% of Amex’s U.S. billed business was commercial, including 35% from small and mid-sized enterprises (SMEs) and 8% from large corporations. Over the same time, only 25% of Visa’s U.S. credit payment volume was commercial. Although Mastercard only discloses total worldwide commercial gross dollar volume (GDV) annually, I believe their U.S. credit purchase volume has a similar commercial mix as Visa’s. Based on the evidence, I believe Amex is gaining share of the U.S. consumer credit market due to their significant presence among affluent households—but not necessarily gaining share within the affluent category—and losing share of the U.S. commercial card market. Below is my approximate estimation of the U.S. commercial card market from 2019-H1 2026:

Recently, Amex called out softness in the middle market, citing competitors Brex and Ramp specifically, which are highly successful fintechs that combine corporate cards with modern expense management software. Divvy, owned by BILL Holdings, also competes in the market and grows volume at an attractive rate (low-to-mid 20% range over the last several quarters). In response to this challenge, Amex recently introduced its own expense management platform, relying on technology from recently acquired companies Center and Hypercard, and is refreshing its commercial card lineup.

On the consumer side, I believe it’s unlikely Amex is gaining share in the affluent category. Here’s why. Although we don’t know exactly how fast the affluent category is growing, we’ve been told repeatedly it’s growing the fastest:

In the most recent period where we have comparable data, which is Q1 2026 (March), Visa’s U.S. consumer credit payment volume grew 8.8% vs. a 9.7% increase for Amex. The narrow spread suggests the affluent portion of Visa’s U.S. consumer credit payment volume may be growing faster than Amex’s. If we assume 40% of Visa’s U.S. consumer credit payment volume was from the affluent category during Q1 2025 (March), a reasonable estimate in my opinion, plugging in a 9.7% growth rate (matching Amex’s) for Q1 2026 (March) would imply Visa’s non-affluent payment volume grew 8.2%, a rather small spread. If we assume 10.5% growth for the affluent portion, a premium to Amex’s growth rate, it implies non-affluent payment volume grew 7.6%, a nearly 3-point spread, which is more likely, in my opinion.

Conclusion. I believe Amex is not gaining share in the affluent consumer category and losing share in the commercial category. Overall share loss is moderate only because the affluent consumer is the fastest growing, where Amex has a significant presence. If the gap between affluent and non-affluent consumer spending narrows, which is unlikely over the near-term, Amex’s share losses may accelerate.

Sustain profitable growth

Background: Amex’s long-term aspiration is to grow revenue more than 10% and EPS at the mid-teens. From 2019-2025, Amex’s revenue and EPS compounded at 9% and 14.5%, respectively. For 2026, Amex now expects 10% revenue growth and 14% EPS growth at the midpoint, largely in-line with aspirational targets. The building blocks for Amex’s EPS growth are for leverage from the marketing and operating expense lines to offset variable customer engagement (VCE) growth, which has been significant both as a percentage of revenue and billed business:

Verdict: The expansion in Amex’s pre-tax profit margin since 2019 has been entirely due to leverage from provision for credit loss as pre-tax, pre-provision profit margin fell approximately 1-point:

Additionally, Amex benefitted from a significant shift in its funding mix with nearly three-fourths sitting in lower-cost deposits at the end of 2025 versus approximately half in 2019. Based on my math, I believe this shift created an additional $983 million of net interest income (due to saved interest expense) and pre-tax profit for Amex:

Adjusting for this, Amex’s expansion in pre-tax margin since 2019 falls from 2.6-points to 1.5-points on a pro-forma basis while the contraction in pre-tax, pre-provision margin increases to 2-points from 1-point:

The key question moving forward is whether Amex will be able to sustain profitable growth as tailwinds from the funding mix shift become less significant, the credit environment potentially becomes less favorable, and the transition to a primarily fee-paying card member mix runs its course.

Conclusion: To be determined, although YTD 2026 results show some bumps in the road. Even though Amex’s pre-tax profit margin expanded by 60-bps from H1 2025 to H2 2026…

The expansion was driven by a couple of non-recurring, or unsustainable, items, more than offsetting higher-than-anticipated VCE costs: (1) a $215 million reserve release in H1 2026 versus a $347 million reserve build in H1 2025; and (2) an indeterminable amount of favorable items [a tax reversal, gains on Amex Ventures’ investments, and a gain on portfolio sale(s)] impacting other expenses, causing them to fall by $334 million from H1 2025 to H1 2026. If I assume H1 2026 other expense is flat to H1 2025 and the credit loss reserve ratio stayed at the Q4 2025 exit rate (2.86% vs. 2.54% Q2 actual), it reduces H1 2026 pre-tax profit by $1.08 billion, or about 3 margin points.

The Numbers

For 2026, I expect revenue of $79.22 billion, up 9.7%. Underlying this is 10% growth in U.S. consumer billed business, 3% growth in U.S. commercial, which incorporates about a 4-point impact starting in Q4 from the loss of the Lowe’s (April) and Amazon (August) portfolios, and 14% growth internationally, including a 2-point FX tailwind, implying 12% FXN growth. I expect a merchant discount rate of 2.21%, down 3-bps from 2025, leading to 8% discount revenue growth. After slowing to 15% growth in Q2, I assume net card fees growth accelerates to 16% in Q3 and 18% during Q4, resulting in a full-year growth rate of 17%. I expect other fee revenue and network partnership revenue to both grow 8% during 2026. I estimate net interest income will grow 10%.

On the expense side, I assume VCE costs will represent 44.6% of revenue, up 180-bps from 2025. If marketing expense grows approximately 10% during H2 as Amex expects, that implies it will represent 8.4% of full year revenue, down 30-bps from 2025. Operating expense as a percentage of revenue will decline by 1-point to 21.2%. This results in a pre-tax, pre-provision profit of $20.418 billion, or 25.8% of revenue, down 60-bps. I expect full-year provision for credit loss of $5.098 billion, down from $5.256 billion in 2025. Pre-tax profit of $15.32 billion is up 11% versus 2025. I assume a full-year tax rate of 21.8% and an average diluted share count of 678 million based on a 4 million share reduction in Q3 and Q4. The result is EPS of $17.47, up 14% versus 2025 and at approximately the midpoint of Amex’s guidance:

For 2027, I estimate revenue of $86.23 billion, up 8.9% based on billed business growth of 8%, weighed down by about three-quarters of 1-point by the commercial portfolio sales. Discount revenue is expected to grow 7%, net card fees 16%, other fees 8%, and network partnership revenue 6%. I expect net interest income to grow 9%. I believe U.S. commercial billed business growth will exit 2027 at 6% growth, reflecting some improvement versus its current run-rate. I expect VCE costs to represent 45% of revenue, a 40-bps increase versus 2026, indicating moderation following the uplift from the Platinum card refresh. I assume marketing expense growth of 6% and operating expense growth of 7-8% due to a normalization in other expenses during H1 2027. My provision for credit loss estimate is $5.71 billion, reflecting average balance growth in-line with billed business growth and a slight increase in the net write-off rate. This results in pre-tax profit of $16.54, up 8% with the margin falling 10-bps. Based on a 21% tax rate and an average diluted share count of 661 million yields a 2027 EPS estimate of $19.56, below consensus of $20.12.

My fair value estimate for Amex is $373, implying about 11% upside:

Over my ten-year forecast, I believe Amex’s billed business will compound at 8% with 7.5% growth in U.S. consumer, about 6% growth in U.S. commercial, and low double-digit FXN growth internationally. Assuming a very low single-digit annual decline in the merchant discount rate results in discount revenue growth of about 7%. Based on card growth of 3% and a 10% increase in card fees per card (annual fees increasing and the mix of fee-paying card members rising) yields average annual net card fees growth of 13%. I assume other revenue grows by about 8% and network partnership revenue 5.5%. Reflecting my belief that card balances will grow in line with billed business, and net interest yield will improve slightly, I assume net interest income grows at a compound annual rate of more than 8.5%, faster than 8% billed business growth. This adds up to compound annual revenue growth of 8.4% over my ten-year forecast period, which in no way is conservative, in my opinion.

On the expense side, I assume many long-standing trends continue: rewards and business development costs make up an increasing portion of revenue (from 42.8% in 2025 to 48.6% by 2035 with the percentage of billed business rising to 2.18% from 1.85%), offset by leverage in marketing (8.7% to 7.2%) and operating expenses (22.2% to 18.3%). I believe credit performance will remain strong with provision expense growing slightly more than 6.5%, below both billed business and revenue growth. The result is Amex’s pre-tax profit margin rising from 19.1% to 19.7% over my ten-year forecast period with a peak of 20.2% in 2033, implying compound annual growth of nearly 9%.

My DCF model uses GAAP NOPAT + depreciation and amortization – capital expenditures as a proxy for free cash flow. I use a 21% tax rate, assume capital expenditures average 4.3% of revenue over my ten-year forecast, and depreciation and amortization increases from 3.2% of revenue in 2025 to 4.2% of revenue by 2035, aligning with capital expenditures. I use a 10% discount rate to reflect a heightened competitive environment and the unpredictability of rewards cost escalation and credit cycles. My terminal growth rate is 3.5%. If I dropped my discount rate to 9%, it would boost my fair value of Amex to $445, implying nearly one-third upside. Conversely, if I raised it to 11%, my fair value would drop to $320, implying minimal downside.

Thoughts on the Stock

By no means am I bearish on Amex. However, I fail to see compelling value at current prices, especially compared to other opportunities across payments and fintech, including Adyen (trading at a moderate premium despite a superior growth profile with significant volume sitting at technologically and operationally disadvantaged legacy platforms), Broadridge Financial (a true monopoly in proxy distribution and processing that spins the flywheel for a best-in-class corporate governance and communications franchise, trading at a discount), and Intuit (QuickBooks is at the center of the SMB ecosystem, providing a launching pad for top-tier growth for Intuit across payments, payroll and HCM, also trading at a discount). In my mind, Amex’s recent results fail to satisfy my requirements for a higher multiple and, in fact, suggest Amex still has much work to do to regain momentum in the U.S. commercial card market and deliver differentiation that drives superior performance among affluent consumers.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting, or subscribing!

Disclosure: As of August 3, 2026, of the stocks mentioned in this report and across payments and fintech, I am long Visa, Global Payments, Intuit, Block, Adyen, Shift4 Payments, Paychex, Mastercard, and Broadridge Financial.I do not hold a position in American Express. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

After reports earlier this year that Stripe and others were considering a bid for all or part of PayPal, Reuters reported exclusively last week that Stripe and private equity firm Advent International (Advent) have indeed submitted an offer for all of PayPal at $60.50 per share. Under the proposal, Stripe and Advent would each own half of PayPal, with no plans to split the company up, and would contribute $17 billion in equity with the remaining consideration funded by debt committed by J.P. Morgan and Morgan Stanley.

The $60.50 offer price translates to an enterprise value of about $54 billion based on 889 million shares outstanding, assuming dilution, and net debt of $67 million, both as of March 31. This implies an EV-to-2026 EBITDA multiple of about 8x and price-to-2026 EPS of 11.4x. While low on their face, the multiples represent premiums to PayPal’s two most comparable publicly traded peers, Fiserv and Global Payments:

However, on an EV-to-EBITDA basis, the proposed price is below recent comparable transactions in payments:

Although a formal response has not been given, PayPal’s board views the offer as inadequate, according to Reuters. Reporting by Reuters revealed additional important information: first, if regulators force a break-up to clinch a deal, Advent could take Braintree, merging it with Nuvei which it took private during 2024, while Stripe takes the rest, including PayPal’s massive user base, suggesting Stripe sees the most value in adding a consumer side to its platform, not more processing scale; and second, Block was involved in earlier discussions with Stripe and Advent about a potential bid for PayPal, but dropped out before the others moved forward. It’s not exactly clear what Block’s thinking was on the strategic merits of a tie-up with PayPal, and how logistics would have worked under tri-party ownership.

Handicapping Next Steps

With an initial bid seemingly dead on arrival, PayPal’s earnings at the end of July may shape negotiations moving forward: deliver solid results and a plausible turnaround plan for core checkout and PayPal’s hand could be strengthened, emboldening them to hold out for a higher price, which they may or may not get; or continue struggling, making acceptance of a lower takeout price more likely. Regardless of the earnings outcome, I believe it is likely Stripe and Advent will make at least one more bid for PayPal. If I were PayPal, or a banker advising them, which I am certainly neither, I would be asking for at least the low-end of recent comparable transactions, 9.6x on an EV-to-EBITDA basis. This implies an enterprise value of $64.7 billion, or about $73 per share. Therefore, if I was handicapping next steps, I would say a bid between $65 to $70 per share is more-likely-than-not rejected, and a bid of $73, or more, has a better shot of being approved. At this point, I believe it is unlikely another suitor emerges.

Is It Worth It For Stripe?

Ultimately, I am not privy to Stripe’s thinking, or PayPal’s or Advent’s, for that matter. I do not know how ‘badly’ Stripe wants PayPal, or believes it needs them, if at all. It is certainly possible Stripe is taking a flier on PayPal with a low-ball offer and may walk if it is rejected. Advent’s history (see at end) and participation certainly suggests opportunism. Stripe has been a hugely successful company to-date, and a massive acquisition like this would be a striking departure from it’s usual playbook. Further, over time, the market has soured on large-scale payments M&A that adds legacy parts. Finally, if my interpretation of Reuters’ reporting is correct, and Stripe prefers the consumer-focused digital wallet part of PayPal, it is a large gamble for Stripe, in my opinion.

First and foremost, the market for digital wallets and consumer finance apps is highly competitive. Each transaction must be fought for and won…every single time. Incentives are on the rise, suggesting an inability to differentiate. Second, Stripe powers other digital wallets and consumer finance apps that compete with PayPal. While I think channel conflict as a risk has historically been overstated, it is still relevant. As an example, would PayPal’s BNPL offering take precedent over Affirm and Klarna at Stripe’s merchants, and how would that impact those relationships? Finally, any effort to build a two-sided stablecoin platform, or one that circumvents Visa and Mastercard, is wishful thinking, in my opinion, as the ‘on-us’ pipe dream has proven perpetually out of reach for any non-network payments company.

So, to answer my question: no, I do not believe it is worth it for Stripe.

PayPal Stock: What to Do?

I see upside to the mid-$70s for PayPal under an ideal scenario, or about 30%. It would likely take some time to get there with potential twists and turns along the way. If a deal falls through, PayPal’s stock could retrace its 17% gain since the formal bid was reported, or worse, given there was likely some takeout premium in the stock since late February when acquisition interest first surfaced. I certainly believe PayPal could trade down to a Fiserv or Global-type multiple if they decide to go it alone. I am not a gambling man, so I do not participate in ‘special’ situations and will stay far away from this one.

Implications for Payments and Fintech

I think there’s two ways to look at a potential transaction’s impact on payments and fintech: a glass half full and glass half empty approach:

Glass Half Full

The offer by Stripe and Advent, however low it may be, suggests there is an underlying bid for the group at a certain level, putting a floor underneath valuations. That would be welcome news for companies like Fiserv, Global Payments, and Shift4 Payments. However, there is one huge caveat: PayPal has a pristine balance sheet, and those three companies do not.

Consider the math: for the $54 billion proposed PayPal deal, only $17 billion of equity is needed with the remaining $37 billion funded by debt, implying a pro-forma debt-to-EBITDA ratio for standalone PayPal of 5.5x ($37 billion divided by $6.74 billion of EBITDA). The deal’s funding mix would be 2.2 to 1 debt-to-equity.

With starting net leverage ratios in the 3-4x range, significantly more equity is required to fund a private equity buyout of either Fiserv, Global Payments, or Shift4 Payments. To pay a similar 8x Fiserv’s 2026 EBITDA would imply an equity value of $41 billion ($77 per share) with additional debt capacity of $19.3 billion to 5.5x EBITDA (5.5 x $8.67 billion of EBITDA = $47.7 billion – current net debt of $28.4 billion = $19.3 billion) implying equity required of $21.7 billion, resulting in a funding mix of 0.9 to 1 debt-to-equity.

Stripe’s combination with PayPal disrupts the momentum of payments’ arguably most successful company. Additional volume opportunities and partnerships come into play, and innovation slows for Stripe, allowing others to catch up. If Braintree combines with Nuvei, similar disruption takes place, creating opportunities for competitors like Adyen, Checkout, and yes, Stripe.

Glass Half Empty

Stripe’s control of, and magical touch on, both Braintree and PayPal’s digital wallets make them more formidable competitors, placing further pressure on legacy processing platforms like Worldpay, and modern ones like Adyen and Checkout, as well as other digital wallets and BNPL providers. Stripe’s new massive two-sided platform creates an unrivaled data edge, further widening Stripe’s moat, and providing the scale necessary to win in agentic commerce. The unthinkable happens and Stripe finally achieves a viable alternative to Visa and Mastercard, disrupting the entire payments industry.

Advent’s History in Payments: Opportunistic Buyer

Advent has proven to be an opportunistic participant in payments M&A. My knowledge of their involvement begins at the depths of the Great Recession when Advent acquired a 51% stake in Fifth Third Processing, the payment processing unit of Fifth Third Bank, contributing $561 million in equity to shore up Fifth Third’s depleted balance sheet. The unit would later IPO as Vantiv in 2012. In a similar fashion, during 2010, Advent and Bain Capital bought 80% of Worldpay, Royal Bank of Scotland’s (RBS) merchant services business, injecting fresh capital into the struggling bank. Worldpay’s IPO in 2015 netted Advent and Bain a nearly $5 billion gain. Two years later, Vantiv agreed to acquire Worldpay for more than $10 billion. When Worldpay was being shopped by owner FIS during 2023 (FIS bought Vantiv in 2019, try to keep up), the Financial Times reported Advent was outbid by ultimate winner GTCR. More recently, following a significant drawdown (approximately 90% between 2021 and 2023), Advent agreed to take Canadian payments company Nuvei private for $6.3 billion in 2024, following that up with the planned acquisition of cross-border payments company Payoneer for $2.75 billion, a significantly discounted valuation, announced about one month ago.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclosure: As of July 20, 2026, of the stocks mentioned in this report and across payments and fintech, I am long Visa, Global Payments, Intuit, Block, Adyen, Shift4 Payments, Paychex, Mastercard, and Broadridge Financial. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

While I’m hopeful performance will improve, it’s unlikely to over the near-term if the current market dynamic remains in place—long AI infrastructure and short software and payments. To be fair, my skepticism for the durability of the AI buildout has been completely wrong, and may continue to be so for the foreseeable future. It’s cost me, but my opinion on the topic has not changed, so I have no interest in reversing course and chasing stocks with either elevated earnings, multiples or both. And, in fact, for the exposure I do have—KLA and Arista Networks—I have been trimming into strength.

I had the distinct honor of owning two of the worst performing stocks in the S&P 500 during Q2: Intuit and Zoetis. While one deserved it, the other almost certainly did not:

• Over the past several months, Zoetis has consistently failed to anticipate near-term challenges to its business from bad publicity (side effects from its osteoarthritis pain medication for dogs), competitive launches in key categories (parasiticides and dermatology), and economic weakness (a decline in vet visits and price sensitivity). As a result, since inching organic revenue guidance up after last year’s Q2 results, Zoetis has cut its outlook in two of the three quarterly reports since then, causing the stock to decline by approximately half with the multiple falling from 22.5x to less than 11x. While the company’s current outlook for 2-5% organic revenue growth in 2026 seems respectable, I don’t believe the market has much confidence in their ability to achieve it, especially given their recent track record and the ramp full-year guidance implies given Q1’s flat performance. Despite my lack of confidence in management, I believe Zoetis’ future is brighter than what the current stock price implies, prompting me to hold on to my shares.

• Even though Intuit’s estimates have moved modestly higher over the past year, the stock is down nearly two-thirds with the multiple collapsing from 35x to nearly 10x on an adjusted EPS basis. After teetering on the edge, TurboTax’s hiccup this past tax season—7% growth instead of the 8% forecasted, which, to be fair, they usually exceed—pushed Intuit firmly into the AI loser penalty box, which can be difficult to escape. While Intuit is one of my favorite long-term ideas, I’m under no illusion about the pickle it’s in: if TurboTax guidance for the upcoming tax season is favorable, the market won’t believe it, demanding proof which won’t come until May of 2027; or, if guidance is not good, and Intuit plans to be more aggressive to win back price sensitive low-end filers, the stock will get punished immediately, without potential for redemption until May of 2028. Heads I lose, tails you win.

Long Mastercard

During the quarter, I swapped my position in MSCI plus some cash for a more sizable starter position in Mastercard, which I believe is the best business in payments and fintech (link). At the time of the swap, MSCI was trading at 31x versus 24.5x for Mastercard, a gap I did not believe was justified. Together, Visa and Mastercard make up 17% of my portfolio. Historically, Mastercard has traded at about a 4-point spread over Visa on a NTM P/E basis. Based on the way I model the companies, I believe a 4-point premium is warranted given Mastercard’s superior long-term earnings growth due to its higher structural growth rate—more exposure to higher-growth value-added services and rest of world payments markets—and margin expansion potential—even though Visa processes two-thirds more volume across its network, Mastercard has more employees. Currently, Mastercard trades at only a 1-point premium, making Mastercard relatively more attractive than Visa, in my opinion.

My Portfolio

Please note, this is the stock portfolio I actively manage for capital appreciation, which complements my investments in equity and bond index funds, high-yield dividend and dividend growth stocks, money market accounts, and certificates of deposit.

I impose no constraints on myself when assembling the portfolio. My primary goal is to find high-quality companies selling at reasonable prices. I maintain a shopping list of about 50 companies as portfolio candidates. One of my objectives is to consolidate positions. In Q2, I exited two positions and initiated one new position, resulting in 18 holdings total, down one from Q1. Reasons for exiting include favorable valuations, positions that are too small, or better opportunities elsewhere. My goal is for 15-20 portfolio companies.

Purchases during the quarter:

And sales:

I sold Otis Worldwide but still maintain a position in the stock in my dividend portfolio. As previously mentioned, I sold MSCI to fund a position in Mastercard as I believed Mastercard represented a superior alternative.

Below is a full list of my portfolio holdings as of June 30, 2026:

My Investable Universe

This is the group of companies I look at outside of payments and fintech. All of the payments and fintech names I follow are fair game for inclusion in my portfolio.

Last week, I named my top picks for payments and fintech during H2 (link): Adyen, Broadridge Financial and Intuit.

Outside of that, very little excites me at the moment. A couple of names I’m looking more closely at are Netflix, Domino’s Pizza—which I recently bought for my dividend portfolio, and Boston Scientific.

As of July 13, 2026, I held long positions in the following stocks:

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclaimer: This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Even though many companies performed well, meeting or exceeding my bullish benchmarks, sentiment remains challenging with the market severely punishing any misstep. Outside of Sezzle and Dave—the top performers during H1 2026—the median return across the remaining 21 payments and fintech companies listed below was -19% with the multiple compressing 25% despite earnings estimates, whether that be EPS or EBITDA, rising 3%:

With the exception of the networks, most mature payments and fintech companies trade at significant discounts to long-term averages:

Among faster growing companies, there remains significant variation in multiples despite similar top-line growth. As an example, even though Adyen, Block and Toast are expected to grow top-line 19-22%, Toast (28x) trades at a significant premium to Adyen (16x) and Block (14x) on an EV-to-EBITDA basis:

The order of the article is as follows: the company, my first half grade, bullish and bearish developments as written January 1, 2026, an explanation of performance relative to expectations, and second half objectives. At the end of the article, I share my top picks.

American Express: B

American Express’ credit performance remains best-in-class, a bullish development. However, U.S. SMB billed business growth remains ‘stuck’ in the 3-4% range and total U.S. billed business growth of 7.2% during Q1 trailed industry-wide growth by 120-bps, the largest spread since…Q1 2021, both bearish developments. Bottom line, I don’t believe American Express has lived up to what its re-rated valuation demands.

Second Half Objectives: I’m sticking to my guns. American Express must close the gap in U.S. credit for the stock to move appreciably higher.

Adyen: B-

While several companies announced significant reductions in force, Adyen is accelerating headcount growth, weighing on 2026 margins, a bearish development. Add in net revenue guidance that failed to excite, the CFO’s departure, and a shift in strategy to incorporate (some) M&A, and you have a recipe for an unsteady—but by no means bad—H1.

Second Half Objectives: Hit net revenue guidance, preferably at midpoint (21%) or above, reiterate long-term margin guidance (55% EBITDA margin by 2028), and talk credibly about how recent acquisitions will strengthen or fortify Adyen’s competitive position and are consistent with Adyen’s ‘single tech stack’ ethos.

BILL Holdings: A-

BILL is set to grow core revenue 15-16% in fiscal 2026, similar to fiscal 2025, and above the high-end of its original guide of 12-15%, with volume growth remaining in the low double-digits, bullish developments. Further, the company’s recent 30% reduction-in-force (RIF) is likely to result in a step-up in fiscal 2027 profitability, accelerating the decline in stock-based compensation as a percentage of revenue, which was already trending down.

Second Half Objectives: I think another year of the same—mid-teens core revenue growth—would go a long way for BILL. The company’s RIF put AI front and center so it’s important BILL shows traction with its AI-powered tools for SMBs.

Block: B+

While the 40% workforce reduction, Block’s AI ambitions, and significant lending expansion make headlines and drive short-term financial performance, underlying momentum continues to improve, although only modestly, in my opinion. After a softer Q4, Square’s GPV growth accelerated during Q1 with growth in food and beverage volume drawing nearly equal to Toast’s, bullish developments. However, the spread between Square gross profit and volume growth (4-points in Q1) remains too wide for comfort. Outside of lending, Cash App’s performance remains positive, but not necessarily accelerating: commerce volume and primary banking actives (PBAs) growth remains in the high-teens.

Second Half Objectives: With a nice 21% gain during H1, I think the stakes get a little bit higher for Block in H2: Square’s gross profit growth needs converge with volume growth, Cash App would ideally sustain commerce volume and PBAs growth in the high-teens, and it would be a big plus for Block if it can demonstrate AI features are facilitating customer success across Cash App and Square.

Broadridge Financial: N/A

Broadridge’s governance and communications businesses continue to perform well, sustained by increased financial market participation. Although I don’t believe tokenized securities pose a risk to Broadridge’s franchise, the onus on them is to win that argument, which may prove difficult over the near-term. Capital markets and wealth management are more SaaS(y), exposing them to AI fears, which has not been helped by declining closed sales during fiscal 2026.

Second Half Objectives: I think it’s imperative Broadridge close some of the larger, complex deals they cited as taking longer last quarter, and provide an outlook for positive closed sales growth in fiscal 2027. Outside of that, providing fiscal 2027 guidance that falls within its long-term algorithm of 5-8% organic recurring revenue growth and 8-12% EPS is mandatory, in my opinion.

Chime: N/A

Chime’s done a lot right since its IPO, but has not been rewarded. I think that’s largely a function of starting valuation and an overshoot to the downside. I believe it’s up to Chime how fast they want to step on the accelerator in terms of lending expansion and monetization. With lend-centric peers being rewarded, it may be tempting for Chime to be more aggressive, but I don’t think that’s the right long-term strategy for Chime and don’t think they will do that.

Second Half Objectives: First and foremost, stabilize spending-based volume (card and outside instant transfers) growth, optimize transaction profit growth for lending products (modestly higher loss rates balanced by lending expansion), and execute on its product roadmap (investments, joint accounts, Jade, its AI-powered advisor, and signs of enterprise traction).

Fiserv: C

While things were basically ‘going as planned’ for Fiserv in 2026—maintained guidance, albeit trending toward the lower end, in my opinion, and positive Investor Day presentations—that all got thrown out the window when Mike Lyons abruptly left the company, eroding trust, and clearly a bearish development for sentiment. Putting that aside, Clover’s underlying volume growth accelerated 3-points to 12% during Q1, demonstrating a still a vibrant platform and any pricing/service missteps have not impaired the franchise, a bullish development. I think the verdict is still out for banking, where service/tech problems may run deeper and industry growth is not as attractive as payments.

Second Half Objectives: The exit of Lyons resets the clock. The new CEO must demonstrate competence when speaking to the investment community, which he is likely to do. Accelerating growth in H2 to achieve 1-3% full year revenue growth is important. The market is expecting the lower-end, so anything above that would, I think, would be clearly positive. Most important data points are Clover volume growth and banking organic revenue growth.

Global Payments: C

Global Payments failed to live up to any of my bullish developments, with organic revenue growth of approximately 5% expected for 2026 (down from 6% to exit 2025), a lack of detail and performance reporting on the combined businesses, and a clear preference for share buyback over more aggressive debt paydown. Still, shares rose slightly in the first half (up 2%), suggesting expectations were sufficiently low to provide upside even with lackluster performance. Unfortunately, for other legacy payments companies, that low water mark for valuation, as set by Global Payments, is approximately 4.5x EPS.

Second Half Objectives: Q2 is expected to be softer due to the travel impact from the Middle East conflict and lower income tax payments, combining for a 1-point headwind to revenue growth. I believe 3.5% organic revenue growth is a good benchmark for Q2—above that would be positive, below that negative. Regardless of what happens in Q2, it’s imperative Global accelerates organic revenue growth to slightly more than 5% during H2, as promised, which is based on signed business to be onboarded. Beyond that, gaining a clearer picture of underlying business mix and performance is very important and something Global promised to provide with Q2 earnings last quarter.

Intuit: N/A

Software disruption concerns from AI and a hiccup at TurboTax were good enough for a whopping 63% decline in Intuit’s NTM P/E ratio since the beginning of the year. Taking a step back, Intuit’s fiscal 2026 EPS estimate rose 3% since the start of the year and Intuit remains committed to mid-teens EPS growth moving forward, even though it has signaled slower top-line growth during fiscal 2027 as it resets pricing at the lower-end of its DIY offering.

Second Half Objectives: All eyes will be on Intuit’s TurboTax fiscal 2027 guidance, which will be delivered with fiscal Q4 results announced mid-to-late August. The bad news for Intuit is that a better-than-expected guide won’t be trusted—needing to be confirmed next tax season, which is still a long way off—and a worse-than-expected guide will be punished immediately. Nevertheless, it’s important to remember DIY tax represents a low double-digit percentage of Intuit’s overall business with the low-end making an even smaller contribution. Over the past decade, Intuit’s organic revenue growth averaged 13%. For fiscal 2026, it’s expected to be 13-14%. Reading the tea leaves, I think a fair expectation for the initial fiscal 2027 guide is 10-11% with an emphasis that Intuit’s big bets—the mid-market, its money offering, and assisted tax—are still performing well.

Jack Henry: A

Jack Henry achieved most of my bullish benchmarks—the current midpoint of organic revenue guidance implies 6.8% growth, at the high-end of original guidance, the number, size and scope of new wins are up significantly versus prior year, and FCF conversion is expected at the high-end of 95-100%. Yet, the stock is still down 20% YTD as Jack Henry’s multiple compressed 26% but still remains uncharacteristically high, for this group, in the low-20s.

Second Half Objectives: I think the market would like to see some acceleration in organic revenue growth for Jack Henry in fiscal 2027 based on the strength of new business signed and its pipeline. From fiscal 2019 to 2024, Jack Henry’s organic revenue growth averaged 7.4%. In the last two fiscal years (including 2026), it’s been 60-90 bps below that. A return to the mid-7% range would be helpful along with sustained margin improvement, which Jack Henry has signaled as likely in fiscal 2027.

Mastercard: B+

Since the beginning of 2025, Mastercard’s return has trailed rival Visa’s by more than 12%, resulting in Mastercard’s historical premium—on a NTM P/E basis—falling from about 4-points historically to less than 1-point currently. Mastercard is on track to grow organic net revenue around 12% during 2026, neither bullish nor bearish, with high-teens value-added services growth, a bullish development. While there has been lots of press and jockeying around stablecoins during the first half, I’m no closer to believing they will significantly alter the way consumers and businesses pay one another.

Second Half Objectives: Based on underlying strength in consumer spending and the cessation of open hostilities in the Middle East—which to be fair was already included in Mastercard’s outlook—a guidance increase post-Q2 seems like a 50-50 proposition.

Paycom Software: N/A

Although Paycom continues to deliver innovative products that are well liked by customers, recurring revenue growth continues to slow, despite hints to the contrary ever since Paycom reset its growth rate following the cannibalizing effects of significant Beti adoption in 2023.

Second Half Objectives: The market is keying on improved client employee growth and retention as signs that Paycom’s ‘full solution automation’ platform is winning not only hearts and minds, but also the wallets, of clients. Since these statistics are given only once at the end of each year, investors are relegated to reading the tea leaves from quarter-to-quarter, which can be difficult and have turned out to be more optimistic than reality during recent years. The objective for the remainder of the year is to deliver healthier upside to its 7-8% recurring revenue guidance than the last couple years, when it only has been about 1-point vs. the original guide.

PayPal: C-

Guidance for branded online checkout growth of ‘slightly positive to low-single-digits’ for 2026 fell well short of expectations, a bearish development and underscoring the fragility of PayPal’s most important volume stream. Alex Chriss’ departure was sudden, but several months on, and it’s still not clear what the plan is for PayPal under new CEO Enrique Lores. While rumors of a sale or breakup floated in the spring, they have gone silent of late, and disclosure around the parts of PayPal that may be on the block—including Venmo—don’t appear to be forthcoming anytime soon.

Second Half Objectives: Delivering upside to guidance aside, the most important objective for PayPal is providing a credible plan to stabilize its core checkout business, which may be impossible for anyone to deliver. Although PayPal indicated financial details around its new segments will not be coming until next year, doing so beforehand would be a good step in restoring some level of confidence and credibility.

Shift4 Payments: C

Organic revenue growth fell to the low double-digits during the past couple quarters, a bearish development for Shift4. Potential revenue synergies aside, Global Blue’s growth was expected to slow during 2026 before any impact from the Middle East conflict, which is weighing on near-term performance. Shift4 repurchased a significant amount of stock in Q4/Q1 (about $600 million), keeping leverage high.

Second Half Objectives: Given where Shift4’s stock price is, the primary objective for the remainder of the year is to deliver on guidance, low-end included, which implies low double-digit organic revenue growth, and maintain or increase transparency around the business. I believe there is no expectation for any Global Blue revenue synergies over the near-term, so any evidence of them would be a positive development.

Shopify: A-

GMV growth remains robust (30% in Q1) and operating profit expanded significantly last quarter, both bullish developments. Despite this, Shopify is guiding for a slowdown in Q2. Also, while Shopify believes it will benefit from AI and agentic commerce, the market is likely more skeptical. In a group where no high multiple is safe, Shopify has the highest by far, putting it at risk.

Second Half Objectives: Deliver meaningful upside to guidance as it has in the past, maintain GMV growth in the high-20% range, and demonstrate it is an AI beneficiary not casualty—which is hard to do either way at this point.

Toast: B+

GPV growth remains in the low-20% range, including a 22% increase in both Q1 and Q4. While positive, Toast was one of only a handful of companies that did not see volume growth accelerate from Q4 to Q1. Consistent with its earlier messaging, Toast does expect 2026 margin expansion to be more modest than recent years due to accelerating investment in its growth markets—international, enterprise and food and beverage retail.

Second Half Objectives: Exceed guidance, as usual, provide evidence of accelerating momentum in growth markets, justifying investments, and build confidence in potential upside to the long-term EBITDA margin target of 40%, which the core business has already reached.

Visa: A

Visa is tracking to low-teens net revenue growth during fiscal 2026 on the back of continued strength in value-added services with mid-to-high 20% growth, both bullish developments. It was not too long ago the market was questioning Visa’s ability to grow double-digits, so 12-13% growth is a significant achievement relative to expectations.

Second Half Objectives: Deliver on guidance and continue to position the business for the possibility stablecoins and agentic commerce may become mainstream transaction and payment methods.

Top Picks

My top picks to start the year—Block and Global Payments—delivered decent results during the first half, especially relative to the rest of the group. While I continue to like and hold positions in both stocks, price movement has created more attractive opportunities elsewhere. My top picks as of today, in no particular order, are Adyen, Broadridge Financial and Intuit.

Adyen

Adyen is not fighting for a small opportunity against companies like Stripe, Checkout.com, and Braintree, it’s pursuing a very large pie that currently sits on disadvantaged legacy platforms. While there have been slight missteps, volume and net revenue are still growing at attractive rates—mid-20% and low-20%, respectively—hardly slowing from recent years. Trading at approximately 15.5x on an EV-to-2026 EBITDA basis, Adyen is attractively valued.

Adyen: Much ado about nothing…or something

Broadridge Financial

Broadridge’s proxy distribution and processing business is a virtual monopoly that enjoys secular tailwinds from increased participation in financial markets. By no means eye popping, but you can take 6% organic revenue growth to the bank for Broadridge every year, providing the foundation for 10% EPS growth. The market use to pay a pretty penny for that. No more. At 14.5x NTM EPS, Broadridge is a steal—in my opinion.

Long Broadridge Financial

Intuit

While the market focuses its attention on the blip at TurboTax, it’s overlooking Intuit’s best business, an increasingly all-in-one platform for SMBs with the dominant QuickBooks accounting suite at its center, something no other software, payroll, HCM or payments company can stake a claim to. I think Intuit’s ability to penetrate services—payroll, HCM, lending, marketing and payments—within the QuickBooks base is a huge and underappreciated opportunity that sets the stage for growth to remain attractive for a long time. 13x fiscal 2027 normalized EPS (GAAP plus the amortization of acquired intangibles) makes no sense to me. I think the stock should be much higher.

Long Intuit

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclosure: As of July 6, 2026, of the stocks mentioned in this report and across payments and fintech, I am long Visa, Global Payments, Intuit, Block, Adyen, Shift4 Payments, Paychex, Mastercard, and Broadridge Financial. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Investment Brief

At first glance, there’s much to like about Paycom Software: a founder-led business delivering mission critical solutions to the mid-market through an organically built all-in-one platform, growing underlying recurring revenue at the high single-digits with juicy margins and a rock solid balance sheet, all for the bargain basement price of about 11x next-twelve-months (NTM) headline EPS. Is it too good to be true? Well, in many ways, the answer is complicated.

Although Paycom’s recurring revenue is expected to grow in the high single-digits during 2026, a respectable figure, it’s a far cry from the company’s pre-pandemic growth rate in the high-20% range. Further, despite multiple hints at expected improvement, Paycom’s recurring revenue growth is set to slow from 11% in 2024, which was originally framed as a temporary downshift due to the cannibalizing effects of significant Beti adoption, to 10% in 2025, and 7-8% during 2026, prompting greater scrutiny of potential contributing factors, including the macro environment, company-specific decisions and circumstances, and/or competition:

Stable Macro. Private employment gains have slowed over the past couple of years, falling from 1.4% growth in 2023, to 0.8% during 2024, and an anemic 0.2% increase in 2025. However, through May of 2026, private employment was tracking 0.5% ahead of the prior year, only slightly lower than 2024’s increase. Even if we assume Paycom’s recurring revenue grows above the high-end of its 2026 range, say, at 9%, that represents a 2-point slowdown from 2024 despite similar private employment growth, suggesting macro is not contributing to Paycom’s slowing growth.

Beti Cannibalization. Starting in 2023, Paycom incentivized client relations representatives (CRRs) to push adoption of Beti (through a tripling of their sales commissions) within Paycom’s existing customer base. Beti encourages employees to do their own payroll, reducing preparation time and labor, and catching errors before they happen, which are often costly for employers. While adoption of Beti boosts customer ROI, it had two significant impacts on Paycom’s financial results: first, CRRs sacrificed revenue-generating cross and up-sells to focus on Beti adoption and utilization, which generates little-to-no incremental revenue; and second, significant adoption of Beti results in fewer supplemental payroll runs to fix mistakes that Beti eliminates, reducing Paycom’s revenue. The strategy’s financial impact culminated in a 38% decline for Paycom’s stock following Q3 2023 results (reported October 31), which saw the company miss it’s Q3 revenue forecast by about 1%, guide Q4 revenue down more than 6.5%, and introduce guidance for a 10-12% increase in 2024 revenue versus the consensus expectation of more than 20% growth. While the word transitory was initially used to describe the downshift caused by Beti’s cannibalization, growth has never reaccelerated, but, in fact, continues to moderate.

Client ROI Achievement Front and Center. Paycom’s Beti push is part of a broader effort by Paycom to drive improved ROI for customers without asking for an immediate return, instead hoping to share in the value creation over time. Over the past two years, Paycom has continued to introduce innovative no-or-low-cost solutions, including GONE, its automated decisioning tool for time-off requests, and IWant, an AI-powered, command-driven prompt allowing employees, HR professionals, and executives to easily access information from Paycom’s platform with little-to-no training. Although Paycom has shared anecdotal evidence about customers’ positive reaction to these new features, a meaningful impact on Paycom’s sales or retention has yet to materialize. Even though client employee growth ticked higher during 2025, along with gross revenue retention, Paycom’s 2026 guidance does not suggest accelerating momentum.

Sales: Stops and Starts. At the end of the day, Paycom’s ability to grow requires feet on the street. Paycom defines capacity by the number of sales teams. A team consists of one manager and several other sales professionals. Paycom has at least one sales office in 41 of the top 50 U.S. markets, including multiple offices in seven cities. While Paycom has mentioned an aspirational goal of 100 sales teams, it ended 2025 with only 58. Further, growth in sales teams has slowed meaningfully. From 2016 to 2018, Paycom increased its sales teams by seven, from 42 to 49. Over the next seven years, only nine sales teams were added:

To open a new sales office, Paycom elevates a high-performing sales professional to manager, relocates them, and tasks them with hiring a team of sales professionals, which are usually college graduates. It takes 24 months for a new sales team to mature. In addition to a lack of candidates to start new offices, Paycom has experienced turnover at the top of its sales organization. Early in 2024, Amy Walker took over all of sales for Paycom, with CEO Chad Richison noting on the Q1 2024 call that she was having a “dramatic impact on that group…and we continue to improve week after week” and in mid-2025 that Paycom had gone back to the “basics” on training. Fast forward less than two years and Jeff York, who was Chief Sales Officer for Paycom from 2007 to 2021, returned as leader of the sales organization in early 2026. At the same time, Paycom was pulling sales teams from the field to retrain them on full solution automation and adding two sales professional per office, resulting in about 100 additional sales professionals for Paycom. Although Paycom does not provide specific detail or guidance on new sales bookings, according to Richison, the retraining “put a little air in the line” with an expectation for bookings to “have some inflection” throughout the year.

Increasing Mid-Market Competition. While the payroll and HCM industry has always been competitive, major players are increasing their focus on the mid-market—Paycom’s sweet spot—and delivering positive results, suggesting a material impact on Paycom:

• ADP’s modernization of Workforce Now, its HCM platform for mid-sized businesses, has contributed to accelerating mid-market customer growth. From fiscal 2019 to 2023, the number of Workforce Now clients increased 10,000—from 70,000 to 80,000. The next 10,000 increase took just two years as Workforce Now clients exceeded 90,000 at the end of fiscal 2025.

• One of Intuit’s big bets is on the mid-market. The company’s Intuit Enterprise Suite combines QuickBooks with payroll, payments, and marketing, and its newly launched Workforce solution goes even further, “equipping businesses with a robust HCM solution that automates, simplifies, and syncs their workforce management, including payroll, time tracking, benefits, recruiting, hiring, performance and compliance on a single platform.” In the past, Intuit’s mid-sized businesses usually graduated to more sophisticated platforms like Paycom’s. Now, many are staying, and adopting more solutions from Intuit as they grow. For fiscal 2026, I expect Intuit’s mid-market ecosystem to generate more than $1.6 billion of revenue, adding approximately $450 million, nearly 3x the increase for Paycom.

• Workday is aggressively moving down-market, from large enterprises to mid-sized businesses, highlighted by the launch of Workday GO at the start of 2025. GO combines Workday’s leading HCM and finance capabilities with AI-powered agents and fast implementation times (less than 60 days) to attract mid-sized businesses. Workday reported medium enterprises “drove roughly 60% of net new ACV (annual contract value) in FY’26.” Given an expectation for an additional $1.1 billion of subscription revenue for Workday in fiscal 2027 implies medium enterprises are contributing hundreds of millions of new subscription revenue, also multiples of the increase for Paycom.

Valuation: More than Meets The Eye, But Still Attractive. Paycom’s non-GAAP net income overstates earnings power in two important ways: first, it adds back stock-based compensation; and second, it ignores the net cash outflow that consistently arises from obtaining and fulfilling contracts, which can be measured as the amount capitalized minus expensed. Paycom is unique in the sense it amortizes contract costs over a 10-year period as opposed to 3-8 years for competitors, resulting in lower amortization expense for Paycom, which overstates both GAAP and non-GAAP profitability. As a result, the multiple on Paycom’s ‘headline’ EPS is materially lower than reality, in my opinion.

Over the last twelve months (LTM), Paycom generated $522 million of non-GAAP net income, which adds back stock-based compensation expense. Free cash flow of $442 million over the same period represented less than 85% of non-GAAP net income, primarily reflecting the $79 million gap between capitalized and amortized costs for obtaining and fulfilling contracts (i.e., a net cash outflow). Reducing free cash flow by stock-based compensation results in about $332 million of non-dilutive earnings power for Paycom over the LTM, only 63% of non-GAAP net income. Applying a similar ratio to the NTM consensus EPS estimate of $11.30 equals $7.17 and implies a price-to-earnings multiple of nearly 18x, much greater than about 11x on a non-GAAP basis. However, this is likely too simplistic a method and ignores the likelihood of continued declines in stock-based compensation and net cash outflows from obtaining and fulling contracts as a percentage of revenue:

Based on my modeling, I estimate GAAP net income of $483 million over the NTM, which includes stock-based compensation of $81 million, or 3.6% of revenue, versus $111 million, or 5.3% of revenue, during the LTM. I assume the net cash outflow from obtaining and fulfilling contracts is $78 million over the NTM, or 3.5%, versus $79 million, or 3.8% of revenue, during the LTM. Reducing my GAAP net income estimate of $483 million by $78 million results in $405 million or $8.44 of normalized EPS, implying a P/E of about 15x:

I believe this is an attractive valuation for Paycom. In fact, on an apples-to-apples basis, Paycom trades at a discount to ADP and Paychex, slower-growing competitors. However, performing a similar calculation for Intuit yields a P/E of only 12.5x on about $21 of normalized EPS for fiscal 2027, a discount to Paycom, ADP and Paychex, despite a superior growth profile for Intuit. As a result, among this group, I still strongly prefer Intuit over everyone else.

Key Discussion Points

Organically built all-in-one platform. Unlike competitors that have different platforms for different market segments, acquire companies to gain or enhance specific features and functionality, or open their platforms to third parties, Paycom has a single organically built all-in-one platform that is largely self-contained and discourages third party integrations. This approach carries both advantages and limitations for Paycom and its customers. For Paycom, a single platform simplifies and speeds product development, lowering costs. It also gives Paycom a holistic view of client data, providing an excellent base for building AI-powered tools. For customers, an all-in-one platform is ideal for smaller and mid-sized businesses that wish to consolidate their payroll and HCM functions with a single vendor. Paycom’s single source of truth (i.e., database) also eliminates costly mistakes associated with multiple back-office integrations. An employee record entered once drives all modules on Paycom’s platform. Unfortunately, larger businesses and more sophisticated mid-market companies, segments Paycom views as key drivers of future growth, may not be satisfied with Paycom’s self-contained platform. They may want additional capabilities, including a fully outsourced option, or to integrate a ‘best of breed’ point solution, deterring them from considering Paycom.

Founder-led. Chad Richison founded Paycom in 1998 and has been CEO throughout the company’s entire history, with the exception of a short period of time during 2024 when he served alongside a co-CEO. Christopher Thomas left the company for personal reasons in May 2024, only three months after accepting the co-CEO job. In 2016, Richison was elected Chairman of Paycom’s Board, giving him effective decision-making control over the company. Richison owns about 12.5% of Paycom’s outstanding stock. Investors favor founder-led businesses because shareholder interests are aligned with the CEO’s, who typically take a long-term view of the business, resulting in healthy investment levels and disciplined capital allocation. There is no doubt Richison’s long-term track record with Paycom is exceptional and his decision to sacrifice near-term returns for improved customer ROI may prove to be the winning strategy. My concern lies with Paycom’s limited transparency, a recent tendency to over-promise and under-deliver, and the possibility the company may be stuck in its ways, unwilling to consider different options to improve performance:

• Although not too different from peers, Paycom’s transparency is more limited, in my opinion. The company stopped giving quarterly guidance, provides no detail and limited color when discussing new sales bookings, and does not offer any medium or long-term guidance to anchor expectations.

• Given more limited transparency, investors must ‘read the tea leaves’ in order to assess medium-term expectations. In this regard, the tea leaves have been over-promising and under-delivering, in my opinion. During 2024, the company selectively disclosed attractive new unit sales and starts, painting an optimistic picture: new unit sales were up 24% in Q2 2024, and 15% YTD, with July 2024 starts up 40% from a revenue perspective. In 2025, Paycom emphasized its focus on growth. From the Q3 2025 call: ”…over the last 2 years, we’ve done a significant amount of work that needed to be done throughout our organization. And as we sit here today, we’re all focused on one thing, and that’s capturing more market share, and that’s available to us now. We have a very differentiated product. It’s meaningful.” Of course, an acceleration in growth has yet to materialize.

• Change can be a good thing. In no way am I suggesting change is necessary to improve Paycom’s performance. Instead, an openness to change may be appropriate given flagging performance. Among the topics that deserve more discussion, in my opinion, are whether Paycom’s closed platform is ideal for larger businesses, outside partners are needed to improve Paycom’s distribution to drive improved sales growth, and a more balanced capital return approach, including a higher and growing dividend, would attract a larger number of shareholders.

AI. No software discussion would be complete without mentioning AI. While all payroll and HCM companies, including Paycom, have touted efforts to incorporate AI into internal operations, service models, and customer-facing products, investors increasingly question whether the system-of-record model remains viable in a world where AI can easily ingest, analyze, and act on large amounts of data at little cost. In an era of AI, I believe Paycom has more positives than negatives. The biggest plus, in my opinion, is Paycom’s single platform, which helps it harness the entirety of its data set to build the best AI-powered tools for clients. I still believe proprietary data holds value. However, Paycom’s mid-market customers may have more resources to build their own software—more than small businesses, where payroll and HCM providers are best positioned, but less than enterprises.

The Numbers

My fair value for Paycom is $164. Key assumptions are:

Revenue. I assume Paycom’s total revenue grows at a compound annual rate of about 6% from 2025-2035. Recurring fees, which represent 93% of Paycom’s total revenue, are expected to grow by nearly 6.5%, slowing from 10% growth in 2025 to 5% by 2031, and remaining steady thereafter. I estimate implementation revenue will grow approximately 3.5% over the same time. For interest on client funds, I assume average client fund balances advance at a slightly slower pace than recurring fees, growing at a compound annual rate of approximately 5.5% over the next decade. Assuming Paycom generates interest at my long-term fed funds rate estimate of 3% implies interest on client funds will grow at a compound annual rate of less than 2% from 2025-2035. I believe my revenue assumptions reflect only modest market share gains for Paycom over time, an appropriately conservative approach given my concerns about increased mid-market competition.

Gross Margin. I assume Paycom’s gross margin averages 83.6% over the next decade, about 1-point lower than the past decade. I believe data center and AI investments will push depreciation and amortization included in cost of revenue up to more than 5% of revenue by 2030, about 1-point higher than 4% of revenue during 2025. Operating expenses included in cost of revenue, which reached 13.5% of revenue in 2024, are expected to fall to 11.4% by 2026, primarily reflecting lower headcount—Paycom’s employees declined by 21% during 2025. Over the long-term, I expect operating expenses included in cost of revenue to represent 11.5% of revenue.

Cash Operating Expenses. Over the next decade, I expect Paycom’s cash operating expenses to fall from 45.9% of revenue in 2025 (and 44.8% during 2026) to 43% by 2035, with leverage occurring in sales and marketing expense, led by advertising, and general and administrative expenses. I assume Paycom’s research and development expense will rise from 12.1% of revenue in 2025 to 12.5% of revenue by 2031, and remain steady thereafter, reflecting Paycom’s commitment to internally developing products.

All of these assumptions imply Paycom’s adjusted EBITDA margin reaches 45.5% by 2035, up 160-bps vs. my 2026 estimate of 43.9%.

To guide my free cash flow estimates, I also model stock-based compensation and deferred contract costs. After projecting a fall to 3.3% of revenue in 2026, I estimate Paycom’s stock-based compensation will rise to 3.9% of revenue by 2035. Reflecting Paycom’s maturation and slowing sales growth, I estimate the cash outflow from obtaining and fulfilling contracts will fall to 2% of revenue by 2035.

For my DCF model, I assume:

• A free cash flow calculation as follows:

• A tax rate of 27%

• Depreciation and amortization reaching 11% of revenue by 2031 before declining to 10.5% in 2035, aligning with total capital spending during 2035

• A discount rate of 10% and a terminal growth rate of 3.5%

Business Overview

Paycom provides a cloud-based human capital management (HCM) platform to small and mid-sized businesses primarily in the United States. The company offers a global HCM platform and native payroll processing in Canada, Mexico, the U.K. and Ireland, but international contribution is believed to be immaterial at this point. Paycom targets businesses with 50-10,000 employees. At the end of 2025, Paycom had 20,321 clients based on parent company grouping with 7.4 million employee records stored on its platform, implying 364 employees per client.

Over the past decade, employees per client grew at a compound annual rate of 4.4%, reflecting Paycom’s move upmarket. However, recent increases have been modest, suggesting Paycom may be struggling to attract large enterprises:

Paycom sits squarely in the mid-market:

And faces significant competition:

Paycom’s 2025 10-K lists 38 different solutions, or modules, offered on its platform across payroll, talent acquisition and management, time and labor, and HR management. Paycom encourages employee participation in human resource administration through user-friendly mobile apps. A client must utilize Paycom’s payroll processing to access all features of Paycom’s platform.

Paycom generates three types of revenue: recurring fees, implementation revenue, and interest on client funds:

• Recurring fees are based in part on the number of modules adopted by clients and client employees, as well as the number of payroll runs and forms filed by Paycom. Payroll processing accounts for the majority of Paycom’s recurring fee revenue. In 2025, Paycom generated $266 in recurring fees per client employee. Over the past nine years, recurring fees per client employee grew at a compound annual rate of 8%, led by increased adoption of modules by clients and to a lesser extent pricing strategies:

• Revenue per employee has an inverse correlation with employees per client. Businesses with a small number of employees generate the most revenue per employee (i.e., ADP and Paychex) while businesses with a large number of employees generate the least revenue per employee (i.e., Dayforce). Not surprisingly, Paycom sits around the middle. However, even though Paylocity and Paycor HCM have fewer employees per client than Paycom, they generate less revenue per employee, suggesting Paycom’s pricing may be at a premium to those companies:

• Paycom charges a one-time fee that represents 10-30% of the contract’s value at time of inception. Paycom recognizes the payment as implementation revenue over a ten-year period.

• Interest on client funds occurs from the timing difference between when funds are collected and when they are remitted to employees and taxing authorities, which can span up to 120 days. In 2025, Paycom’s average client fund balance was $2.66 billion by my estimate. Paycom invests client fund balances in short-term securities, including commercial paper, overnight CDs, and two-year treasuries, among others. Paycom captures a significant portion of the fed funds rate with its investment portfolio. Paycom began reporting interest on client funds in Q4 2024, providing retrospective reporting back to 2022. Paycom discloses average client fund balances on its quarterly earnings conference calls. Historically, Paycom’s average client fund balance has grown at a modestly slower rate than recurring fees, but above client employee growth:

Guidance: Outperformance Moderating

Historically, Paycom generated healthy upside to guidance. Excluding the pandemic year of 2020, from 2019-2022, Paycom beat its initial revenue guidance by an average of 4.3%. That changed in 2023 with Beti cannibalizing revenue from extra payroll runs and cross-sells from the CRR group, leading to a miss of 0.4%. Although Paycom beat revenue expectations during 2024 and 2025, it was versus more modest expectations and outperformance was much smaller, averaging less than 1%. Similarly, adjusted EBITDA upside also moderated in recent years, but still remains significant versus Paycom’s initial outlook:

Go-To-Market

Among peers, Paycom’s sales approach is unique. It relies only on an internal sales force, eschewing the partners many other payroll and HCM providers rely on to sell their products, including accountants, banks, insurance brokers, benefits administrators, and systems integrators, among others. Additionally, and as a result, Paycom spends heavily on advertising to attract customers. In 2025, Paycom’s advertising expense was $126 million, representing more than 6% of revenue. Although ADP and Paychex do not disclose advertising expense, Paylocity (1%), Dayforce (1.5%) and Paycor HCM (5.5%) all spend less, some significantly so.

From 2016-2020, Paycom’s advertising expense increased from 1.5% of revenue to 8%, before falling back to 6.1% in 2025. The remaining portion of sales and marketing expense (i.e., Other in the table below), excluding stock-based compensation, has fallen from 23.5% of revenue in 2016 to only 16% of revenue during 2025. Per average sales team, Other sales and marketing expense was $5.7 million during 2025:

Balance Sheet and Cash Flow

Historically, Paycom has carried little-to-no debt. That changed in Q1 2026 when the company borrowed $675 million to help fund a repurchase of 8.375 million Paycom shares at $127 per share for a total price of approximately $1.06 billion. Still, even after the borrowing, Paycom’s net debt-to-EBITDA ratio is only 0.7x, providing them ample flexibility to invest, repurchase more shares, or boost its dividend. Paycom has never made an acquisition and there is no indication the company would consider doing so at this point.

Over the past decade, Paycom’s cumulative free cash flow represented only 70% of non-GAAP net income:

This reflects two dynamics: the previously mentioned cash outflows from obtaining and fulfilling contracts, and a sizable gap between depreciation and amortization and total capital spending:

Paycom owns and operates their own data centers, requiring significantly greater capital investment relative to peers:

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Disclosure: As of June 29, 2026, of the stocks mentioned in this report and across payments and fintech, I am long Visa, Global Payments, Intuit, Block, Adyen, Shift4 Payments, Paychex, Mastercard, and Broadridge Financial. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Investment Brief

In the year since its IPO, Chime’s execution has been solid. It is thoughtfully monetizing its member base to drive attractive top-line growth while maintaining a sizable cost advantage relative to incumbent banks and other fintechs, leveraging ChimeCore—its proprietary processing platform and ledger system, which was delivered ahead of schedule—to innovate faster and lower costs, and moving toward meaningful GAAP profitability sooner-than-expected. Still, shares have languished, down about one-third from their IPO price of $27. I believe there are a handful of contributing factors:

• Total spending-based volume growth is slowing. In its latest quarter, Chime’s total spending-based volume, which includes card purchases and outbound instant transfers, or OITs, grew 14.5%, slowing from more than 19% growth at the start of 2025. This is a continuation of a longer-term trend that has seen Chime’s spending-based volume growth fall below active member growth, suggesting fewer active members are adopting Chime as their primary financial relationship, which is defined as a member that has made at least 15 card purchases or received one qualifying direct deposit of $200 in the past calendar month:

• At the time of its IPO, the company reported 67% of its active members used Chime as their primary financial relationship, driving 55 transactions per month, on average, across its member base. Although Chime has not updated these metrics, their language has shifted…slightly. Now, a ‘majority’ of members use Chime as their primary financial relationship, driving ‘more than 50’ transactions per month, on average, across its member base. While the change may sound trivial, minor changes in the trajectory of Chime’s most important KPI—primary financial relationships—can be meaningful for a fast-growing, and high-multiple company, like Chime.

• Lending-based revenue is becoming a larger part of Chime’s business. As of Q2 2024, lending-based contributions to Chime’s revenue were minimal. Now, they make up about 20%. By the end of 2026, with the planned expansion of Instant Loans, they could make up closer to one-quarter of Chime’s revenue. While lending products are important, and a key reason why some members join Chime, the market places a lower value on their associated revenue and profit, in my opinion. Overall, slowing spending-based volume growth and an increasing mix of lending-based revenue is generally not a good combination, and was particularly problematic for Block’s Cash App. I believe spending-based volume growth must stabilize or improve before shares of Chime can move materially higher.

• Competition is increasing. Chime faces a range of competitors: incumbent banks, domestic fintechs like Cash App, Venmo, SoFi, Dave, MoneyLion, now owned by Gen Digital, OnePay by Walmart, Green Dot, and Netspend, BNPL providers like Affirm and Klarna, and global fintech heavyweights like Nubank and Revolut. Although not dramatically different, in my opinion, an argument can be made competition is increasing. By Chime’s own admission, since SpotMe, Chime’s fee-free overdraft product, was launched in 2019 banks in the United States have cut overdraft fees in half. Given that avoiding fees is one of the main reasons why a new member joins Chime, lower—or zero—overdraft fees at incumbent banks may make it less likely people switch. Among domestic fintechs, incentives are on the rise as they all chase the coveted direct deposit relationship. Launched in November 2025, Cash App Green provides similar benefits—a higher savings rate, special rewards, and higher borrowing limits—as Chime Plus to entice greater engagement. Likewise, Venmo is offering enhanced rewards (5% cash back) at select brands when a user direct deposits $500 into their Venmo account each calendar month. Both Affirm and Klarna offer a card that can flex between everyday spend funded by a checking account and BNPL loans for larger discretionary purchases. Finally, Nubank and Revolut have applied for bank charters in the United States and promise a concerted effort to expand in the country if (once) approved.

• Macro is concerning…always. Many fintechs suffer from perpetual caution on the low-to-middle income American consumers they serve. Thus far, the group has held up in the face of sustained high inflation as the labor market—despite a few bumps—and wage growth remain healthy. Although Chime argues the company may benefit during difficult times due to its low cost leadership, the market is concerned about a further slowdown in spending, elevated credit losses, or a lack of originations that may occur during an economic downturn.

Thoughts on the Stock. From my perspective, Chime is among the most consumer-friendly fintechs in the world, which should stand for something. What I believe it provides Chime is greater visibility into sustained revenue growth of 15-20% and substantial progress on reaching the company’s long-term adjusted EBITDA margin goal of 35%, or more. At less than 16x my 2027 EBITDA estimate of $409 million, which is burdened for stock-based compensation, Chime starts to look attractive. However, to borrow a biblical phrase, there is no room left at the inn given an abundance of higher-quality payment and fintech companies trading at, what I believe, are similarly attractive valuations. While Chime is a name to consider for gaining exposure to fintech lending, I still prefer Block over Chime, and the best values I see today across payments and fintech—and where I’m allocating capital—are Mastercard, Intuit, Adyen, and Broadridge Financial, in no particular order.

Highlights

Low cost provider. Chime lives up to its motto of being free where possible and offering the lowest cost product when fees are necessary. Like most other fintechs, Chime offers fee-free checking, debit card, and overdraft, a better deal relative to incumbent banks. For lending, where fees are necessary to compensate for losses, Chime offers the lowest cost product among fintechs. For MyPay loans—which can be free if members wait 24 hours to receive funds—Chime’s yield was 2.6% in Q1 2026, significantly below Dave’s 6.4% yield on ExtraCash advances. Although Block does not disclose its revenue from Cash App Borrow, it charges a 5% flat fee per loan and may assess late fees and accrue interest on past due balances, suggesting a yield of up to 6% or more. For installment loans, both Affirm and Klarna charge up to a 36% annual percentage rate, or APR. Based on data from Affirm, I estimate the average APR on their outstanding installment loans is 30%. Although details are still emerging, it appears Chime may earn fees equating to an APR in the mid-to-high teens on their Instant Loans, suggesting a sizable discount to Affirm. How does Chime do it? First, Chime’s privileged repayment position, backed by recurring direct deposits, results in industry-leading loss rates, allowing Chime to generate healthy transaction margin on the lowest cost product. Second, ChimeCore provides a unique cost advantage for Chime, contributing to its ability to be the low cost provider while generating attractive consolidated profitability.

Monetization runway. Given the daylight between Chime’s pricing on lending products and other fintechs, there is significant runway for Chime to improve monetization while remaining the clear low-cost provider, an enviable position, in my opinion. The best example: I expect Chime to originate $18.6 billion of MyPay loans during 2026. If instead of generating a yield of 2.6%, Chime earns…say…4%—still significantly below competitors—it would result in an additional $250 million of revenue for Chime at (theoretically) zero incremental cost. Chime is monetizing in other ways that brings value to both itself and members. By moving new and existing members’ spend to a secured credit card, which functions nearly identically to a debit card, members are able to establish or improve credit and earn rewards while Chime generates higher interchange fees. Chime believes its secured credit card will be a long-term revenue tailwind. In addition to monetizing existing spending and lending, Chime plans to introduce new products, like investment accounts, that should contribute modestly to average revenue per active member, or ARPAM, growth over time.

Proprietary technology systems. Chime boasts owning 100% of its tech stack, including ChimeCore, its proprietary processing platform and ledger system. This reduces Chime’s cost to serve. The conversion to ChimeCore reduced processing costs by 60%, contributing to Chime’s ability to maintain a low-cost advantage. It also allows Chime to develop and launch products faster and in a proprietary way, as working with a third-party may result in innovation being spread among competitors. Finally, having access and visibility into 100% of its data should help Chime develop leading AI-powered tools for internal use and members.

Strong balance sheet. Chime has no debt and approximately $1 billion of cash and short-term marketable securities, providing flexibility to acquire companies and capabilities, or return money to shareholders through buybacks and potentially dividends.

Risks

In addition to increasing competition and macro concerns discussed above, Chime faces the following risks:

Durbin carveout. Even though Chime is among the largest issuers of debit cards by purchase volume in the United States, it benefits from an exemption to the debit interchange cap, imposed by the Durbin Amendment, meant for smaller banks. As a result, Chime generates hundreds of millions of dollars of revenue that could theoretically be eliminated if the spirit of the law is followed. Potentially mitigating this risk is Chime’s decision to steer new and existing members to the Chime Card, a secured credit card, which generates higher interchange and is on firmer regulatory ground.

Credit exposure. Chime’s direct deposit relationships give them a privileged repayment position, limiting losses on SpotMe and MyPay loans, which are repaid in less than two weeks. However, Chime appears set to move more aggressively into higher value installment loans that span up to 12 month repayment terms, exposing Chime to more significant losses if there is a downturn in the economy, or a slowdown that disproportionately impacts its mainstream American member base.

Banking license may prompt shift away from asset-light model and result in lower multiple. At a recent conference, Chime indicated that its decision to apply for a banking charter is a matter of when, not if. While moving away from an asset-light partner model to being a bank may bring certain benefits, it could tie up more of Chime’s capital and depress its multiple as the company’s earnings power matures.

Too stingy? Although Chime deserves credit for its low-risk lending strategy, it may miss opportunities to acquire or retain customers by bringing loss rates down too low. Although Chime has mentioned testing a different version of MyPay for non-direct deposit members, it does not appear to have gone anywhere.

Business Overview

Chime offers a range of financial services to the hundreds of millions of mainstream Americans making less than $100,000 per year. Chime is not a bank (yet), so it relies on partners (Stride Bank and The Bancorp Bank) to hold deposits, issue cards, and make loans, while Chime manages the technology infrastructure and user experience. Given its digital-only footprint, Chime’s cost to serve is dramatically lower than the branch model employed by traditional banks, allowing Chime to offer free or lower-cost solutions. Approximately 90% of Chime’s new members are unhappily banked by the large incumbents like Bank of America, J.P. Morgan, and Wells Fargo. Although Chime spends significantly on advertising ($510M in 2025), approximately half of its new members come from word-of-mouth marketing and referrals from existing members, driving attractive customer acquisition costs, or CAC, relative to lifetime value, or LTV. Historically, Chime focused on acquiring members that will make Chime their primary financial relationship immediately. However, at around the beginning of 2025, Chime altered its strategy to make it easier for customers to interact with more of their products before making a full-fledged primary financial relationship commitment to Chime.

Chime’s most significant products are as follows:

Checking. An FDIC-insured checking account with no monthly fees, no minimum monthly balance requirement, and access to 47,000 fee-free ATMs nationwide. Members can receive their scheduled direct deposits two days early with Chime’s Get Paid Early feature. Although Chime pioneered this capability several years ago, most major banks now offer it. Chime generates revenue from spending on debit cards attached to the checking account and from fees for out-of-network ATM withdrawals.

Overdraft. Chime allows certain members to overdraft up to $200 fee-free on debit, credit, and ATM transactions. Members must be enrolled in either Chime Plus or Chime Prime to access SpotMe. Chime does not charge for SpotMe but instead relies on optional tipping. For those members not enrolled in SpotMe, transactions that exceed the existing balance are declined. Loss rates on SpotMe loans are less than 0.4%.

P2P. Chime’s Pay Anyone feature allows members to send money instantly to both Chime and non-Chime members for free.

Outbound Instant Transfers. Chime began offering OITs in 2025. Instead of pulling money into another app or account from Chime, which could take a few days and would be monetized as debit card purchase volume, OITs allow members to instantly push money for a 1.75% fee.

Savings. Chime offers different interest rates on members’ savings balances depending on their level of engagement with Chime. For members that do not qualify for a premium tier, Chime currently pays 0.75%. For Chime’s most premium tier, Chime Prime, which requires $3,000 of monthly direct deposits, Chime currently pays 3.75% on savings balances, several times the national average. Chime holds members’ saving balances in a sweep account at one of its partner banks and recognizes revenue based on the spread between what it earns and what it pays out to members.

Secured Credit Card. A secured credit card functions like a debit card in the sense that members pre-fund an account before making purchases. Unlike a debit card, using a secured credit card can build credit history or improve an existing score. Also, given higher interchange rates on secured credit card purchase volume, members have access to greater rewards potential by spending with a secured credit card. Last year, Chime introduced the Chime Card, its latest secured credit card. Prior to launch, credit represented 16% of Chime’s total card purchase volume. In March, credit represented nearly 25% of total card purchase volume with Chime noting that over half of new members are adopting the Chime Card and those members using it for 70-80% of their total spend. Chime Card volume generates 175-bps of interchange, net of rewards. With the launch of Chime Prime, which offers 5% cash back on a rotating category selected by the member, Chime expects rewards costs to increase in the coming quarters.

MyPay. Members with a qualifying direct deposit can access up to $500 of their paycheck for free if they wait 24 hours, or instantly for a fee of 3%, with a minimum fee of $2 and a maximum fee of $5. Previously, Chime charged a flat $2 fee for an instant MyPay loan. The average MyPay loan is $85 and is repaid in less than 2 weeks. From its full launch in July 2024, Chime has originated $25 billion in MyPay loans and loss rates have fallen from 170-bps to 100-bps, which Chime believes will be MyPay’s steady state loss rate.

Instant Loans. Members with a qualifying direct deposit can access a 3-to-12 month installment loan for up to $1,000. Chime charges a flat fee of $5 to $20 per loan, which is added to the principal and repaid ratably over a monthly basis. Since its launch in March of 2025, Chime has originated $580 million of Instant Loans. The average Instant Loan size and term is $250 and 6 months, respectively. Loss rates are currently around 4% but loss rates for repeat borrowers fall by half.

Chime offers special perks to members who make qualifying direct deposits:

• Chime Plus: With a single $200 direct deposit or a cumulative $400 in direct deposits over the last 34 days, members are eligible for Chime Plus, which offers access to SpotMe, Chime’s fee-free overdraft product, a 3% savings rate, 2% cash back on up to $1,500 of spending per month with the Chime Card on a rotating category chosen by the member, and priority 24/7 member support.

• Chime Prime. With at least $3,000 in direct deposits over the last 34 days, members are eligible for Chime Prime, which offers access to SpotMe, Chime’s fee-free overdraft product, a 3.75% savings rate, 5% cash back on up to $1,500 of spending per month with the Chime Card on a rotating category chosen by the member, and priority 24/7 member support.

Chime Workplace: Chime’s newest distribution channel is Workplace for enterprise customers. Its free for employers, and employees can access 100% of their paycheck on a daily basis for free due to the minimal losses Chime incurs given their direct integration with an employer’s payroll system. Chime monetizes the relationship by capturing employees’ everyday spend. Customer acquisition costs are significantly lower for Workplace and while Chime believes it will be a long-term driver of member growth, enterprise sales cycles are long, so investors should temper their expectations over the near-term.

Corporate History

Chime was co-founded by San Francisco neighbors Chriss Britt and Ryan King in 2012. Britt (current CEO of Chime), formerly of Visa and Green Dot, was focused on the business side, while King (current CTO of Chime), a former head of engineering at a startup, was tasked with developing the technical aspects of Chime. Since its launch in 2014, Chime has evolved from a simple prepaid card to a holistic digital financial services platform for mainstream Americans:

No fintech story would be complete without mentioning the heights Chime reached (on paper) during 2021, when it was valued at $25 billion in a funding round led by Sequoia Capital. Chime entered the public markets almost exactly one year ago. The company’s IPO price of $27 implied a market cap of $11-12 billion. On an intraday basis, Chime’s all-time high market cap reached more than $19 billion. Fast forward to today and Chime’s market cap of approximately $7 billion is a far cry from its past glory.

Chime has made few acquisitions throughout its history with the most recent being Salt Labs in 2024 (for up to $173 million, based on earnouts), a company focused on daily earned wage access, the nexus of Chime Workplace, the company’s enterprise channel.

Chime has a dual-class share structure, giving Britt and King nearly 75% of voting power and effective control over Chime.

Strategy

Chime’s strategy is relatively straightforward: acquire direct deposit relationships by offering free or the lowest cost products, monetize primarily through everyday spending, and attach additional products that generate revenue for Chime and bring value to its members.

Chime relies on word-of-mouth marketing, referrals, and paid media to acquire members. Word-of-mouth marketing and referrals account for about half of new members acquired. Total customer acquisition costs, which include advertising, brand marketing, referral bonuses, and other marketing incentives, ranged from $93 to $130 per customer acquired on a quarterly basis since 2022, with Q1 2026 coming in at $107. Given the long-lasting nature of direct deposit relationships, which can last 10-15 years, Chime’s LTV to CAC is attractive at 8x or more, translating to a payback period of 5-6 quarters currently, down from approximately 7 quarters one year ago.

Chime’s pace of innovation has accelerated with the launch of Instant Loans, the Chime Card, Workplace, and Chime Prime, all in the past year or so. Over the remainder of 2026, Chime plans to introduce new checking account options, including joint and custodial accounts, rollout investing features, including support for Trump Accounts, and launch Jade, its AI co-pilot for members. Over the long-term, Chime plans to launch products in support of its highest-earning members, its fastest growing category. Among the products mentioned is an unsecured credit card.

Members that attach 6 products or more make up 15% of Chime’s total active members, up from just 5% two years ago. ARPAM for these members is greater than $500, more than double Chime’s average.

Workplace represents a significant opportunity for long-term, low-cost member growth. Although rollouts among the small number of employers that have signed up are going well, Chime has stressed the enterprise channel will not be a material contributor to growth over the near-term as sales cycles are long.

Financial Review and Estimates

For 2026 and 2027, I estimate revenue of $2,699 and $3,179 million, implying growth of 23% and 18%, respectively:

Key assumptions:

• I expect card purchase volume growth to slow to approximately 12% in 2026 and 2027.

  • Credit will represent 31% of total card purchase volume by Q4 2027.

• Including OITs, total spending-based volume growth is estimated to be 14.6% and 14.0% in 2026 and 2027, respectively.

• Spending-based revenue is expected to grow 18.7% in 2026, down 220-bps from 2025, better than the 340-bps decline in volume growth, as more volume shifts to higher-yielding credit and OITs, offset by a moderate decline in the credit net interchange rate due to increased rewards costs. For 2027, I expect spending-based revenue growth of 17.5%, down 120-bps.

• I expect MyPay originations of $18.5 and $21.7 billion during 2026 and 2027, respectively.

• I assume a yield on MyPay originations of 2.64% and 2.75% in 2026 and 2027, respectively, reflecting little-to-no change in the product’s current pricing schedule.

• I assume OIT volume of $5.9 and $9.5 billion in 2026 and 2027 with OIT revenue of $104 and $166 million, respectively, reflecting consistent pricing of 1.75%.

Admittedly, Instant Loans are a bit of a wildcard and dependent on Chime’s preferred pace of originations, which influences revenue and loss rates. For 2026, I assume Instant Loan originations of $960 million, with a quarterly cadence of $180, $220, $260, and $300 million. In 2027, I expect originations of $1.42 billion. In order to derive revenue, I take a rolling three quarter average of originations, multiply by two to reflect a 6 month average duration and multiply this average outstanding balance estimate by 4.25% to reflect an APR of about 17%. Based on this framework, I arrive at Instant Loans revenue of $72 and $111 million in 2026 and 2027, respectively. This, of course, could be dramatically different if Chime ramps up originations more significantly and my understanding of the product’s APR is off-base.

• Remaining other revenue reflects ATM fees—which I expect to grow moderately slower than active member growth—and various other categories including tips on SpotMe loans, excess savings revenue, referral fees, and fees for facilitating cash deposits. The decline in other revenue in 2026 and 2027 primarily reflects the impact of lower interest rates on Chime’s excess savings revenue.

For 2026 and 2027, I expect adjusted EBITDA of $449 and $694 million, implying a margin of 16.6% and 21.8%, respectively. On an incremental basis, this translates to a low-60 percent margin in 2026, above Chime’s guidance for the mid-50s percent. My estimate for 2027 implies an incremental margin in the low-50s percent:

• Gross profit, exclusive of depreciation and amortization, is expected to be 89.5% in 2026 and nearly 90% in 2027.

• I expect transaction and risk losses as a percentage of revenue to be above 14% in 2026 and 2027, reflecting an uptick from Q1 2026 as MyPay loss rates have likely bottomed and Chime ramps up Instant Loan originations, which carry higher loss rates.

• For cash operating expense, excluding transaction and risk losses, I assume 13% growth in 2026, up about 2-points from 2025, followed by 8% growth during 2027.

• I assume stock-based compensation of $271 and $285 million in 2026 and 2027, representing 10% and 9% of revenue, respectively.

Chime Financial Model

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Chime Unhappily Ever After

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Disclosure: As of June 14, 2026, of the stocks mentioned in this report and across payments and fintech, I am long Visa, Global Payments, Intuit, Block, Adyen, Shift4 Payments, Paychex, Mastercard, and Broadridge Financial. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

The Big Picture

With few exceptions, volume and revenue growth remained steady or improved across payments and fintech during Q1. Fiserv’s reset, which is set to lap in H2 2026, continues to be a drag on legacy acquiring and bank technology revenue growth. Outside of it, bank technology revenue growth remains healthy (above 7%) and—although slowing modestly in Q1—legacy acquiring revenue growth remains in the mid-single-digits.

Many of the key themes of the recent past remain in place:

• Significant value-added services expansion compliments high single-digit volume growth to drive organic net revenue growth in the low-teens for Visa and Mastercard.

• International markets represent a meaningful driver of volume and revenue growth for commerce platforms.

• Aggregate take rates for SMB providers remain relatively steady.

• Loss rates remain contained across the board.

• The proliferation of lending drives substantial revenue growth across payments and fintech:

  • Merchant cash advance revenue—where disclosed or reasonably estimated—increased 27%

  • EWA and short-term liquidity products revenue increased 114%

  • BNPL revenue increased 38%

Publications Update

Below are my recent publications:

Intuit: Buy The Blip?

Fiserv Investor Day Notes

Payments and FinTech Earnings Recap: Q1 2026

Affirm: Better, But Is It Good?

Q1 2026: Portfolio Update + Investable Universe

Is Toast A Buy?

Long Broadridge Financial

Adyen: Much ado about nothing…or something?

Shift4: Warning Signs

U.S. Debit Card

Tracking

• U.S. debit card payment volume for Visa, Mastercard and the EFT networks

• Payment volume for the debit card portfolios of J.P. Morgan, Bank of America, Wells Fargo and U.S. Bank

Underlying Growth Remains Healthy

• Reported debit card payment volume1 increased 5.2% during Q1, a 20-bps improvement from Q4. The conversion of the Capital One debit portfolio to Discover negatively impacted growth by at least 180-bps. Overall, I estimate underlying debit card payment volume growth of 7.7%.

• Visa reported 6.7% growth (up 80-bps) and Mastercard 1.4% growth (down 100-bps).

  • Excluding the Capital One conversion, Mastercard indicated gross dollar volume (which includes both payment volume and cash withdrawals) growth would have been approximately 6.5% higher, implying about 8% payment volume growth.

• Collectively, J.P. Morgan, Bank of America, and Wells Fargo (all exclusive, or near-exclusive, debit customers for Visa) grew 7.9% during Q1 (up 150-bps vs. Q4). This is the first time in my data set the largest issuers outgrew the market.

• I estimate all other issuer volume grew 7.6% in Q1, up 20-bps from Q4.

  • In addition to regional and community banks and credit unions, other debit issuers include FinTech banks such as Chime and Cash App.

    • While Chime’s overall card payment volume grew 12% during Q1, down 1-point from Q4, credit makes up an increasing portion (23% in Q1 vs. 16% a year ago), implying debit payment volume growth of only about 3%. If I adjust for this, all other issuer volume grew 7.8%.

U.S. Credit Card

Tracking

• U.S. credit card payment volume for Visa, Mastercard, American Express and Discover

• Payment volume for the credit card portfolios of J.P. Morgan, Capital One, Citi, Bank of America, U.S. Bank and Wells Fargo

• Average loans and net charge-offs for the credit card portfolios of J.P. Morgan, Capital One, Citi, Bank of America, U.S. Bank, Wells Fargo, American Express and Discover

Strongest Growth Since 2023

• U.S. credit card payment volume increased 8.4% during Q1, a 160-bps increase vs. Q4, the highest level of growth since Q1 2023.

• Adding U.S. BNPL GMV and liquidity product originations to U.S. credit card payment volume raises the pro-forma growth rate by 80-bps during Q1 to about 9.2%, suggesting FinTechs are playing a key role sustaining healthy spending growth in the U.S., especially among low-to-middle income consumers.

• Visa grew fastest at 9.6%, followed by Mastercard (8.0%) and American Express (7.2%) — Discover volume increased slightly vs. prior year.

  • This was the eleventh consecutive quarter American Express failed to gain share of the U.S. credit card market.

• Among major issuers, J.P. Morgan gained share, growing 8.7%, up 140-bps vs. Q4. Capital One (8.0%, up 180-bps), Bank of America (5.4%, up 160-bps) and Citi (6.2%, up 140-bps) all showed similar acceleration.

• Average credit card loans2 increased 4.8% in Q1, up 30-bps vs. Q4.

• The Q1 net charge-off rate3 rose to 3.85%, up approximately 18-bps from Q4 but down 46-bps vs. the prior year period, a bigger decline than 35-bps during the past two quarters.

Networks

Tracking

• Volume, processed transactions, and net revenue4 for Visa and Mastercard

Value Added Services Growth Remains Robust

• Aggregate global payment volume (PV) for Visa and Mastercard increased 8.9% during Q1, a 50-bps improvement from Q4.

  • International PV increased 10.2%, a 10-bps improvement from Q4, while reported U.S. PV grew 7.1%, a 110-bps improvement from Q4. Excluding the Capital One version, I estimate underlying U.S. PV grew 8.4% during Q1.

• Global processed transactions of 109.88 billion, grew 9.1% during Q1, down 20-bps from Q4.

• Aggregate organic net revenue growth for Visa and Mastercard was about 13.7% during Q1, up 30-bps from Q4. For the first time in 13 quarters, Visa’s organic net revenue growth outpaced Mastercard’s.

  • Value added services (VAS) revenue continues to lead the way, with Visa and Mastercard reporting 27% and 18% (organic) growth in VAS revenue during Q1, respectively, both down about 1-point from Q4. VAS revenue represented 34.5% of aggregate Visa and Mastercard net revenue in Q1, up 240-bps over the prior year period.

  • Although still below last year’s elevated levels, FX volatility was higher-than-expected during Q1, providing a boost to Q1 results.

• Visa reported organic net revenue and global PV growth of 15% (up 2-points) and 9%, respectively.

  • U.S. and international PV growth was 8% and 10%, respectively.

  • Processed transaction and cross-border volume (excluding intra-Europe) growth of 9% and 11%, respectively, stable with Q4.

• Mastercard reported organic net revenue and global PV growth of 12% (down 2-points) and 9%, respectively.

  • U.S. and international PV growth was 5% and 11%, respectively.

  • Switched transactions increased 9%, down 1-point from Q4, while cross-border volume grew 13%, a 1-point slowdown from Q4.

Legacy Acquiring

Tracking

• Volume, revenue and take rate for Fiserv, Global Payments, Worldpay, U.S. Bank’s Elavon and J.P. Morgan

Revenue Growth Ticks Down Across Board

• Aggregate revenue growth for Legacy Acquiring slowed to less than 3% during Q1, a 100-bps decline from Q4. Fiserv slowed by 160-bps, pro-forma Global Payments + Worldpay and U.S. Bank’s Elavon each slowed by 70-bps.

• In its first quarter following the acquisition of Worldpay, Global Payments reported organic revenue growth of 4.5% in Q1, down 1.5-points from Q4. On a pro-forma basis, the slowdown was approximately 70-bps. Global provided little detail about the composition of its performance given the recent close of the acquisition, but plans to beginning in Q2.

• Fiserv’s Merchant organic revenue growth turned negative during Q1 (-1%), down 2-points from Q4. The absence of nonrecurring revenue slowed Clover revenue growth to 6% (down 6-points but up mid-teens on a year-over-basis excluding it) and non-Clover revenue fell 2.5%. Despite this, underlying volume growth for Clover improved 3-points to 12% and total SMB volume growth across Fiserv’s merchant franchise remained stable at 7%, providing a base to return to respectable revenue growth in H2 2026.

Commerce Platforms

Tracking

• Volume5, revenue6 and take rate for Square, Shopify, Toast, Lightspeed, Clover and Shift4 Payments

Revenue and Volume Growth Improves to Around 20%

• Aggregate Commerce Platforms revenue grew 19% in Q1, a 2-point acceleration from Q4, in-line with Commerce Platforms volume growth, which also improved by 2-points to 20% in Q1.

  • All Commerce platforms reported an acceleration in volume growth with the exception of Toast, whose Q1 volume growth of 22% was level with Q4.

• Commerce Platforms payments-related revenue increased 16% (up 1-point) while non-payments revenue (fees from software subscriptions and merchant lending primarily) grew nearly 22% (up 2-points).

  • Meaningfully lower year-over-year take rates at Square and Clover were the primary contributors to the spread between payments-related revenue and volume growth. However, based on the evidence, the pressure was not primarily pricing-based, but rather due to company-specific factors: Square is incurring higher processing costs to gain flexibility with a processing partner and moving upmarket, and Fiserv suggested Clover’s processing revenue was in-line with volume growth, implying the moderation in non-VAS Clover revenue growth was due to lower nonrecurring revenue.

• Square’s volume, or GPV, grew 13% on a reported basis in Q1, up 3-points from Q4—but up only approximately 1-point on a constant currency basis. U.S. GPV grew 8.2%, up 120-bps from Q1. International GPV grew 26% on a constant-currency basis, up 1-point. Food and beverage GPV growth accelerated by 5-points to 21%, nearly matching Toast’s growth. Square’s gross profit grew 9%, or 11% excluding hardware costs. I estimate Square’s net take rate fell approximately 7-8-bps vs. the prior year, with about an equal contribution from the processing partner impact and Square’s move upmarket.

• Toast’s volume growth slowed by 20-bps to 21.6% during Q1 as GPV per location fell by 1%. Revenue growth remained relatively stable at 26.1% (down 40-bps), with the spread between revenue and volume growth due primarily to ongoing mid-single-digit growth in SaaS ARPU and expansion in the payments net take rate.

• Clover’s reported volume, or GPV, growth improved 3-points to 9% in Q1. Excluding the gateway conversion, volume grew 12%, also up 3-points from Q4. Revenue growth continued to slow, falling to 6%, down 6-points vs. Q4. VAS revenue grew 18%, reaching 27% of Clover revenue, up 3-points from the prior year period. Non-VAS revenue grew in the low single-digits as nonrecurring revenue fell and processing revenue increased 10%, in-line with reported volume growth.

• Shift4 Payments reported volume growth of 24%, up 1-point from Q4—although with acquisition contribution (Smartpay and Bambora) and FX, volume growth may have slowed on an organic basis. Shift4’s blended spread, or take rate, was 61-bps during Q1, bouncing back 4-bps from Q4 and flat on a year-over-year basis. Shift4 disclosed organic revenue (GRLNF) growth of 11% in Q1, down approximately 1-point from Q4 based on my estimate.

E-Commerce

Tracking

• Volume7, revenue and take rate for PayPal, Shopify and Adyen

Volume Growth Accelerates with Mid-Teens Growth for Braintree

• Aggregate E-Commerce revenue grew 11% in Q1, a 2-point increase from Q4.

  • Shopify and Adyen represent more than 36.5% of aggregate E-Commerce revenue, up nearly 550-bps from the prior year.

• Aggregate E-Commerce volume grew approximately 20% on a local currency basis during Q1, up about 3-points from Q4.

• PayPal’s volume, or TPV, increased 8% on an FXN basis in Q1, a 2-point increase from Q4. Excluding P2P, volume was up 13% on a reported basis, reflecting acceleration in Braintree’s growth to the mid-teens—a large, but less profitable, volume stream for PayPal. Branded online checkout volume growth ticked up to 2% during Q1. Transaction margin dollars rose 2.5% in Q1, similar to Q4. Revenue for PayPal—which I define as revenue less transaction expense—grew 2.5%, up more than 1-point from Q4.

• Adyen’s net revenue grew 20% on a constant-currency basis in Q1, a 1-point improvement from Q4. Volume growth was 21% on a reported basis. Adjusting for foreign currency, I estimate underlying constant-currency volume growth of approximately 25%, up a couple points from 2025.

• Shopify’s GMV grew 30% on an FXN basis in Q1, up 1-point from Q4 and in a similar 29-30% band as the last three quarters. Revenue—which I define as merchant gross profit plus subscription revenue—grew 31% during Q1, up a full 7-points from Q4, reflecting an acceleration in subscription revenue growth and an improvement in merchant gross margin. Shopify’s merchant gross margin of 39% improved 20-bps over the prior year period compared to an average decline of 130-bps over the last six quarters prior to Q1. I attribute the improved margin performance to an acceleration in high-margin merchant cash advance revenue (up 47% in Q1), a smaller decline in the payments net take rate, and a favorable mix or improved pricing on transaction fees on GMV not processed by Shopify Payments.

FinTech Banks

Tracking

• Revenue, active members, volume8 and short-term liquidity origination volume for Cash App, Chime, Dave, The Bancorp Bank and Green Dot

Lending Expansion Drives Significant Revenue Growth

• Aggregate FinTech Bank revenue grew 37% during Q1, a 3-point acceleration from Q4. Volume growth of 18% accelerated by approximately 1-point.

• Cash App gross profit, excluding Bitcoin, grew 40% during Q1, a 5-point improvement from Q4 despite a moderate slowdown in other key metrics like primary banking actives (from 22% to 18% growth) and Cash App total inflows (from 15% to 14%). More profitable lending streams continue to be the catalyst for accelerating Cash App gross profit growth. Borrow originations sustained hyper-growth, increasing 175% year-over-year. Finally, post-purchase BNPL, which is highly profitable for Cash App, has scaled faster than any other lending product in Block’s history, contributing to meaningful acceleration in overall BNPL GMV growth.

• Chime’s revenue increased less than 25% during Q1, down 70-bps from Q4. Card purchase volume growth slowed 100-bps to 12.1%. Payments revenue, which represents interchange fees on card purchase volume, grew 15.3%, outpacing purchase volume growth due to a mix shift toward higher yielding secured credit transactions, but still slowed 150-bps vs. Q4. Platform revenue grew 50% in Q1, up 3-points from Q4’s increase. In Q1, MyPay, outbound instant transfers, and Instant Loans combined to represent nearly two-thirds of platform revenue, up from less than 50% during the prior year.

Buy Now, Pay Later

Tracking

• Revenue and volume for Affirm, Afterpay, Klarna, PayPal, Sezzle and Zip

GMV and Revenue Growth Improves Further

• Aggregate BNPL GMV was $68.7 billion in Q1, up 27%, a 2-point improvement from Q4.

  • I estimate U.S. BNPL GMV of approximately $37 billion during Q1, up 35% from the prior year.

• Aggregate BNPL revenue grew 38%, a 5-point acceleration from Q4.

• BNPL providers are driving attracting volume and revenue growth through the expansion of financing and payment options, as well as by partnering with payment service providers (PSPs) and digital wallets to increase the number of merchants and consumers utilizing their solutions.

• Affirm’s revenue grew 33%, a 3-point improvement from the December quarter, as GMV growth of 35% ticked down only slightly (1-point). Revenue less transaction costs (RLTC) increased 41%. As a percentage of GMV, RLTC was 4.31%, up 19-bps vs. the prior year, driven by an ongoing improvement in funding costs. The Affirm Card generated $2.1 billion of GMV in the quarter.

• Klarna reported GMV and revenue growth of 33% and 44%, respectively. On a like-for-like basis (LfL), GMV increased 22% (down 1-point) and revenue grew 36%, a 4-point improvement from Q4. U.S. GMV increased 39% with revenue growth accelerating to 68%. Klarna’s transaction margin dollars (TMD) grew 34% LfL and as a percentage of GMV expanded by 8-bps over the prior year to 1.15% during Q1.

• I estimate Afterpay’s GMV growth reached 38% during Q1, up 14-points from Q4, due to significant adoption of post-purchase BNPL on Cash App Card transactions, Block’s most successful lending product launch ever.

Corporate Payments

Tracking

• Volume and revenue9 for BILL Holdings, Corpay, AvidXchange and Payoneer

Mid-Teens Revenue Growth Persists

• Aggregate Corporate Payments revenue grew 14.8% in Q1, a 10-bps improvement from Q4. Volume growth of 21.4% slowed 2-points from Q4 but is being influenced by a single enterprise customer that generates a significant amount of lower-yielding revenue.

• Corpay’s organic revenue growth of 15.6% in Q1 was essentially unchanged vs. Q4. Organic spend volume growth fell by 10-points but continues to be heavily influenced by volume from a single enterprise customer where Corpay generates a lower revenue yield. Excluding float compression, Corpay’s organic revenue grew 18%, similar to Q4.

• BILL Holdings’ core revenue, which includes transaction and subscription fees, grew 15.9% during the March quarter, down 1.5-points from the December quarter, as total payment volume growth ticked down 80-bps to 11.7%. Transaction fees growth slowed to 17.5% (down about 2.5-points) but subscription fees growth improved to more than 9% (up about 2.5-points). By solution, AP/AR revenue growth remained steady at a little less than 12% while spend and expense revenue growth slowed by about 3-points to 21%.

Bank Technology

Tracking

• Revenue from Fiserv, FIS, Jack Henry, nCino, Q2 Holdings, and Alkami Technology

Outside of Fiserv, Growth Remains Healthy

• Aggregate Bank Technology revenue grew 1.1% in Q1, down 210-bps from Q4. Excluding Fiserv, growth would have been 7.2%.

• Fiserv’s Financial Solutions revenue fell 6% on an organic basis with weakness across digital payments (-5%), issuing (-6%), and banking (-6%) despite underlying stability in key drivers: low double-digit network volume growth, global accounts on file up low single-digits, and total accounts up 6% inclusive of Finxact. Select pricing changes and the absence of nonrecurring revenue account for the discrepancy between organic revenue growth and key drivers. Fiserv expects Q2 to be the trough for Financial Solutions with growth improving in H2 2026—more in-line with key drivers—before reaching 2-4% during 2027-2029.

• Jack Henry’s organic revenue growth was 7.3% during the March quarter, a 70-bps improvement from the December quarter. Across segments, Core revenue increased 9% (due in part to the inclusion of some non-recurring revenue), Payments grew 5% (a tick down due to lower network incentives), and Complementary expanded 7%. Jack Henry noted consolidation at one of its competitors (i.e., Fiserv) has positively impacted its sales pipeline across Core, Payments and Complementary solutions, with its win rate likely to improve over time. Through the first three quarters of fiscal 2026, Jack Henry has 43 core wins versus 28 in the prior year period. Additionally, 58% of core wins are attaching digital banking and card processing this year versus only 29% a year ago.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclosure: As of May 31, 2026, of the stocks mentioned in this report and across payments and fintech, I am long Visa, Global Payments, Intuit, Block, Adyen, Shift4 Payments, Paychex, Mastercard, and Broadridge Financial. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Intuit shares fell meaningfully in after-hours trade after the company slightly reduced their outlook for TurboTax revenue growth in fiscal 2026, from 8% to 7%. Expectations were lifted elsewhere, resulting in an aggregate increase in guidance. Overall, for fiscal 2026, Intuit expects: 13-14% revenue growth, non-GAAP operating margin to expand by about 1-point, and non-GAAP EPS to grow 18%:

Confirming media reporting earlier in the day, Intuit announced it will be reducing its workforce by 17% to remove layers of friction from the decision-making process. Intuit expects ‘a big chunk’ of savings to drop to the bottom-line with a ‘smaller part’ reinvested, suggesting Intuit is satisfied with the level of investment against its key priorities: assisted tax, its money portfolio, and mid-market, all of which continue to grow more than 30%.

Intuit attributed the softness in TurboTax to two factors: (1) a smaller number of overall tax filings this season (down 0.3% versus an expectation for a 1% increase, creating a net gap of 2MM filings); and (2) weakness among price-sensitive lower-income (<$50k) DIY filers. Simply put, Inuit lost on price within this cohort. Historically, Intuit made one-time offers to bring this group of customers in the door but has failed to retain them at standard pricing. To address the issue moving forward, Intuit will selectively lower pricing, modify product features, and rely on other opportunities to monetize these customers. What could that look like? Incentivizing customers with a reduced or free tax filing if they deposit their refund (or better yet, their paycheck) into a Credit Karma Money checking account, attach a debit card, and spend a certain amount monthly. Or a reduced or free tax filing as a reward for opening a credit card account, purchasing insurance, or taking out a mortgage via a Credit Karma referral. I cannot stress enough that the weakness called out by Intuit is in a narrow part of the market. And while Intuit is not giving up on this group of customers, it is emphasizing, and having success among, higher-value DIY and assisted filers with more complex tax situations.

YTD, TurboTax revenue has grown 7.5%. For the full fiscal year, Intuit expects TurboTax revenue to grow approximately 7%, implying $5,286MM of revenue. Assuming 53% (or $2,801MM) for TurboTax Live leaves $2,485MM from the DIY category, just 11.6% of Intuit’s total revenue:

Excluding DIY revenue from both fiscal 2025 and 2026 implies Intuit’s remaining revenue will grow approximately 18% in fiscal 2026:

The math moving forward is relatively straightforward: If TurboTax Live revenue grows at the midpoint of Intuit’s long-term guidance of 15-20% (which would be a meaningful slowdown from 47% growth in fiscal 2025 and 36% growth in fiscal 2026), it would contribute more than 9-points to TurboTax’s overall growth. Pairing that with a 5% reduction in DIY revenue (an improvement from the 14% decline in fiscal 2025 and more in-line with fiscal 2024’s performance), yields 7% total TurboTax revenue growth in fiscal 2027. A more realistic scenario: 25% Live growth and a 10% decline in DIY yielding 8.5% total TurboTax revenue growth in fiscal 2027.

Thoughts on the Stock

Perception is greater than reality for software companies, and a weak spot anywhere is certain to be punished in this market environment. In that regard, Intuit’s decline is not surprising and, to a degree, justified. However, the results do little to refute the key points of my thesis:

• Intuit is moving successfully into the much larger assisted tax category, which is unlikely to be disrupted by AI. For fiscal 2026, Intuit expects TurboTax Live revenue and customers to grow 36% and 38%, respectively. TurboTax Live will make up 53% of TurboTax’s total fiscal 2026 revenue, or $2,801MM, representing only 7.5% of the $37B total addressable market.

• QuickBooks’ dominance makes Intuit the ‘ultimate SMB platform’ with a clear right to win in other service offerings, specifically payments and payroll. Through the first three quarters of fiscal 2026, Intuit’s online payments and payroll revenue increased more than 25%. It is important to note that growth dipped to 22% during fiscal Q3. However, fiscal Q2 was seasonally stronger due to the timing of some payroll-related tax filings, which accelerated growth on a year-over-year basis to 28%. In aggregate, fiscal Q2 and Q3 online payments and payroll revenue grew 25%, roughly in-line with fiscal Q1’s 26% growth rate. Over the trailing twelve months, online payments and payroll revenue were more than $3.4 billion. Finding that combination of scale and growth is rare among Intuit’s peer group.

Valuation: Compelling, but is anyone in a hurry to buy?

At the after-hours price of approximately $323, Intuit trades at <21x its expected fiscal 2026 GAAP EPS estimate of $15.82 (midpoint). However, included in this amount is an anticipated $300MM restructuring charge in fiscal Q4 and roughly $660MM of amortization of acquired intangible assets. Adjusting for these items (net of tax) results in normalized fiscal 2026 EPS of $18.44. If we assume mid-teens growth off this base during fiscal 2027 (which may prove conservative given Intuit’s plan to let most of the savings from the headcount reduction drop to the bottom-line), it results in normalized EPS of about $21.21, implying a multiple of ~15x:

In my view, this is highly compelling, especially for a company expected to grow revenue at the high-end of low double-digits and EPS by at least 15% over the medium-term. Although I plan to add to my position (because nothing has changed fundamentally, except the price), I’ll likely do it in a measured way, primarily because I do not expect the stock to recover quickly and potentially fall more as Intuit has no way to redeem itself until the conclusion of next tax season, which is a full year away.

Moving forward, I’ll be watching a couple of items closely. First, online payments and payroll revenue growth. I would very much like to see this growth rate recover (moderately) in fiscal Q4, validating that the dip in fiscal Q3 was due to a timing issue, which made fiscal Q2 seasonally stronger. A range of 23-25% for fiscal Q4 is reasonable to expect, in my opinion. Second, the exact savings from the workforce reduction, and what portion plans to be reinvested versus fall to the bottom-line. And finally, more details around its plan to win back price-sensitive lower-income DIY filers and how it will show up in the income statement (more Credit Karma revenue from increased monetization and the impact on margins). However, as mentioned previously, even if the plan is credible and management is optimistic, it ultimately won’t matter until actual results come in after next tax season.

Here is a link to my full report on Intuit: Long Intuit

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As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclosure: As of May 21, 2026, I am long Intuit. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Retention. Fiserv relies on cross-selling to grow revenue (boost average revenue per client), improve margins (additional revenue comes on at high incremental margins), and increase its value to clients (relationships become stickier when more products and services are taken). Retaining clients as a base for cross-selling is critical to Fiserv’s strategy. New management is taking several steps to improve retention: rolling back excessive price increases, using AI to quickly resolve basic service inquiries, adding frontline personnel to increase client coverage, and making investments to improve technology and systems resiliency.

Attrition has been most acute within Fiserv’s core banking franchise where platform consolidations and service gaps have doubled attrition rates (versus its historic baseline) over the past few years. According to Fiserv, every $1 of core processing revenue generates an additional $2.70 of revenue from an average of 10 other products and services across Fiserv’s Financial Solutions segment. With $1.3B of core processing revenue in 2025, this implies total revenue of $4.8B from core clients, half the segment’s total. During 2023-2025, core and related revenue attrition represented 1.5-points of total Financial Solutions revenue, implying $142MM for 2025, or 3% of core and related revenue. I’m uncertain if this is just voluntary attrition or includes involuntary attrition (clients being acquired by banks with non-Fiserv cores). Either way, this is a low number (even if it has doubled over its historic baseline) and demonstrates the attractiveness of Fiserv’s core banking franchise. Fiserv believes its actions to date (no forced conversions, $142MM invested in stability and operations, and its Smith Consulting Group acquisition) are starting to ‘bend the curve’ on core platform attrition. Still, Fiserv is not forecasting a quick return to historical levels, but rather a gradual decline, reaching its historical baseline by 2029, an appropriately prudent assumption and one of the reasons why Fiserv is forecasting banking revenue to grow at the lower-end or below its 2-4% medium-term outlook for the Financial Solutions segment.

Non-Clover SMBs. Even though Clover is among the largest commerce platforms (a POS system combining hardware, software, and processing), non-Clover SMBs still generate $4B of revenue (1.8MM locations and $700B of GPV), greater than the $3.3B of Clover revenue. Much like its strategy in core banking, Fiserv does not intend to force non-Clover merchants to convert to Clover. Instead, Fiserv will support non-Clover SMB solutions and offer high value Clover upgrades that result in minimal disruption for a non-Clover merchant: the Clover dashboard, Clover Capital, Clover Savings, and its new marketing agent. Fiserv believes this package will result in a revenue uplift of 15%. Converting a non-Clover merchant to the full Clover experience will result in a 30% revenue uplift. Fiserv estimates 50-60% of its $4B of non-Clover SMB revenue is in scope for upgrade or conversion. An uplift of 15% on this base equals $330MM of revenue with the full conversion generating $660MM of additional revenue, or about 6.5% of total 2025 Merchant Solutions revenue:

Clover Details. Fiserv had 910k Clover merchants at the end of 2025, up from ~700k at the end of 2023. Clover merchants generate $357k in GPV per location compared to $53k for Square (based on 4.5MM sellers) and $1,189k for Toast. Excluding value-added services (VAS), Clover’s revenue of $2.47B (2025) represented 76-bps of GPV, which compares to a payments take rate of ~107-bps for Square, ~49-bps for Toast, and ~60-bps for Shift4 Payments. Clover’s non-VAS revenue includes hardware sales, which are unknown. In the Merchant Solutions segment, product revenue (which is likely the best proxy for hardware sales) represented 12.5% of total revenue during 2025. Assuming a similar contribution to Clover, implies payments revenue of $2.08B, or 63-bps of GPV. After re-reading the Q1 earnings call transcript, even though implied non-VAS Clover revenue grew LSD, Fiserv stated Clover’s payment processing revenue grew 10%, more in-line with reported GPV growth (9%), suggesting a stable payments take rate, and a more significant decline in hardware sales. Unlike Square and Toast, Fiserv generates an ‘appropriate and stable operating margin’ from Clover hardware sales. Only $30B, or approximately 9%, of Clover’s total GPV is online. Here is my estimate of Clover’s U.S. GPV composition based on Fiserv’s disclosures:

Restaurants. Restaurants are an important category for payments companies. It’s a big market (food services and drinking places generated $1.18T in retail sales in 2025) with surprisingly durable growth and lots of SMBs, presenting attractive revenue opportunities from software penetration (moving restaurants to cloud-based POS systems) and payment processing (higher take rates). Clover, Toast, Square, Shift4, and Global Payments are all major players in restaurants. According to Fiserv, Clover’s U.S. restaurant GPV grew at 4x the cumulative industry rate from 2023 to 2025, a surprisingly strong showing despite a resurgence at Square, Clover’s formidable competitor in limited-service restaurants. It’s not entirely clear what industry growth rate Fiserv refers to. According to the U.S. Census Bureau, from 2023 to 2025, retail sales at food services and drinking places increased slightly less than 11% in total. If we use limited-service eating places, the increase was 8.5% in total. Both aggregate enterprise customers and SMBs (and Fiserv may be referring to a proprietary SMB growth rate). If we use the 8.5% increase for limited-service eating places as the industry growth rate, this implies 34% growth (4 x 8.5%) for Clover’s U.S. restaurant GPV, lower than Toast’s 55% increase, but more than 31% for Square. The natural question is: if Clover, Square, and Toast are all gaining significant ground in restaurants, who’s losing? The answer is likely the long-tail of smaller, less robust restaurant POS systems, legacy on-premise providers, and non-Clover Fiserv.

ISVs. An interesting part of Fiserv’s strategy with Clover is developing highly specialized vertical-specific solutions in partnership with ISVs. Historically, payments companies embed only processing capabilities within ISVs, earning limited economics. Fiserv’s new strategy combines most Clover capabilities (hardware, VAS, and processing) with vertical-specific software from ISVs, creating a potentially best-in-class commerce solution and allowing Fiserv to keep more economics, a win-win for all parties. The first iteration of this strategy was the launch of Clover PracticePay for healthcare providers last summer. PracticePay combines the practice management software of Rectangle Health with Clover’s commerce capabilities. Last week, in a similar fashion, Fiserv announced Clover Reserve powered by Tabit for full-service and fine dining restaurants. Fiserv plans additional ISV partnerships.

Modernization + AI. Like other payment and fintech companies, Fiserv is leaning heavily on AI to create better solutions (faster) and lower costs by automating certain business functions, including customer service and software development. In the category of easier said than done, Fiserv believes its collection of assets (although dispersed) and the corresponding data it creates will be significantly enhanced by AI, allowing Fiserv to catch-up to competitors…but not be disrupted by new entrants using the same AI tools. I found this portion of the presentation to be particularly ambitious:

Fiserv highlighted the following modernization and AI efforts:

• Launching an enhanced omni-channel payments platform for enterprise and platform customers early next year featuring new customer identification tools, fraud controls, routing optimization, embedded finance solutions, and payouts. If successful, it would rival modern offerings from Adyen, Stripe and Braintree.

• Updates to its card issuing platforms Optis and VisionNext. Optis is for larger traditional card issuers, while VisionNext is Fiserv’s cloud-based platform for modern use cases that will compete with companies like Marqeta and Pismo. Fiserv highlighted a $250MM pipeline for VisionNext with four implementations already in flight.

• Fiserv is launching agentOS in collaboration with OpenAI for its financial institution customers. agentOS will offer a marketplace of agents that complete tasks across Fiserv’s banking platforms. The marketplace will include agents built by Fiserv and third-parties as well as the tools for banks to build agents themselves.

Financial Outlook. There was little surprise in Fiserv’s medium-term outlook (2026-2029) relative to what the company shared last October when it reset its financial baseline: 4-6% adjusted revenue growth (total not organic, but contemplates no significant M&A), more than 300-bps of cumulative margin expansion (50-bps annually from operating leverage and 200-bps from Project Elevate savings), a majority of FCF directed to share buyback, and double-digit EPS growth.

By segment, Fiserv expects 6-8% adjusted revenue growth for Merchant Solutions, and 2-4% growth for Financial Solutions:

• Within Merchant Solutions, Fiserv expects Clover revenue to grow 15-20% and enterprise growth to be in the MSDs. Clover revenue growth will be boosted by increased penetration of VAS, including Capital (which is used by only 4.5% of Clover merchants), and conversion of non-Clover SMBs to Clover. The remaining portion of Merchant Solutions, which makes up approximately half of current segment revenue, is expected to be relatively flat.

• For Financial Solutions, banking is expected to be at the low-end or slightly below the broader segment goal of 2-4% growth with issuing and digital payments at the higher-end of the range.

FCF conversion is expected to be 90% with capital expenditures averaging 8% of revenue over the medium-term outlook. The tax rate of 21-22% is higher than the 19% it has averaged over the past few years. Fiserv expects 2029 EPS to be above $12, implying a CAGR of nearly 14%.

Here is my outlook for 2026-2029 along with my Fiserv model:

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Fiserv Investor Day Notes

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As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclosure: As of May 17, 2026, of the stocks mentioned in this report, I am long Global Payments, Adyen, Block, and Shift4 Payments. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Overall, the market continues to tilt decidedly negative toward payments and fintech companies. In the face of solid results (on both an absolute and relative basis), many stocks sold off as full year outlooks were maintained and a number of bearish arguments persist unresolved: the potential for a weakening macro, increasing competitive intensity, and the impact of AI on software and payments. Below is an aggregated view of key themes across payments and fintech from this earnings season:

Macro: Very little evidence of consumer weakening emerged in Q1. Strong U.S. volume growth continued into April, partly on the back of a robust tax refund season. Charge-off rates are well contained across the board. Where provided, spending remains resilient for both affluent and lower-to-middle income consumers. Significant expansion of alternative fintech lending is likely helping bridge the gap for consumers living paycheck-to-paycheck. Perhaps the most important factor is that these people still have paychecks, as the employment backdrop appeared stable-to-improving despite fears of a structural decline in employment due to AI.

Middle East Conflict: The conflict with Iran appears to be having only a modest impact (so far) on global travel and spending patterns with pockets of strength partially offsetting, including a rebound in inbound U.S. travel. Even though both Visa and Mastercard reported a dip in cross-border travel volume growth during April, it was partially due to the timing of Ramadan. Still, it’s not exactly clear how this will play out if the conflict and elevated energy prices persist or worsen.

Competitive Intensity: Where available, payment yields are mostly stable, with the exception of Fiserv, which has made a purposeful decision to reset its pricing strategy for Clover. Among fintech banks (Cash App, Chime and Venmo), incentivizes to attract greater engagement are on the rise (Cash App Green and Chime Prime).

AI: Discussion around AI-related productivity gains (coding and customer service) and customer-facing feature launches are accelerating. The argument I’m hearing most from payments and fintech companies (which I’m partial to) is their accrued data advantage will translate to differentiated solutions relative to AI-native companies. Stablecoins and agentic commerce remain theoretical concepts, not near-term realities. I believe Visa and Mastercard are well positioned to incorporate these emerging commerce options into their ubiquitous global payment networks. Companies with meaningful software exposure (Shopify, Toast, Broadridge, and Intuit) have been beaten down even though current performance remains solid-to-strong. The question moving forward is whether valuations have been reset to the point where sustained success will result in higher stock prices.

Capital Allocation: Share buyback remains a significant part of the capital return story for payments and fintech companies. In fact, it’s hard to think of a company not buying back stock (answer: Adyen and Affirm). Here’s a list of last quarter’s buyback amounts: Visa ($7.9B); Mastercard ($4.0B); American Express ($1.9B); PayPal ($1.5B); Corpay ($786M); Block ($636M); Global Payments ($550M); Shopify ($491M); Toast ($323M); Shift4 Payments ($295M); Fiserv ($240M); Broadridge Financial ($200M); Jack Henry ($160M); Chime ($86M); and BILL Holdings ($57M). The question is, are there incremental buyers of payments and fintech stocks beyond the companies themselves?

Below is a recap of earnings for the companies I follow most closely, sorted by reporting date:

American Express

Synopsis: American Express continues to deliver steady results as its affluent customer base remains in good shape. Even though U.S. volume growth continues to trail larger network peers, credit performance remains excellent, underscoring American Express’ ability to attract and retain the most premium fee-paying customers.

Most Important KPI(s): FXN revenue grew 10%, at its aspirational long-term target. Discount revenue, American Express’ largest source, and anchor of its spend-centric business model, increased 7% FXN. FXN billed business grew 9%, up 1-point from Q4.

Best Part(s) of Earnings: At 2.3%, American Express’ net write-off rate is below its pre-pandemic level, expanding its lead versus peers. American Express continues to perform extremely well with Millennials and Gen-Z, suggesting its brand has generational staying power: in Q1, this cohort, which represents 36% of U.S. consumer billed business, grew over 17%.

Worst Part(s) of Earnings: U.S. billed business grew only 7.2% in Q1, up 70-bps vs. Q4. For comparison, Visa’s U.S. credit volume grew 9.6%, up 220-bps from last quarter, while Mastercard’s grew 8.1%, up 150-bps. Despite Q1 outperformance, American Express maintained guidance as it plans to reinvest upside in marketing and technology spend to support long-term growth. A bearish point of view may be the highly competitive U.S. affluent card market requires elevated investment to sustain attractive growth.

Valuation: After expanding significantly from 12x at the end of 2023 to nearly 23x at the start of this year, American Express’ multiple has backed-off to around 17.5x currently, more in-line with its pre-pandemic average of the mid-teens.

Visa

Synopsis: For me, Visa’s results were best-in-class this earnings season. Organic net revenue growth reached 15% on the back of strong U.S. volume growth and a 27% increase in VAS revenue. Over the last ten quarters, Visa’s VAS revenue growth outpaced Mastercard’s by 6-points on average. With VAS revenue now representing 30% of Visa’s total, sustaining a low-to-mid 20% growth rate for VAS sets the stage for 11-12% total net revenue growth, easily clearing the double-digit bar investors feared was slipping out of reach not too long ago.

Most Important KPI(s): Organic net revenue grew 15%, up 2-points from the December quarter. FXN global PV increased 9%, up 1-point. FXN cross-border volume grew 12%, similar to the past three quarters. Processed transactions grew 9%, similar to the December quarter.

Best Part(s) of Earnings: Visa raised its organic net revenue and EPS growth guidance for fiscal 2026 based on strong volume growth, VAS outperformance, and increased FX volatility (Visa earns a spread over the wholesale rate when it converts currency in a cross-border transaction—the spread is influenced by FX volatility, so the more volatility the better for Visa).

Worst Part(s) of Earnings: While not perfectly clear, the Olympics and upcoming World Cup may be driving outsized VAS revenue growth for Visa through increased marketing engagements with customers. If this is the case, it may indicate a lower sustainable growth rate for VAS and set up a more challenging comparison next fiscal year. Cross-border travel, a highly valuable volume stream for Visa, dipped in April due in part to the Middle East conflict.

Valuation: At around 23x NTM EPS, Visa trades near its trough level over the past decade. Historically, this has been an excellent time to buy the stock, but will this time be different?

Mastercard

Synopsis: Mastercard’s results played second fiddle to Visa’s, a rare occurrence over the past few years. Still, results were solid, and I expect Mastercard to sustain modestly stronger growth than Visa over the long-term.

Most Important KPI(s): Organic net revenue grew 12%, down 2-points from Q4. FXN global PV increased 9%, similar to Q4. Switched transactions grew 9% and FXN cross-border volume grew 13%, both 1-point lower vs. Q4.

Best Part(s) of Earnings: 12% organic net revenue growth is nothing to blush at. Organic VAS revenue growth remains in the high-teens.

Worst Part(s) of Earnings: Mastercard maintained full-year guidance despite solid volume growth and increased FX volatility. Guidance assumes the Middle East conflict concludes this quarter, and travel patterns normalize in H2. This could prove optimistic, capping outperformance for the remainder of the year.

Valuation: Over the past decade, Mastercard has traded at a 4-point premium to Visa on an NTM P/E basis. It currently sits at less than 1.5-points. Interesting.

Broadridge Financial

Synopsis: Broadridge reported solid results, inching up recurring revenue and EPS guidance for fiscal 2026 (ends June), but the stock fell on a reduction in its closed sales forecast, which contributes to recurring revenue growth in future years. Broadridge cited larger and more complex deals taking longer to close.

Most Important KPI(s): Equity positions (that generate revenue) were up 11% with fund positions up 6%. Organic recurring revenue growth was 5%. YTD closed sales of $147M are down 16% from the prior year period.

Best Part(s) of Earnings: Position growth, the primary driver of long-term growth in Broadridge’s regulatory and communications franchise, remains healthy. For the upcoming proxy season, Broadridge expects revenue-generating equity positions to increase in the low double-digits with mid-to-high single digit growth in fund positions. Even though deals are taking longer to close, Broadridge’s sales pipeline (north of $1B) is up 20% vs. the prior year.

Worst Part(s) of Earnings: Broadridge’s capital markets and wealth management businesses deliver significant parts of their offering via SaaS to large customers with a primary alternative being an in-house solution. Any commentary about large enterprise deals taking longer to close may stoke AI fears (and that’s exactly what happened this quarter).

Valuation: At 15x NTM EPS, Broadridge trades at a meaningful discount to its low-to-mid 20s average over the past decade. I believe that is just too low for a business with a virtual monopoly in proxy distribution and a highly complimentary regulatory and communications franchise that together represent close to 70% of profits.

Fiserv

Synopsis: Even though Fiserv delivered results in-line with the shape of its full-year forecast, banking organic revenue fell 6% as elevated attrition drove a decline in the number of accounts on Fiserv’s core platforms, a troubling development for a business that relies heavily on cross-selling.

Most Important KPI(s): Organic revenue declined 4%. Management expects Q2 to be the trough with improvement in the second half as comparisons ease. Even so, achieving the midpoint of Fiserv’s 1-3% full-year organic revenue growth outlook appears challenging. Adjusted operating margin fell 810-bps to below 30%.

Best Part(s) of Earnings: Underlying Clover volume growth accelerated by 3-points in Q1, reaching 12%.

Worst Part(s) of Earnings: Disruption from platform consolidations and poor service (which are now being addressed) has led to elevated attrition among Fiserv’s core banking customers. Core accounts fell 2%. Jack Henry, a key competitor to Fiserv in the community bank and credit union space, is reporting higher competitive takeaways, citing the disruption at Fiserv as a contributing factor.

Valuation: Fiserv trades at a rock bottom multiple of less than 7x NTM EPS. Although this is not deserved, Fiserv’s best asset (the annuity-like earnings stream from its core banking franchise) may now be its greatest liability as the market questions a return to MSD growth.

PayPal

Synopsis: Despite solid Q1 results, PayPal shares fell after management offered cautious commentary and a soft outlook for Q2 and hinted a sale of all or parts of PayPal was not imminent. PayPal will reorganize its business into three distinct segments (PayPal, Venmo, and Braintree, essentially) and reduce headcount by 20% to fund growth investments. However, new CEO Enrique Lores failed to deliver a more specific turnaround plan for the struggling digital payments giant.

Most Important KPI(s): Transaction margin dollars (TM$) excluding interest on client funds grew 3% during Q1 with an uptick in branded online checkout TPV growth to 2%.

Best Part(s) of Earnings: Braintree volume growth accelerated to the mid-teens during Q1. PayPal announced a multi-year restructuring plan that will generate cost savings to fund investments to modernize PayPal’s technology platform and incentivize customers to more fully participate in PayPal’s ecosystem.

Worst Part(s) of Earnings: Q2 branded online checkout TPV growth was tracking at the ‘low-end’ of PayPal’s full-year guidance for ‘slightly positive to LSD growth’ as management noted weakness in the travel vertical and Europe. PayPal is guiding for a LSD decline in TM$ excluding interest on client funds in Q2.

Valuation: At around 8x NTM EPS, PayPal’s valuation reflects serious concern over PayPal’s competitive position and the fragility of its branded online checkout volume stream. Still, the balance sheet is in excellent shape, and PayPal produces significant FCF that it deploys to dramatically shrink its share count.

Shopify

Synopsis: Shopify is another company where results appeared strong, but the stock got knocked down pretty hard as the upcoming quarter’s guidance failed to impress. The bottom line is Shopify is among the most expensive stocks in payments and fintech, so any bobble may be (severely) punished. Although Shopify is positioning itself as a ‘winner’ in agentic commerce, the outcome is far from determined, creating additional uncertainty for the stock.

Most Important KPI(s): FXN GMV grew 30%, up 1-point from Q4, and the second consecutive quarter of more than $100B. Payments penetration was 67%, up 3-points from a year ago, driving 41% growth in payments volume (on a reported basis).

Best Part(s) of Earnings: Shopify delivered 78% GAAP operating profit growth in Q1. Shopify’s GMV growth remains best-in-class with strength across geographies and channels.

Worst Part(s) of Earnings: On a reported basis, Shopify expects Q2 revenue growth in the ‘high-20s’, down from 35% in Q1, and ‘mid-20s’ gross profit growth, down from 32% in Q1. After accounting for a smaller FX tailwind (0.5% in Q2 vs. 2% in Q1), the slowdown is about MSD. Shopify mentioned that increased LLM costs were a headwind to subscription gross profit margin, a dynamic that is expected to continue.

Valuation: Burdened for SBC expense, I estimate Shopify trades at an EV-to-2026 EBITDA multiple in the mid-50s. Although more reasonable than in the past, it’s still (slightly) too rich for my blood.

Adyen

Synopsis: Adyen disclosed preliminary Q1 results in conjunction with its Talon.One acquisition announcement on April 23. FXN net revenue grew 20%, at the low-end of its full-year 20-22% guide. However, Adyen expects Q2 to be slightly stronger, and H2 to be equal to H1.

Talon.One Acquisition: Adyen is acquiring Talon.One, a German-based loyalty and incentives platform, for €750 million, roughly 12.5x expected ending 2026 ARR of €60 million. Adyen believes the combination of its unique identification capabilities (enabled by Adyen’s single platform) and Talon.One’s SKU-level product catalog will enable Adyen to deliver real-time promotions to human shoppers, online and in-store, and AI agents. While this sounds wonderful in theory, delivering it in practice may be more difficult, especially since payments companies have been attempting this for at least the past decade.

Most Important KPI(s): FXN net revenue increased 20%. Processed volume grew 21% on a reported basis. Assuming a similar FX impact as net revenue (-4-point) implies FXN processed volume growth in the mid-20% range, a bit better than 23-24% growth during 2025. Adyen added 88 net new FTEs in Q1, below the pace implied by its full-year plan for a 550-650 increase (which remains unchanged).

Best Part(s) of Earnings: Adyen has not observed a discernible change in spending behavior since the start of the Middle East conflict. Further, it appears wallet share gain of existing customer volume is off to a solid start in 2026.

Worst Part(s) of Earnings: The Talon.One acquisition is expected to be 1-point dilutive to Adyen’s 2027 EBITDA margin. Volume growth was more weighted to Adyen’s largest customers during Q1, driving about a 5-point spread between FXN net revenue and processed volume growth, slightly higher than Adyen’s long-term average.

Valuation: Adyen trades at about 16.5x on an EV-to-EBITDA basis, an attractive level in my opinion and a discount to other high-growth payments and fintech peers, including Shopify (mid-50s) and Toast (low-20s).

Global Payments

Synopsis: In its first quarter post-Worldpay close, Global delivered organic revenue growth of 4.5%, in-line with expectations. Although Global kept the full-year guide intact, which includes approximately 5% organic revenue growth, the call was short on details and Global outlined headwinds from lower tax payments and the Middle East conflict that will be a 1-point drag on growth in Q2.

Most Important KPI(s): Organic revenue grew 4.5%. Segment composition (forthcoming with Q2 results) and growth dimensioned by legacy Global Payments and Worldpay were not disclosed, making a robust analysis of Q1 results difficult.

Best Part(s) of Earnings: Global Payments delivered on their Q1 commitment of organic revenue growth of ‘slightly less’ than 5%. While qualitative in nature, the Worldpay integration appears on track and momentum around the Genius platform appears solid.

Worst Part(s) of Earnings: Expectations for Q2 are unclear. Comments around headwinds suggest it is possible organic revenue growth could step-down in Q2, making the path to approximately 5% growth for the full-year more back-half weighted, always a concerning proposition.

Valuation: Global remains the ultimate show-me story in payments. At a pro-forma market cap of about $19 billion, Global trades at less than 4x its expected 2028 FCF of around $5B. I’m sticking with it.

Jack Henry

Synopsis: Jack Henry delivered steady fiscal Q3 results, raised the low-end of its organic revenue guidance, and upped its margin outlook for fiscal 2026. More importantly, Jack Henry is signing more, and larger, core banking customers and selling them more solutions upfront, setting the table for continued momentum in the upcoming fiscal years.

Most Important KPI(s): Organic revenue grew 7.3%. Fiscal year to-date, Jack Henry won 43 core deals, up from 28 a year ago. 58% of core wins this fiscal year included digital banking and card processing, double the percentage (29%) from a year ago.

Best Part(s) of Earnings: FCF conversion is expected at the high-end of its 95-105% forecast. Despite significant expansion in fiscal 2026 (85-bps at midpoint), Jack Henry expects additional margin expansion during fiscal 2027. Jack Henry is seeing early success with its SMB payments product and is poised to begin selling its highly popular digital banking solution outside its core customer base.

Worst Part(s) of Earnings: Payments revenue grew only 5% in fiscal Q3 as network incentives were a headwind. It is important to note Jack Henry’s network incentives (the amount of rebates it earns from Visa and Mastercard) are based on the number of transactions, not the dollar value of transactions, making them susceptible to rising inflation (and by the way, a positive for Visa and Mastercard).

Valuation: At 21x NTM EPS, Jack Henry is (significantly) less expensive than it was in the past but is in no way cheap, especially compared to other similarly attractive businesses across payments and fintech.

Shift4 Payments

Synopsis: Shift4 delivered in-line Q1 results, maintained its full-year guide, and provided greater transparency around organic GRLNF, a welcome development for transparency advocates (myself included). While this was good enough for an initial pop, those gains have since been erased as the market appears to be taking a wait-and-see approach for the rest of the year.

Most Important KPI(s): Organic GRLNF increased 11%, broadly in-line with my 12% estimate for Q4, but down significantly from mid-20s growth in 2024. Shift4’s blended spread of 61-bps jumped about 4-bps from Q4 and was flat year-over-year.

Best Part(s) of Earnings: SSS were slightly better than management’s internal expectation. Blended spreads rebounded from Q4, alleviating some of my concerns. Shift4’s H2 guide, which includes Global Blue in the base and only a moderate inorganic contribution from Smartpay and Bambora, implies organic GRLNF growth of 11-12%.

Worst Part(s) of Earnings: It’s not exactly clear how an ongoing, or escalating, Middle East conflict will impact not only Global Blue, but other discretionary categories like restaurants, travel and entertainment, where Shift4 plays heavily.

Valuation: At around $41 per share, Shift4 trades at only 7x the midpoint of its non-GAAP EPS ($5.60). If I burden EPS for SBC expense and recurring acquisition and restructuring costs, it reduces non-GAAP EPS by about $1.50, implying normalized EPS of $4.10 and a P/E of 10x. From my perspective, the market is pricing a slowdown in organic growth to the MSDs. If you believe Shift4 can sustain an organic growth rate closer to the low-DD (as I do), then shares are attractive, and upside potential is significant.

Chime

Synopsis: Chime shares declined significantly post-earnings despite better-than-expected results and an increase to full-year guidance. Even though Chime is successfully monetizing its customer base with (among the lowest cost) lending products (MyPay), the Chime Card (a secured credit card), and instant transfers, card purchase volume growth, a key barometer of primary financial relationships, continues to moderate.

Most Important KPI(s): Card purchase volume of $38.7B increased 12%, down 1-point from Q4. Including instant transfers, volume growth was 15%, also 1-point slower vs. Q4.

Best Part(s) of Earnings: Falling SBC expense and operating leverage are expected to result in GAAP profitability during 2026. A switch to a variable pricing model has boosted MyPay yields (to 2.6-2.7% in Q1 from about 1.9% a year ago) while loss rates remain low at 1%.

Worst Part(s) of Earnings: Card purchase volume growth has slowed from 18% to 12% over the past year, even though active member growth remains high at 19%, suggesting Chime is acquiring more lightly engaged users while the pace of primary financial relationships added may be slowing.

Valuation: If we take the high-end of Chime’s 2026 adjusted EBITDA guidance ($431M) and burden it by expected SBC expense (say $250M), it implies normalized EBITDA of $181M and an EV-to-2026 EBITDA multiple of the low-to-mid 30s, reasonable in my opinion.

Affirm

Synopsis: Affirm continues to impress with significant volume growth, strong credit performance, and substantial operating leverage. Although I have questions about the long-term durability of Affirm’s high-APR lending profile, there was little to find fault with in Affirm’s fiscal Q3 results.

Most Important KPI(s): GMV growth of 35% (down 1-point from last quarter) and revenue less transaction costs (RLTC) as a percentage of GMV expanded to 4.3%, above the company’s long-term target of 3-4%.

Best Part(s) of Earnings: Funding costs continued to fall, down 34 bps sequentially and 126 bps on a year-over-year basis. Even though there are concerns about the broader private credit market, Affirm highlighted the breadth and depth of demand for its loans, resulting in a further tightening of spreads on recent deals.

Worst Part(s) of Earnings: Affirm expects GMV growth of 28% (at the midpoint) for the June quarter, a 7-point slowdown, as it faces its most difficult comparison. Still, Affirm alluded to the fact it believes GMV growth for the upcoming fiscal year can grow above the fiscal Q4 exit rate.

Valuation: On a GAAP basis, which incorporates SBC expense, I estimate Affirm trades at an EV-to-EBITDA basis in the low-to-mid 30s, a price I’m unwilling to pay for a business model I’m uncomfortable with.

Toast

Synopsis: Despite strong results and an increase in full-year recurring gross profit and adjusted EBITDA targets, shares of Toast fell significantly post-earnings. While I cannot place my finger on the exact reason why, possibilities include: increased competition from Square, a softer Q2 outlook (even though the full-year guide increased), high expectations given Toast’s premium valuation, and commentary about hardware costs being a larger headwind in 2027 vs. 2026.

Most Important KPI(s): GPV growth of 22% ticked down ever so slightly from Q4. Toast’s payment take rate of 50.9-bps expanded by more than 2-bps from a year ago. SaaS ARPU on an ARR basis increased 4% from a year ago, similar to Q4.

Best Part(s) of Earnings: Moderating SBC expense growth and operating leverage are driving significant GAAP profitability for Toast. With few exceptions, Toast’s volume and location growth remains best-in-class among publicly traded PSPs.

Worst Part(s) of Earnings: Toast is forecasting recurring gross profit growth to slow from 27% during Q1 to 23% in Q2 at the midpoint. Based on my modeling and historical precedence, I expect Toast to outperform its guidance. Advanced memory chip purchases are expected to negatively impact near-term FCF and result in a larger headwind from hardware losses in 2027.

Valuation: At $50 per share, the market was pricing exceptional outcomes for Toast not only in U.S. SMB restaurants, but also enterprise, international, and adjacent categories. At around $23 per share, the market is pricing a great outcome only for U.S. SMB restaurants but giving you a reasonably priced call option on Toast’s other growth opportunities.

Block

Synopsis: Block delivered solid Q1 results as growth in key volume streams improved modestly and consumer lending expanded significantly. For the second time since its November investor day, Block lifted its 2026 outlook, now forecasting 19% gross profit growth and a 27% adjusted operating margin. Post-RIF, execution appears steady with an accelerated pace of product development.

Most Important KPI(s): Square GPV grew 11% on a constant currency basis, up 1-point, with over 8% U.S. growth and a 26% increase internationally. Cash App gross profit grew 38%.

Best Part(s) of Earnings: Cash App commerce volume grew 18% and 21% excluding Cash App Business GPV, both slight improvements from Q4, reflecting ongoing strength in Cash App Card volume growth and likely acceleration in BNPL volume as use cases expand. Square is seeing particular strength in food and beverage with GPV growth accelerating 5-points to 21%, nearly matching Toast. Through April, Square U.S. volume growth was 9%, a 1-point improvement from Q1.

Worst Part(s) of Earnings: Although improving, Square’s gross profit growth of 9% trailed reported GPV growth by nearly 4-points. Excluding hardware losses, Square’s gross profit increased 11%. For H2 2026, Block expects Square’s gross profit and GPV growth to converge. Transaction and credit losses nearly tripled as Block continues to scale its consumer lending business.

Valuation: Trading at just 13x on an EV-to-2026 EBITDA basis, Block remains ‘cheapest’ among high-growth payments and fintech peers (Toast at low-20x, Adyen at 16.5x, and Shopify at the mid-50s), suggesting further upside potential if Block can execute on the medium-term financial goals (mid-teens gross profit growth and substantial margin expansion) laid out at its November 2025 investor day.

BILL Holdings

Synopsis: BILL delivered core revenue growth of 16%, at the higher-end of guidance. More importantly, it announced a 30% workforce reduction that will generate $110 million in annual savings, with only a modest amount ($20-30 million) allocated to growth investments, resulting in a step-up in profitability ($85 million on BILL’s fiscal 2027 consensus revenue forecast of $1.85 billion implies 4.5 points of margin expansion).

Most Important KPI(s): TPV of $88.7B increased 12%, down about 1-point from the December quarter. Core revenue (which excludes interest on client funds) increased 16%, at the high-end of its 14-17% guidance.

Best Part(s) of Earnings: BILL announced a $1B share repurchase authorization, about a quarter of its market cap. The workforce reduction should result in a meaningful step-up in profitability during fiscal 2027. SBC expenses are trending down. Monetization trends remain stable and the rewards rate for its spend and expense product (Divvy) fell 3-bps sequentially.

Worst Part(s) of Earnings: BILL remains unprofitable on a GAAP operating basis and derives significant income from interest on client funds and corporate cash balances, making it susceptible to a meaningful decline in interest rates (which, admittedly, is unlikely over the near-term). BILL slightly lowered the high-end of its fiscal 2026 core revenue guidance with the mid-point of its fiscal Q4 guide (+14.5%) implying a modest slowdown from 16% during fiscal Q3.

Valuation: BILL trades at 2.3x on a price-to-NTM revenue basis, a significant discount to recent deals completed in the B2B payments space. With a buyout looking unlikely (I think), BILL is accelerating its transition to a more profitable business.

Corpay

Synopsis: Corpay delivered the goods in Q1: organic revenue growth of 11%, a raise of the full-year guide, and bullish commentary on many parts of its business (corporate payments, lodging, and its middle market strategy across the organization).

Most Important KPI(s): Organic revenue grew 11%, Corpay’s fourth consecutive quarter at that level. Corporate payments, which now make up 40% of Corpay’s revenue, grew organically by 18% excluding float income.

Best Part(s) of Earnings: New sales (up 24%) and retention (93.5%) were strong. The lodging business improved sequentially and is expected to exit the year with growth in positive territory (up MSD or better). EPS guidance was raised by about 3%. Corpay is considering additional divestitures and acquisitions to further tilt the business toward corporate payments, where it feels it has a complete solution and the TAM is significant.

Worst Part(s) of Earnings: Corpay still expects around 10% organic revenue growth for the full year as comparisons get more challenging starting in Q2.

Valuation: Corpay may be the ‘deal’ stock that has performed best in payments. What the team has been able to build in corporate payments is truly impressive. The pitch on Corpay is simple: it has leadership positions in markets that are less competitive (fleet, lodging, and tolls) and significant enough to support multiple winners (corporate payments). At just 14x on NTM EPS (burdened for SBC expense and recurring acquisition costs), no one should be sleeping on Corpay.

Payments And Fintech Earnings Recap Q1 2026

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Disclosure: As of May 13, 2026, of the stocks mentioned in this report, I am long Visa, Global Payments, Intuit, Adyen, Block, Shift4 Payments, and Broadridge Financial. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Affirm has effectively unbundled the credit card, allowing consumers to finance major purchases with an individual installment loan decisioned at the point of sale. More importantly, Affirm provides transparent and fixed repayment terms, helping consumers avoid excessive high-cost debt and punitive fees, positioning Affirm as a viable alternative to an open-ended revolving credit card limit. Reflecting its success, Affirm has become the largest provider of buy now pay later (BNPL) loans in the United States:

Although BNPL loans have grown significantly in the United States, they represent only a small portion of e-commerce volume, their most natural use case:

Relative to other developed markets, the United States trails significantly on BNPL penetration of e-commerce, implying further adoption runway ahead:

If the opportunity is extended to all revolving credit card spend, both online and in-store, which the Affirm Card (and others like it) seek to target, the addressable market increases significantly:

Affirm’s blue-chip partners (including Shopify and Amazon) enable acceptance where a majority of United States e-commerce is conducted, attracting tens of millions of consumers to Affirm’s platform, which in turn makes Affirm more appealing to merchants, creating a virtuous cycle commonly referred to as a network effect.

The company uses proprietary technology to evaluate each transaction, leveraging data accumulated from the hundreds of millions of loans it has originated to continually improve its underwriting models. Affirm believes its advanced underwriting techniques and shorter loan durations will combine to limit credit losses, especially during dynamic and weaker economic environments.

Affirm utilizes multiple funding sources (asset-backed securitizations, warehouse loans, and forward flow agreements) to support its growth while maintaining an asset-light balance sheet. At the beginning of 2026, Affirm applied for an industrial bank charter. Securing it could eliminate the need for banking partners, enabling Affirm to offer more financial services, capture better economics (by becoming the issuer of the Affirm Card), and lower funding costs (by gathering low-cost deposits).

Not all is sunshine and rainbows though. From my perspective, there are logical reasons to be skeptical of the BNPL model, and Affirm in particular:

Across publicly traded BNPL providers, average order value (AOV) was $110 during 2025, more than double U.S. debit average ticket size ($50) but approximately equal to U.S. credit average ticket size (>$100). One of the key (but not only) arguments in favor of BNPL is that its availability significantly increases average order sizes, supporting merchant fees that are higher than card interchange rates. Based on the available information (not all BNPL revenue, or its sources, are publicly disclosed), my best estimate is that merchant fees represent at least 3% of BNPL gross merchandise volume (GMV), higher than the aggregate U.S. credit card interchange rate of 2.35% for Visa and Mastercard. Given the similarity between BNPL AOV and credit card average ticket size, BNPL is a more costly option for merchants, all else equal. Of course, there is an argument that BNPL brings in new customers that may not necessarily be able (or willing) to access (or use) traditional credit products, making the premium worthwhile for merchants. However, according to surveys and company disclosures, smaller ticket non-discretionary items (like the famous BNPL burrito) are making up a greater portion of BNPL GMV, contributing to a decline in AOV. There are two explanations for this, neither positive in my opinion: either low-to-middle income consumers (the primary user of BNPL loans) are under enough financial distress that short-term funding is required to purchase basic necessities; or certain consumers have become so fond of these products they are choosing them even when it is not financially necessary. In that case, merchants are footing a needlessly high bill for a purchase that could have been completed with a debit card, where the cost of acceptance is comparatively (much) lower. Based on this analysis, I believe it is likely merchant fees as a percentage of GMV will trend lower over time, placing further pressure on an industry that is only marginally profitable today despite being significantly scaled.

Of the four publicly traded pure play BNPL providers (Affirm, Klarna, Sezzle, and Zip), combined GMV, revenue, and GAAP (IFRS) operating profit over the last twelve months were $185 billion, $8.5 billion, and approximately $275 million, implying an operating margin of just 3%-4% industry-wide. Why is this? Because the industry’s original, most popular, and most consumer-friendly product, the interest-free Pay in 4 loan, does not appear to be all that profitable. Consider Klarna. Despite significant GMV ($128 billion) and a 49% reduction in headcount over the last three years, Klarna failed to deliver an operating profit on an IFRS basis in either 2024 or 2025, prompting an aggressive pivot to fair financing, Klarna’s interest-bearing monthly installment loan. While I do not doubt the ability of the BNPL industry to become more profitable over time, they are likely to do so by becoming less consumer-friendly and more like the traditional credit card issuers they vilify, potentially limiting the popularity of BNPL in my opinion. Affirm acknowledged recently that “monetizing the consumer side” allows them to meet the requirements of merchants that are pushing back against Pay in 4 loans based on acceptance costs:

Although Affirm does not charge late fees, uses simple interest calculations as opposed to compounded interest, and clearly discloses the amount a borrower must repay at the time of a loan’s origination (all improvements over a traditional revolving credit card), Affirm’s interest-bearing loans carry significant annual percentage rates, or APRs. By my estimate, the weighted average APR on Affirm’s interest-bearing loan portfolio (which made up 70% of Affirm’s GMV over the LTM) was more than 30% as of December 31, 2025. Although some argue President Trump’s proposed interest rate cap on credit cards could be a positive development for BNPL and other short-term liquidity products, given Affirm’s heavily reliance on high APR monthly installment loans, it would likely be negative for Affirm. Although this effort has gone nowhere, it could be renewed at any time, including under a Democrat-controlled White House or Congress, which is less friendly to the BNPL industry in my opinion.

Despite assurances from Affirm (and other BNPL providers) that its underwriting capabilities and shorter loan durations will limit credit losses during an economic downturn, it is not at all clear that will actually happen, and many investors are unwilling to give them the benefit of the doubt, myself included. Additionally, even under a scenario where cyclical factors (higher unemployment) drive a modest uptick in credit losses, it may be enough to erase what little profits Affirm and the BNPL industry currently generate. Varying calculations of default rates and unique credit scoring make it difficult to precisely assess the health of BNPL users. Although recent credit performance has been comparatively strong, there are contributing factors that may not be durable: minimal unemployment and extraordinary consumer support (stimulus and a moratorium on student loan repayments). To be fair, I am not an expert on credit, limiting my ability to confidently weigh-in on one of the key bull-bear arguments for Affirm and the broader BNPL industry.

Other risk factors for Affirm include:

• Affirm generates a significant amount of GMV and revenue from a small number of large customers. The loss of one of these customers would have a significant negative impact on Affirm’s financial performance. Even if they do not lose any of their large customers, their significant importance to Affirm may provide them leverage during contract renewals, placing downward pressure on merchant fees or increase the cost to retain them.

• Affirm relies on third-parties to support its growth and profitability. The ability of Affirm to sell its loans to third-party investors at attractive prices is a key part of the company’s financial model. While there is no indication of an imminent turn in the financing market, if one does occur in the future, Affirm may be forced to originate less loans, keep more loans on its balance sheet, requiring more capital, pay higher funding costs, and/or realize lower gains on the sale of its loans.

• The BNPL market is likely to become more competitive. Affirm faces competition from other BNPL providers, including pure plays like Klarna (who is moving aggressively into interest-bearing monthly installment loans in the United States) and those inside larger companies (Afterpay, a part of Block, and PayPal). Block and PayPal already have significant user bases that are a natural fit for BNPL. A wider range of services may attract consumers to Block and PayPal over Affirm. In the case of PayPal, it has tens of millions of online sellers as customers, making it an easy lift to build a significantly scaled two-sided BNPL network. Although PayPal recently raised its merchant fees for Pay Later transactions, it is spending to fund rewards for its BNPL users and improve its BNPL presentment at checkout. Banks have the capacity to become more aggressive in BNPL if they choose, but there are technical and cultural obstacles to overcome. Finally, Affirm’s short-term loans compete not only with other BNPL providers, but also earned wage access (EWA) and other short-term liquidity products like Cash App Borrow by Block and ExtraCash by Dave.

My Thoughts on the Stock

Historically, I’ve been hesitant to invest in companies with lend-centric business models, whether they be banks, consumer finance companies, or fintechs, due to my lack of confidence in accurately forecasting credit cycles (their timing and extent) and assigning a durable competitive advantage to what is arguably still a commoditized activity, lending money. Although some may look at my recent decision to buy Block as running counter to that tendency, I did so because Block’s non-lending gross profit streams (which still make up a significant portion of Block’s total) are accelerating. At the risk of being accused of ‘talking my book’, I do believe Block is among the best positioned on the fintech lending side given Cash App’s massive, and increasingly engaged, customer base of younger people that are open to non-traditional financial products. After all, who better to lend money to than someone you see both deposit and spending activity for.

Regarding Affirm, there is no question it has established a leadership position in one of the most attractive (and profitable) areas of BNPL: interest-bearing monthly installment loans. The questions for me are: (1) how durable that leadership position is; and (2) what cost am I paying to access it.

On the first point, I believe it is only logical to assume that one of the most profitable areas of BNPL will attract greater participation over time, increasing competition. Moreover, while Affirm compares favorably to other BNPL providers and credit cards by abstaining from late and other ‘junk’ fees, its heavy reliance on interest from high APR loans makes it much more like a traditional consumer finance company than a high-growth fintech in my opinion.

On GAAP numbers, which incorporates Affirm’s significant stock-based compensation, Affirm trades at a premium to other fintechs on an EV-to-2026 EBITDA basis: Affirm (36x), Toast (28x), Adyen (18x), and Block (13x). For all of these reasons, I am taking a pass on Affirm. My preference remains Adyen and Block, and being opportunistic with Toast, Visa, and Mastercard, should better opportunities present themselves.

BNPL 101

Originally, the BNPL market consisted primarily of interest-free Pay in 4 loans offered exclusively for online purchases through a provider’s direct integration with a merchant’s checkout flow. Typically, at the time of purchase, one-fourth of the transaction amount was required as a down payment, with the remaining 75% to be repaid over a six-week period, with a quarter due after two weeks, four weeks, and six weeks. BNPL providers generated most of their revenue from merchant fees with a modest contribution from consumer-based fees, primarily in the form of late fees, which are assessed by some (but not all) BNPL providers.

Over time, the BNPL market shifted to include additional products, revenue sources, and distribution methods:

Products. In addition to traditional Pay in 4 loans, most BNPL providers now offer: interest-bearing monthly installment loans; a single-use virtual card that allows a consumer to make a purchase at any merchant; and a physical card supporting pay now (by linking to a checking account) and pay later features, with both pre- and post-purchase decisioning.

Revenue Sources. With the introduction of interest-bearing monthly installment loans, interest income is becoming a more prominent revenue source for BNPL providers. For Affirm in particular, interest income contributed 48% to total revenue over the LTM in comparison to 37% for the fiscal year ended June 30, 2020. Other sources of revenue include:

• Merchant Fees. When merchants integrate a BNPL payment option directly into their website or checkout flow, BNPL providers charge a fee for each completed transaction. The fee is typically calculated as a percentage of the total purchase amount, and in some cases, a fixed fee may also apply. The specific percentage is determined by several factors, including the type of loan product, the merchant’s category, and the item purchased. As a general rule of thumb, interest-bearing loans carry a lower percentage fee compared to interest-free Pay in 4 loans.

• Interchange. For purchases completed with a virtual or physical card, the merchant pays a default or mutually agreed upon interchange rate to the issuing bank, which shares a portion of the interchange fee with their BNPL partner. The interchange rate is dependent upon the merchant’s category, the type of funding method (a checking account or credit line), and the item purchased.

• Advertising or Affiliate Revenue. Merchants pay a fee to BNPL providers when they direct customers to the merchant’s website and a transaction is completed. Typically, BNPL providers provide exclusive deals or merchant-specific offers on their website or app.

• Late Fees. Many BNPL providers charge late fees either immediately after a payment is past due, or after a grace period has expired. Late fees are typically a fixed dollar amount up to a certain percentage of the purchase amount. Based on my knowledge of the industry, only Affirm and PayPal do not charge late fees.

• Other Consumer Fees. In addition to late fees, select BNPL providers charge fees for: unsuccessful payments or insufficient funds; using a certain payment type to repay a loan; rescheduling a loan payment; using a virtual card at select merchants; or creating a post-purchase BNPL loan.

• Subscriptions. Some BNPL providers offer perks like exclusive discounts, higher spending limits, enhanced customer service, and waived fees in exchange for a monthly subscription fee.

• Other Fees. BNPL providers may generate revenue by selling loans at a gain to third-parties after origination, or by servicing loans (collecting and remitting payments) for third-party holders.

Distribution. Historically, BNPL providers built acceptance by establishing direct connections with online merchants. In order to accelerate the pace of adoption, BNPL providers have partnered with payment service providers (PSPs) and commerce platforms to increase acceptance among their customer bases, which includes many small and mid-sized businesses that are difficult to effectively reach with a direct sales approach. Additionally, BNPL providers offer both virtual and physical cards to achieve ubiquity of acceptance online and in-store. On the consumer side, BNPL providers embed their lending products inside digital wallets, significantly expanding their reach.

Below is an overview of leading BNPL providers:

Affirm 101

Consumers can initiate transactions with Affirm in a handful of ways: (1) by navigating to an online merchant integrated with Affirm, and completing a purchase with either an existing or new Affirm account; (2) by starting a shopping journey on Affirm’s website or app, being directed to an online merchant integrated with Affirm (based on the consumer’s selection), and completing a purchase with either an existing or new Affirm account; (3) by requesting (and being approved for) a payment plan with Affirm, receiving a virtual card, and completing a purchase by either entering the virtual card account information at checkout for an online purchase, or by storing the virtual card in a digital wallet (Apple Pay) to shop in-store; and (4) by using the Affirm Card online or in-store.

Affirm offers Adaptive Checkout, a feature that displays different loan options and repayment terms at the time of purchase, providing flexibility for consumers and boosting conversion, a key selling point for merchants:

Partnerships. Affirm has various partners to expand its reach and support its growth, including PSPs (Stripe, Adyen, Worldpay), commerce platforms (Shopify), digital wallets (Apple Pay), and investors (banks, insurance companies, private credit). Affirm recently announced a partnership with Fiserv (and FIS in 2025) to bring its BNPL products to community bank and credit union debit programs.

Over the LTM, Affirm generated GMV of $43.5 billion. Affirm discloses GMV by loan product and merchant category:

Affirm’s Funding Model. Once a transaction is completed, either Affirm or one of its banking partners sends the amount of the purchase (less a fee) to the merchant. Over the LTM, approximately $35.5 billion (or 83%) of Affirm’s GMV was originated by its banking partners, which include Cross River Bank, Celtic Bank, and Lead Bank. Even if a loan is originated by one of its banking partners, Affirm is required to purchase the loan for a price that is equal to the amount of a loan plus a fee and any accrued interest. In some instances, Affirm recognizes a loss on the purchase when the price is higher than the loan’s fair value. After Affirm has originated a loan themselves, or purchased it from one of its banking partners, Affirm chooses whether to hold it on its balance sheet or sell it to a third-party investor.

Affirm’s Revenue Model. Over the LTM, Affirm generated $3.7 billion of revenue. Below is a breakdown:

• Merchant Network Revenue. Affirm generates affiliate and transaction fees from integrated merchants. Affiliate fees occur when an Affirm user makes a purchase on the merchant’s website after being directed there by an advertisement on Affirm’s website or app. Transaction (or merchant) fees are charged when an Affirm user completes a transaction on an integrated merchant’s website, whether or not they were directed there by Affirm. The fee typically represents a percentage of GMV and is dependent primarily on the type of loan product. Over the LTM, merchant fees represented 2.93% of Affirm’s integrated merchant GMV. Based on the chart below, Affirm’s interest-bearing loans (70% of GMV over the LTM) carry the lowest fee as a percentage of GMV (~2%), long-term (>12 months) 0% APR loans have the highest (>10%, but falling), and interest-free short-term loans (Pay in X and 0% APR loans with three-to-12 month terms) are in the middle (~5%):

• Card Network Revenue. GMV from the Affirm Card and Affirm’s virtual card generates interchange fees for the issuing bank, which shares a portion with Affirm. Over the LTM, card network revenue (interchange fees) represented 1.85% of Affirm’s card-based GMV.

• Interest Income. The biggest component of Affirm’s interest income is contractual interest on interest-bearing loans held on Affirm’s balance sheet. At the beginning of 2023, Affirm raised its APR cap on interest-bearing loans to 36% and progressively moved more customers to the higher limit. As a result, Affirm’s weighted average APR increased from the mid-20% to approximately 30%. Over the LTM, Affirm’s weighted average APR was 30.25%. Also included in Affirm’s interest income is the difference between the amortization of discounts (a positive) and premiums (a negative) on loans receivable purchased from its bank partners or originated by Affirm.

• Gain on Sale of Loans. Affirm recognizes gains on the sale of loans to third-party investors and unconsolidated securitizations. The gain is equal to the proceeds from the sale less the carrying value of the loan held on Affirm’s balance sheet. Over the LTM, Affirm’s gain on the sale of loans equaled 2.58% of the unpaid balance of loans sold.

• Servicing Income. Affirm services loans held by third-party investors and unconsolidated securitizations, generating fees based on a contractual percentage of the outstanding principal balance. Over the LTM, Affirm’s servicing income represented 1.84% of the average unpaid balance of off-balance sheet loans, generally consistent with the prior three fiscal years.

Transaction Costs. Affirm incurs the following transaction costs, which it deducts from revenue to arrive at revenue less transaction costs, or RLTC:

• Loss on Loan Purchase Commitments. On certain occasions, Affirm is required to purchase loans from its originating bank partners for a price in excess of the fair market value, which results in the recognition of a loss. The losses are influenced primarily by the amount of long-term 0% APR loans purchased. In other words, the significant merchant fee for a long-term 0% APR loan compensates for the lack of interest income and the loss recognized when the loan is purchased. Over the LTM, loss on loan purchase commitments equaled 0.82% of total loans purchased and 5.19% of 0% APR installment loans purchased.

• Provision for Credit Losses. Affirm’s provision for credit losses is influenced primarily by the amount of loans held on the company’s balance sheet, and subject to estimates for future losses and loans charged-off during the period. Admittedly, this is one of the more challenging aspects of Affirm’s business to understand and model. For a bank or consumer finance company, where nearly all loans are held on the balance sheet, a standard measure of credit performance is the net charge-off rate, which is calculated by taking net charge-offs (charge-offs less recoveries), dividing them by the average loan balance, and annualizing it. Performing a similar calculation for Affirm results in an above-average net charge-off rate (about 7.7% for the December 2025 quarter). However, Affirm is responsible for certain losses on loans sold to third-party investors, making my calculation not representative. Another measure of credit performance is delinquency rates, typically calculated by taking loans that are more than 30-days past due and dividing them by total loans outstanding. On this measure, Affirm performs better than other non-prime lenders like Bread Financial, Synchrony Financial, Discover and Capital One and only moderately worse than prime lenders like J.P. Morgan and American Express.

• Funding Costs. Affirm’s funding costs represent interest expense associated with total funding debt from warehouse lines and securitizations. For the most recent quarter, Affirm’s annualized cost of funds was 6.15%, down from the high water mark of about 7.7% reached at the end of 2023, but higher than the mid-3% range during the middle of 2022, before the Fed began to hike:

• Processing and Servicing. Affirm’s processing and servicing costs consist of payment processing fees, platform fees, and other expenses associated with customer service and support. Payment processing fees, the largest component of processing and servicing costs, incurred primarily when a customer repays a loan, were $316 million over the LTM, equal to 0.73% of GMV.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclosure: As of April 27, 2026, of the stocks mentioned in this report, I am long Adyen, Block and Visa. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

The AI Trade

As of today, 2026 hyper-scaler [Alphabet, Amazon, Meta, Microsoft, and Oracle] capex is expected to be $687 billion, up an incredible 345% over 2023. Further, the 2026 hyper-scaler capex forecast has moved from $467 billion as of September 30, 2025, to $687 billion today, a nearly 50% increase in just six months. Simply incredible. While there are several ways to play the AI and data center capex super-cycle—energy, construction, electrical products, semiconductors, semiconductor capital equipment, memory, and networking equipment—I continue to have minimal direct exposure [Arista Networks (networking equipment) and KLA Corp (semiconductor capital equipment) make up approximately 5% of my total portfolio], which has been a significant headwind to performance. I continue to believe the valuations of hyper-scalers and technology hardware companies are incompatible—either the market will begin to discount the hyper-scalers based on their capital intensive future, or it will sell-off technology hardware companies when signs emerge that the AI and data center capex super-cycle has peaked, or is set to grow much more slowly, supporting the current hyper-scaler valuations. As of right now, the hyper-scalers are set to generate just $47 billion of free cash flow in 2026 against $11.9 trillion of market, a yield of about 40-bps (251x):

Payments: Light at the end of the tunnel, or freight train?

My existing payments holdings continued to perform poorly during the first quarter, consistent with the broader group: Visa (-14%), Global Payments (-13%), Shift4 Payments (-31%), and Block (-8%).

I would describe it as a one-two-three punch for payments and fintech stocks from: (1) increased regulatory and legislative scrutiny; (2) AI disruption fears; and (3) the Iranian conflict.

• President Trump kicked off the year by proposing a one-year cap of 10% on credit card interest rates, and throwing his support behind the long-stalled Credit Card Competition Act. While little-to-nothing has come from the president’s utterances so far [and nothing likely will, as I wrote about it here], it was enough to weigh further on an already beaten down group.

• Up next were AI disruption fears, which knocked down a broad swath of stocks, including software, information services, and payments and fintech, among others. I believe there are two primary concerns regarding AI’s impact on payments and fintech: (1) the proliferation of more affordable software for SMBs; and (2) agentic commerce disrupting the payments value chain. I take these risks seriously, but believe there are strong, and logically sound, arguments against disruption. For the sake of brevity, the link to where I wrote more about this topic is here.

• Finally, the Iranian conflict, which started at the end of February, placed further downward pressure on payments and fintech stocks as investors worried spiking energy prices may curtail consumer spending, drive up delinquencies among lower income cohorts, and reduce global travel and the corresponding high-value cross-border transactions. Although there are signs of a detente between the U.S. and Iran, energy prices remain significantly elevated, and are likely to stay that way for a while even if there is an immediate cessation of hostilities, which is by no means guaranteed. Now, it’s important to note the U.S. consumer has remained extremely durable in the face of several challenges over the past handful of years. Assuming strength in perpetuity is a fool’s errand, but all indications—including first quarter payment card data from the major banks—suggest they are weathering this latest storm just fine…so far.

I made noteworthy changes to my payments holdings in the first quarter: I exited my Fiserv position, started a new Adyen position, and added to Block and Shift4:

Long Adyen

Unlike legacy peers that have cobbled together systems, products, sales and distribution from a long list of acquisitions, Adyen has built a modern payments engine entirely from scratch complete with local acquiring licenses and banking charters to control its own destiny, enabling a merchant to sell anywhere, across any channel, and accept virtually any payment method, all from a single low-cost platform backed by powerful insights derived from Adyen’s extensive data. The result is a best-in-class combination of organic growth and profitability for Adyen, rivaled only by Visa and Mastercard. I have a high level of confidence in Adyen’s ability to achieve mid-to-high teens organic net revenue growth over the medium-term through growing, and further expanding, with existing customers, adding new customers in new verticals, and thoughtfully monetizing additional products and services, including its embedded finance offerings. I estimate a fair value for Adyen of between €1,150 and €1,435 per share, implying upside of 20% to 50% from current prices. Adyen is one of my favorite ideas, not only in payments, but the entire market. I’ve written about Adyen here, here, and here.

Software: Shuffling the deck

I exited my smaller ServiceNow and Adobe positions during the first quarter, and added significantly to Inuit, and also upped my position in Microsoft. I simply have more conviction, and a greater comfort level, around Intuit than ServiceNow or Adobe, prompting the changes.

Adding to Intuit

SMBs are weighed down by the large number and disparate nature of their service providers and technology applications, costing them money and trapping their data. Platform companies like Intuit offer key advantages, giving SMBs the opportunity to consolidate vendors, save money, and gain a holistic view of their data, allowing them to use it effectively. Although other platform companies exist, none have what Intuit has: QuickBooks, the dominant accounting suite for SMBs, making Intuit the ultimate SMB platform and giving it a clear right to win across other service offerings, where it is still not significantly penetrated. To demonstrate, in fiscal 2025, Intuit generated more than $3.6 billion of revenue across payroll and HCM and payments, growing 24%, placing it in rare company among publicly traded peers, in terms of both scale and growth.

Additionally, the cost of failure is high when it comes to preparing, filing and paying taxes. Although TurboTax has long dominated the do-it-yourself (DIY) category, where lower and no-cost options are widely available, it is moving aggressively to disrupt the much larger assisted category where human interaction is required. During the last tax season, TurboTax Live, Intuit’s assisted offering, represented 41% of total TurboTax revenue, growing 47%. To support its TurboTax Live offering, Intuit has opened 600 offices across the U.S., finding a customer is five times more likely to convert knowing there is a human being that can help within 50 miles.

My fair value estimate for Intuit is between $475 and $625 per share, implying upside of 20% to 60% from current prices. I wrote about Intuit here.

Long MSCI and S&P Global

During February, in the midst of the AI-induced sell-off across information services stocks, I started positions in MSCI and S&P Global.

MSCI divides its business into four segments. In the Index segment, its largest and most profitable, MSCI creates and licenses indexes, generating subscription fees for data access and royalties based on assets under management, or AUM, for products linked to MSCI indexes. The company’s indexes can be market-cap weighted, thematic or customized. Outside of the Index division, MSCI provides a suite of analytical tools and ratings across equity, fixed income and private assets that aid in the construction of portfolios, management of risk and performance attribution. MSCI leads an attractive market, generates a significant percentage of its revenue from recurring sources where it holds pricing power, uses its extensive free cash flow and a moderate amount debt to consistently repurchase shares, and is led by a long-tenured CEO with substantial skin in the game. I wrote about MSCI last July here.

S&P Global generates nearly 60% of its adjusted operating profit from credit ratings and indices, highly attractive businesses that face minimal competition and benefit from regulatory lock-in. Simply put, S&P may not rate bonds or construct indexes better or worse than anyone else, including other companies, humans, or AI models, but their ratings and popular benchmark indexes are required before a company can raise debt or launch a new index-based mutual fund or ETF. S&P Global should benefit from increased global debt issuance—including a significant maturity wall coming due over the next few years—and a continued shift toward passive investing over time, resulting in attractive revenue, earnings and free cash flow growth.

My Portfolio

Please note, this is the stock portfolio I actively manage for capital appreciation, which complements my investments in equity and bond index funds, high-yield dividend and dividend growth stocks, money market accounts, and certificates of deposit.

As I’ve mentioned in the past, I impose no constraints on myself when assembling the portfolio. My primary goal is to find high-quality companies selling at reasonable prices. I maintain a shopping list of about 50 companies as portfolio candidates. One of my objectives is to consolidate positions. In the first quarter, I exited five positions and initiated three new positions, resulting in 19 holdings total, down two from the fourth quarter of 2025. Reasons for exiting include favorable valuations, positions that are too small, or better opportunities elsewhere. My goal is for 15-20 portfolio companies.

Purchases during the quarter:

And sales:

I reduced three positions and exited five positions during the first quarter. My goal remains a smaller number of larger positions. In software, I sold Adobe and ServiceNow to fund additional purchases of Intuit—where I have greater conviction—and Microsoft. Similarly, in healthcare, I sold Agilent Technologies and used a portion of the proceeds to increase my Thermo Fisher position. Although not exactly the same, Agilent and Thermo are similar in the sense they both provide equipment, consumables, and services for companies participating in the life science, diagnostic and chemical markets. I sold UnitedHealth because I no longer have confidence in my ability to accurately forecast their financial performance over the long-term, given government and other outside influences on the health insurance industry.

Below is a full list of my portfolio holdings as of March 31, 2026:

My Investable Universe

This is the group of companies I look at outside of payments and fintech. All of the payments and fintech names I follow are fair game for inclusion in my portfolio.

Increasingly, I see the market as being segmented into four distinct categories: AI beneficiaries [expensive]; companies perceived to be at risk from AI disruption [previously expensive, now cheap(er)]; companies neither at risk nor benefitting from AI, but susceptible to other factors, both positive and negative [a mix of expensive and reasonable valuations], and hyper-scalers [a no man’s land]. Here are a couple examples from each category:

• AI Beneficiaries: NVIDIA, KLA Corp, Arista Networks, Parker-Hannifin, and Hubbell.

• AI Disruption: Airbnb, Uber, S&P Global, FactSet, Adobe Systems, Intuit, and ADP.

• AI Neutral—Expensive: Fastenal, GE Aerospace, O’Reilly Auto Parts, TJX, Ross Stores, Costco Wholesale, Waste Management, and Sherwin-Williams.

• AI Neutral—Reasonable: Lowe’s, Ulta Beauty, Domino’s Pizza, and Phillip Morris International.

Clearly, my eye is drawn to AI neutral names with reasonable valuations [Lowe’s, Ulta Beauty, Domino’s Pizza, and Phillip Morris International] and names I view as unjustly cheap based on misplaced AI disruption fears [Airbnb, Uber, S&P Global, Intuit and ADP]. That’s where I’ll continue to look for new ideas, and to add to existing positions. I’ll continue to wait on AI neutral names where valuations are expensive.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclosure: In addition to all of the stocks listed in my full holdings table, of the stocks mentioned in this report, I also own Home Depot and Lowe’s. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Investment Brief

At just 17.5x the high-end of its 2026 Adjusted EBITDA guidance, Toast now trades at a reasonable valuation, especially considering its status as category leader in U.S. SMB restaurants, and top-tier growth profile—low-20% recurring gross profit growth is expected for 2026 based on initial guide:

However, there are two important caveats. First, Toast adds back stock-based compensation and related payroll tax [SBC+RPT] to arrive at adjusted EBITDA. Although it has been trending down over time, SBC+RPT still represents a significant percentage of recurring gross profit for Toast:

For 2026, assuming $270 million of SBC+RPT [11.5% of recurring gross profit— Toast’s medium-term target laid out at its 2024 Investor Day was for SBC+RPT to reach a low-teens percentage of recurring gross profit], implies $525 million of normalized EBITDA. On this basis, Toast trades at 26.5x, a more demanding valuation:

Relative to its closest peers—Adyen and Block—Toast trades at roughly double the valuation on an EV-to-EBITDA basis, despite the fact top-line growth is expected to be relatively similar for the three in 2026 [Toast 21% recurring gross profit growth at midpoint of guidance, Adyen 21% constant currency net revenue growth at midpoint of guidance, Block’s guidance for 18% gross profit growth]:

I think there are good reasons for why Toast should trade at a premium to Adyen and Block, but double the valuation seems out of bounds. Reasons for a Toast premium include:

• Toast is relatively simple to understand. There are only a handful of KPIs to follow with Toast: locations, GPV, payments net take rate, SaaS ARR, and SaaS ARPU. Adyen also has a small number of KPIs. However, recent share of wallet shifts among large volume customers has made assessing Adyen’s underlying performance trickier, but not impossible. Block, on the other hand, is definitely more complex, with shifting, incomplete, and selective disclosures making it difficult to know exactly what’s happening across its varied businesses.

• Toast has limited credit exposure, exclusively in the form of merchant lending. In 2025, about 10% of Toast’s recurring gross profit came from Toast Capital and other financial technology products. Although Adyen plans to to move into lending eventually, it has de minimis exposure today. Block has more significant consumer and SMB lending exposure across BNPL, Cash App Borrow, and Square Capital. Over the trailing twelve months, I estimate 26% of Block’s gross profit came from lending products.

• Toast is nearly all U.S. The Iranian conflict and resulting spike in energy prices poses greater economic risks to continental Europe than the U.S. Europe, the Middle East, and Africa [EMEA] represented nearly 60% of Adyen’s 2025 net revenue. After excluding Bitcoin revenue, I estimate international markets represent a low double-digit to mid-teens percentage of Block’s revenue, with its most significant exposure likely being the U.K.

• Toast consistently outperforms expectations [more on that later]. Although putting up solid results on an absolute basis, Adyen has struggled recently to exceed its own expectations, often coming in at the lower-end of net revenue growth targets. Block lowered expectations following last year’s first quarter, but has exceeded guidance since, and lifted its 2026 gross profit growth outlook—provided initially at its November Investor Day—following fourth quarter results.

• Toast may have pent-up margin expansion capability or dry powder to sustain attractive top-line growth if it is able, or willing, to generate internal productivity gains from AI. Adyen has hired the most since COVID among fintech peers [Toast is in the middle of the pack], and Adyen’s and Toast’s efficiency ratios [net revenue or recurring gross profit per average employee] sit at the bottom of the group. Block recently slashed its workforce by 40%—due to AI advancements—and is poised to generate almost $2 million of gross profit per employee in 2026, multiples of Adyen and Toast.

The second caveat is that while Toast has historically produced healthy top- and bottom-line beats…

It has signaled a current bias toward reinvesting top-line upside into emerging growth opportunities—international restaurants [Canada, U.K., Ireland, and Australia], U.S. enterprise restaurants, and U.S. food and beverage retail.

Toast ended 2025 with an ARR of $2,047 million. ARR from Toast’s emerging growth opportunities passed $100 million during the fourth quarter, suggesting a 5% contribution to Toast’s total ARR. According to Toast, its core business [U.S. SMB restaurants] has already reached a 40% Adjusted EBITDA margin. Assuming Toast’s core business generated 95% of recurring gross profit [$1,793 million]—leaving 5% from emerging growth opportunities, matching its ARR contribution exit rate—and a 40% adjusted EBITDA margin [$717 million of adjusted EBITDA], implies an adjusted EBITDA loss of $84 million on $94 million of recurring gross profit for Toast’s emerging growth opportunities.

My 2026 Estimates

Previous discussion focused on high-end of Toast’s Adjusted EBITDA guidance. This discussion is focused on what I actually believe will happen.

My 2026 outlook for Toast is relatively straightforward. I assume: 31,000 location adds [up slightly versus 30,000 in 2025]; flat GPV per location; a continuation in seasonal patterns for the payments net take rate; and a 4% increase in SaaS ARPU on an ARR basis. The end result is recurring gross profit of $2,348 million, about 3% upside to the midpoint of Toast’s guidance. I assume hardware and professional services generate a $273 million loss on a gross profit basis in 2026, up 39% from 2025, and primarily reflecting the impact of tariffs and significant increases in memory prices on hardware costs. I assume operating expenses—excluding bad debt—fall by about 2-points as a percentage of recurring gross profit [to about 49%], much smaller than the more than 7-point decline in 2025. This results in Adjusted EBITDA of $820 million, upside of about $35 million or $4.5% to the midpoint of guidance. So, not necessarily reflecting a complete reinvestment of top-line upside, but significantly less than the $120 million of adjusted EBITDA outperformance averaged over the last three years. Under this scenario, Toast trades at 25.3x on an EV-to-EBITDA basis.

Long-Term Outlook

My long-term assumptions for Toast remain largely unchanged, and continue to push the envelope of reasonableness—in my opinion. One meaningful adjustment I’ve made is lowering my long-term Adjusted EBITDA margin target to 45%, from 49% previously:

My model assumes continued significant share gains in U.S. restaurants [a 40% market share for Toast by 2035—double its current 20% share—including 54% of SMB restaurants and more than 12% of enterprise restaurants] and strong success in the company’s initial international markets [20% market share by 2035] and U.S. food and beverage retail [16% market share by 2035]. Again, I believe these are very healthy assumptions, and by no means conservative.

My DCF model yields a wide range of fair value outcomes, depending on the discount and terminal growth rates used. Under the most favorable scenario—a 9% discount rate and 4% terminal growth rate—my fair value estimate for Toast is $41, implying nearly 60% upside. If I use a 10% discount rate and 3.5% terminal growth rate, my fair value estimate for Toast is $32, still nearly 25% upside:

Conclusion

Shares of Toast are now definitely more reasonably priced [even more so after today’s drop]. However, I still (much) prefer Adyen and Block over Toast. The internal debate I’m having is whether I want to ‘throw in the towel’ on Global Payments and Shift4 Payments in order to fund more purchases of Adyen and Block, and start a position in Toast. I’m not at that point yet—as I believe strongly that the market is materially mis-pricing both Global and Shift4—but I’m certainly watching Toast, and the rest of the group, intently.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclosure: As of April 9, 2026, of the stocks mentioned in this report, I am long Adyen, Block, Global Payments, and Shift4 Payments. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Broadridge Financial (Broadridge) is a significant and direct beneficiary of increased participation in financial markets. Its largest business—delivering proxies and interim reports [interim(s)] and tabulating shareholder votes—earns revenue based on the number of stocks, mutual funds, and ETFs held by retail investors, primarily in ‘street name’ at broker-dealers and banks. Each position, whether one share or one million, requires an annual proxy or interim, generating revenue for Broadridge. Since fiscal 2006, Broadridge’s equity and fund positions have grown at compound annual rates of 7% and 8%, respectively, with only two annual declines in the last 19 years:

Financial product innovation and other developments have contributed to robust position growth over the past decade: the proliferation of zero commission trading in the mid-to-late 2010s, stimulus payments in 2021 and 2022 that provided discretionary funds for investment, and more recently, the rising popularity of managed accounts and direct indexing. Tokenizing private market and other illiquid assets, like equity, debt, real estate, and fine art, represent opportunities for future position growth, requiring equal or greater disclosures.

Broadridge holds a virtual monopoly in proxy and interim delivery, with reports suggesting a market share between 75% and 90% of total U.S. positions. On one hand, delivering proxies and interims is regulatorily mandated, making it mission critical. On the other hand, broker-dealers, banks, corporate issuers, and fund companies, individually, lack the scale and expertise necessary to perform the function effectively, making outsourcing to a third party like Broadridge ideal.

Imagine a scenario where every corporate issuer or fund company must interact with thousands of broker-dealers and banks to deliver proxies and interims. Or a broker-dealer or bank that must coordinate with several thousand different corporate issuers and fund companies. By working with Broadridge, broker-dealers, banks, corporate issuers, and fund companies simplify a highly complex process, delivering seamless experiences for retail and institutional investors.

Pricing for proxy and interim delivery is regulated by the SEC and NYSE. Although broker-dealers and banks are responsible for distributing proxies and interims to beneficial shareholders, they are reimbursed by corporate issuers and fund companies. As a result, Broadridge typically charges the highest price allowed, keeping a fee for themselves and passing the rest on to their broker-deal and bank customers. Given Broadridge’s significant scale, it is likely the low-cost provider in an industry with very few players, enabling Broadridge to pass on a larger portion of the allowable fee to broker-dealers and banks, strengthening Broadridge’s relationship with their broker-dealer and bank customers and keeping competitors out. The last comprehensive pricing review was concluded in 2014, resulting in a modest 4% reduction in average fees.

Broadridge has established additional attractive businesses in its governance and communications franchise serving primarily corporate issuers and fund companies that leverage and complement the relationships, data, technology, and processes that power proxy and interim delivery. They include shareholder analytics and engagement tools, regulatory document composition, virtual shareholder meetings, and an omni-channel communications platform serving customers across diverse verticals in addition to financial services.

Broadridge’s remaining businesses provide transaction processing and related services to participants in securities markets and software for financial advisors. Broadridge’s acquisition and organic investment activity over the years has focused on building end-to-end platforms across capital markets and wealth and investment management, moving away from a historical focus on performing only back-office and administrative tasks. Although there are attractive aspects of these businesses—recurring revenue, vendor consolidation opportunities, and scale that facilitates cost mutualization—they do not match the favorable dynamics that underly proxy and interim delivery, and typically face greater competition and risks from emerging threats like AI.

Although individual business performance fluctuates moderately from year to year, Broadridge—as a whole—generates incredibly consistent results. Over the past decade, organic recurring revenue growth averaged nearly 6.5% with a range of 4% to 9%. Since the acquisition of DST Systems’ North American Customer Communications (NACC) business in fiscal 2017, Broadridge has generated average annual underlying margin expansion of more than 60 bps. After dipping in fiscal 2021 and 2022 as Broadridge invested heavily in its modern wealth management platform and global post-trade capabilities, free cash flow conversion rebounded to more than 100% in the past two fiscal years and was 92% over the past decade, in aggregate.

At less than 17 times forward earnings, Broadridge trades at a very reasonable price, in my opinion, especially considering approximately 70% of the company’s earnings come from deeply entrenched, and often regulatorily mandated processes, where Broadridge faces little-to-no competition and benefits from secular growth opportunities. While risks to Broadridge’s business model should not be discounted, I believe they are manageable, and the most significant ones impact a smaller portion of Broadridge’s earnings power.

Risks

Shares of Broadridge have come under pressure recently as investors assess emerging risks from AI and tokenized securities:

• Broadridge’s capital markets and wealth management business units deliver significant components of their offering via software as a service (SaaS). Additionally, a small number of customers make up a significant portion of revenue. Finally, often the primary alternative to a Broadridge solution is building in-house. This is a perfect storm for AI disruption (theoretically)—Broadridge’s customers, utilizing their significant resources and rapidly improving AI tools, will have little trouble creating their own in-house alternatives, effectively ending the cost mutualization advantage for Broadridge. While not exactly applicable to Broadridge, a general example of this potential risk is Goldman Sachs’ recent decision to work with Anthropic to develop agents to perform operational and back-office functions. Pushback: While parts of Broadridge’s capital markets and wealth management solutions are SaaS-based, a meaningful portion involves establishing connections with third-parties to move money—processing and settling transactions—and is unlikely to be disrupted by AI-powered software or agents.

• Tokenized securities offer instant settlement and programmable contracts. If trading in them becomes widespread, it could diminish the value of Broadridge’s capital markets business unit, which simplifies the complex trade lifecycle that exists today. Pushback: Many of Broadridge’s post-trade capabilities would still be needed, even in a world of tokenized trading. Additionally, Broadridge has demonstrated an ability to innovate around emerging technologies, with its distributed ledger repo (DLR) platform now processing $380 billion of volume daily, up 5x versus a year ago.

• Although tokenized securities will require similar disclosure requirements as traditional securities, the risk for Broadridge is that mass adoption of tokenization upends the traditional broker-dealer model and results in significantly greater direct registration of securities with corporate issuers and fund companies, bypassing Broadridge for proxy and interim delivery. Today, two ownership records exist: one at the Depository Trust Company (DTC)—a central repository for electronic versions of U.S. stock certificates—which aggregates all positions for each broker-dealer; and another at the broker-dealer, which tracks specific customer positions. Corporate issuers and fund companies, unable to see individual holders at broker-dealers, must work with an intermediary like Broadridge to satisfy their legally required obligation to deliver a proxy or interim report to all shareholders, including registered and beneficial. With tokenized securities trading on a transparent blockchain, corporate issuers and fund companies may have the ability to communicate directly with shareholders, as opposed to going through an intermediary like Broadridge. Pushback: This bearish scenario assumes retail investors will move away from a system that largely works today—consolidating all their positions at a single broker-dealer. In a tokenized world, retail investors would likely need a separate wallet for each tokenized security registered directly with a corporate issuer or fund company. Although there could be a company that comes along to make the experience seamless for retail investors, it would likely require significant time and money to match the simplicity of the broker-dealer model and the reliability of Broadridge’s regulatory communications.

Additional risks for Broadridge include:

• Although it has not been the case historically, a significant market sell-off could drive retail investors out of financial markets permanently, placing downward pressure on position growth over the medium to long-term.

• The combination of a significant—and sustained—sell-off in financial markets is rarer, and could make it more likely positions either fall or grow more slowly.

• Regulatory bodies could significantly reduce the maximum allowable fees for delivering proxies and interims, negatively impacting Broadridge’s revenue and profitability.

• Even under a scenario where a review of pricing is announced and conducted, it could cause a sell-off in Broadridge’s stock simply by introducing the potential for a significant decline in allowable fees, even if one does not ultimately occur.

• The loss of a large customer could negatively impact Broadridge’s financial performance.

• Increasing consolidation in financial services may result in customer losses for Broadridge, greater bargaining power for Broadridge customers, or provide customers with the scale necessary to move operations in-house.

Company Description

Broadridge generates recurring revenue from six business units:

• Regulatory represents the fees Broadridge earns from delivering equity proxies and mutual fund and ETF interim reports, which include annual and semi-annual reports and annual prospectuses. Broadridge charges the maximum allowable fee for proxy and interim delivery and recognizes it as revenue on a gross basis, with an agreed upon pass-through to broker-dealer and bank customers reported as an expense.

• Data-Driven Fund Solutions represent revenue primarily from two businesses: an analytics platform for fund companies that provides intelligence about their shareholder base and competitors; and mutual fund and ETF processing, and a communications platform, for retirement plan sponsors.

• Issuer represents a collection of services for corporate issuers, including vote processing across registered, beneficial and institutional shareholders; virtual shareholder meeting services; shareholder analytics and engagement tools; transfer agency services; and composition, filing, hosting, and printing of SEC required documents, including proxies and annual reports.

• Customer Communications represent Broadridge’s omni-channel (both print and digital) platform for customer communications serving companies in financial services, healthcare, telecom, and utilities, and encompasses marketing materials, billing and account statements, and trade confirmations. Broadridge generates recurring revenue from fulfilling communications. The digital portion of Broadridge’s omni-channel platform, although smaller (recently crossing the $100 million mark), is growing faster (double-digits over the past three fiscal years) and carries higher margins than the print portion.

• Capital Markets represent Broadridge’s trading platform for equities, fixed income, and exchange traded derivatives, and spans order initiation through settlement, and various post-trade capabilities, including accounting and record keeping, compliance, tax reporting, and asset servicing. Broadridge’s acquisition of Itiviti in 2021 significantly expanded its global front- and middle-office capabilities, including order and execution management, complementing Broadridge’s historical focus on domestic transaction processing and post-trade capabilities. A meaningful portion of Broadridge’s revenue for this business unit is based on the number of trades processed, while the remaining part is subscription-like and dependent on the number of components adopted by customers.

• Wealth and Investment Management primarily represents Broadridge’s technology platform for financial advisors and wealth managers, providing tools to acquire and onboard customers, digitize operations, including communications, manage portfolios, process trades, service accounts, and calculate advisor compensation, among others. In 2018, Broadridge began a multi-year journey to update its wealth platform, with UBS as its anchor client. Broadridge is believed to have spent upwards of $1 billion on this effort. The result was a modern, cloud-based technology platform supporting approximately 50 proprietary modules, as well as third-party apps. Broadridge generates subscription-like fees based on the number of modules adopted by customers. Broadridge began recognizing revenue from UBS in fiscal 2024, anticipating an annual run-rate of approximately $70 million, with an expected $20-$30 million of annual closed sales from customer adoption of its modern wealth management platform.

In addition to recurring fees, Broadridge generates event-driven revenue that varies year by year, but typically mirrors equity and fund position growth over the long-term. Events that trigger special in-year communications include:

• A change in directors, fee structure, or investment strategy at a mutual fund or ETF, requiring a fund proxy and shareholder vote.

• A separate agenda put forth by one or more shareholders contesting a management proposal.

• A corporate action, including a proposed sale of the company, that requires a separate proxy and special shareholder vote.

• A change in portfolio manager or share class at a mutual fund or ETF, requiring a supplemental prospectus by fund companies.

Over the past decade, annual event-driven revenue averaged $245 million:

Finally, Broadridge recognizes distribution revenue, which primarily reflects reimbursement for the costs of physically mailing communications, and is based on the number of pieces delivered and postage rates. Broadridge earns little-to-no profit on distribution revenue. For comparison purposes, Broadridge’s operating profit should be viewed as a percentage of recurring and event-driven revenue, with distribution revenue excluded.

Corporate History

Broadridge was conceived in 1962 as the Brokerage Services division of Automatic Data Processing (ADP). The business unit’s original focus was processing stock trades for U.S. customers. Over its time with ADP, primarily through acquisitions, the division’s capabilities expanded to include processing fixed income trades and trades for international customers.

Broadridge’s proxy juggernaut can be traced to one man—Richard Daly. ADP’s Brokerage Services division began offering proxy services in 1989 after it acquired Daly’s company. In its first year with Daly as head of the proxy business, ADP signed 31 major clients. ADP significantly expanded its presence in proxy services with the 1992 acquisition of The Independent Election Corporation of America, or IECA, where Daly had worked previously as both CFO and COO.

ADP spun off its Brokerage Services division in 2007, with the new company called Broadridge Financial Solutions.

In its time as a public company, mostly led by Daly, Broadridge has continued to make acquisitions to expand its capabilities. Since fiscal 2008, its first full year as an independent company, Broadridge has made acquisitions and purchases of intellectual property totaling $5 billion. Despite that number, a significant portion of Broadridge’s profits still originate from delivering proxies and interims, and related parts of its governance and communications franchise.

Management and Strategy

Tim Gokey became CEO of Broadridge in 2019 following the retirement of long time leader Richard Daly. Prior to his turn as chief executive, Mr. Gokey served as COO of Broadridge from 2012 to 2019.

I believe Mr. Gokey has done a good job leading Broadridge, successfully executing a strategy to establish businesses that capitalize on its strengths in proxy and interim delivery, create end-to-end technology platforms in capital markets and wealth management, and further innovation across corporate governance and trading.

• Establish businesses that capitalize on its strength in proxy and interim delivery. In fiscal 2025, Broadridge generated $1.45 billion of recurring revenue—or about one-third of its total—from businesses that leverage and complement the relationships, data, technology, and processes that power proxy and interim delivery. Over the past five fiscal years, these businesses generated compound annual organic recurring revenue growth of approximately 7%. While proxy and interim deliveries attract much of the spotlight for Broadridge, investors should consider it part of an overall governance and communications franchise that share many of the same attractive characteristics.

• Create end-to-end technology platforms in capital markets and wealth management. Although it came at a high cost—Broadridge paid $2.6 billion to acquire Itiviti and approximately $1 billion to modernize its wealth platform—the strategic rationale for creating end-to-end technology platforms seems clear: develop cross-sell opportunities among existing clients, attract smaller and mid-sized customers with the promise of vendor consolidation, and make switching costs greater for customers that adopt more of Broadridge’s components, improving already high retention levels. If there’s an area to be critical of Broadridge, its been the amount of money spent to modernize the wealth platform, and whether a reasonable return is ever possible. While the company promised $20-$30 million of annual closed sales from its new wealth platform, it has been less forthcoming with actual details about closed sales attributable to it, only referencing sporadic ‘significant customer signings’ and strong pipeline activity.

• Further innovation across corporate governance and trading. Broadridge has highlighted a couple areas in corporate governance where it believes it can innovate to create incremental growth opportunities: pass-through voting— allowing retail investors the opportunity to influence how large asset managers vote their shares; proxy advisory services—utilizing Broadridge’s data and technology to guide voting decisions for major asset managers, disrupting a large market (hundreds of millions of dollars) controlled by a small number of players; and standing voting instructions—enabling retail investors to set prearranged parameters on how they wish to vote their shares, creating greater voting participation. In capital markets, Broadridge’s DLR platform, which facilitates intra-day repo transactions, has seen significant adoption, reaching $380 billion of daily volume, and contributing very modestly to Broadridge’s capital markets growth.

Competitive Landscape

For proxy and interim delivery, Broadridge faces minimal competition. Mediant Communications, owned by PE-backed BetaNXT, is frequently cited as a competitor, but is believed to only have a small number of customers. Say Technologies, another competitor, was acquired by Robinhood in 2021.

Broadridge faces more—but still sporadic—competition in other parts of its governance and communications franchise. Computershare is a significant competitor for transfer agent services, shareholder meetings, and investor communications for registered shareholders. Workiva provides a cloud-based platform for public companies to create SEC filings.

In capital markets, wealth and investment management, Broadridge faces more significant competition.

Capital Markets. Broadridge competes with FIS and Fidessa ION in order and execution management systems. According to Broadridge, this is a $6 billion market opportunity, with Fidessa ION controlling 40%, FIS a high-teens percentage, and Broadridge holding a mid-teens share via its acquisition of Itiviti.

For securities transaction processing and settlement, Broadridge’s range of competitors is less clear, but among them is FIS. Additionally, the option of performing the function in-house has been identified as Broadridge’s main competition.

Wealth and Investment Management. Broadridge faces a number of competitors with a range of capabilities in the wealth and investment management space:

FIS, SS&C Technologies, and SEI Investments are publicly traded competitors. Envestnet was publicly traded until it was acquired by Bain Capital for $4.5 billion in late 2024. Similarly, Orion, AssetMark, BetaNXT, and FNZ are all PE-backed competitors.

Financial Review and Valuation

Broadridge relies on net new business, internal growth, and acquisitions to drive recurring fee revenue growth. Over the past decade, organic recurring revenue growth averaged nearly 6.5% with a range of 4% to 9%:

Net new business represents revenue contribution from closed sales less client losses. Broadridge discloses recurring revenue closed sales and backlog at the end of each fiscal year. From that, one can calculate an implied contribution to organic recurring revenue growth from closed sales:

There is a modest difference between the implied and reported contribution, suggesting a small portion of Broadridge’s recurring revenue falls out of its backlog each year. In any case, the contribution from reported closed sales to organic recurring revenue growth has been extremely consistent over the past decade, with nine years at 6%, and one year at 7%, suggesting Broadridge has been highly successful at signing new logos and expanding relationships with existing customers through the adoption of more features, including its expanded governance and communications franchise, and its end-to-end technology platforms across capital markets and wealth management.

Client losses averaged a 2%-3% headwind to organic recurring revenue growth over the past decade, implying a retention rate of 97%-98%, demonstrating the ‘stickiness’ of Broadridge’s customer relationships. In many cases, client losses result from acquisition activity among customers, the most recent example being the loss of E*TRADE in wealth and investment management due to its acquisition by Morgan Stanley.

Internal growth represents the contribution from pricing, equity and fund position growth, and internal trade growth for the portion of capital markets revenue tied to the number of transactions processed. Over the past decade, internal growth contributed an average of 2% to organic recurring revenue growth.

Acquisitions contributed an average of 5% to Broadridge’s recurring revenue growth over the past decade, bringing average reported recurring revenue growth to 11%. Key acquisitions include the $410 million purchase of DST’s NACC business in 2016, the approximately $300 million acquisition of RPM—a provider of wealth management software—in 2019, and the $2.6 billion acquisition of Itiviti in 2021.

Margins. After dipping in fiscal 2017 due to the acquisition of the lower margin DST NACC business, Broadridge’s underlying operating margin—which I define as Broadridge’s non-GAAP operating profit divided by the total of recurring and event-driven revenue [excludes little-to-no margin distribution revenue]—expanded from 24.1% in fiscal 2017 to 29.2% in fiscal 2025, averaging a more than 60 bps annual increase. Broadridge targets 50 bps of annual margin expansion with scale, the conversion from print to digital communications, and expense management and efficiencies more than offsetting investments in the business required to sustain attractive organic recurring revenue growth.

Margins are higher across Broadridge’s governance and communications franchise versus capital markets and wealth and investment management. While not specifically disclosed on an operating basis, I estimate about a 10-point margin premium for governance and communications.

Medium-Term Outlook. Broadridge is targeting 5-8% organic recurring revenue growth over fiscal 2024-2026, similar to past three-year periods. With growth expected at the higher-end of the 5-7% range set for fiscal 2026, Broadridge should land at the middle of the range for the current three-year period. With the added contribution from tuck-in M&A, margin expansion, and very modest share repurchases, Broadridge targets 8-12% EPS growth, which it has typically landed at the higher-end of over the past decade.

Balance Sheet and Cash Flow. Broadridge had total debt of about $3.2 billion at the end of 2025, implying a debt-to-EBITDA ratio of about 2x, down from about 4x following the close of the Itiviti acquisition in 2021. Taking into account Broadridge’s cash position, net leverage is below 2x, a very manageable level and supportive of the company’s tuck-in acquisition strategy. As mentioned previously, Broadridge’s free cash flow conversion dipped in fiscal 2021 and 2022 (more significantly) as it funded significant investments for its modern wealth management platform and global post-trade capabilities. Over the past decade, free cash flow conversion was 92%. Going forward, I expect free cash flow conversion to be close to 100%.

Dividends. I think of Broadridge as a high-quality dividend compounder, and in fact, purchased the stock for accounts dedicated to my dividend strategies. It targets a payout ratio of around 45%. With EPS growth at the low double-digits over the past decade, dividend growth has followed. The current share price offers a yield of 2.4%.

Valuation. There are two ways I look at Broadridge’s valuation. First, based on my DCF model, and the second way, on a sum-of-the-parts (SOTP) analysis.

My DCF model assumes Broadridge grows at the low-end of its typical 5-7% organic recurring revenue growth average over the next decade, expands underlying margins by 50 bps, pays a tax rate in the low-20% range, and spends about 2.5% of non-distribution revenue on capital expenditures, including purchased and internally developed software. I assume no accretive M&A, even though I believe it is highly likely to occur. Using a 10% discount rate and a 3.5% terminal growth rate yields a fair value of around $185, implying about 15% upside from current prices. However, I would argue strongly the stability of Broadridge’s business—especially its governance and communications franchise—demands a lower discount rate. If I instead use a 9% discount rate, which I believe is appropriate, and keep my 3.5% terminal growth rate, it yields a fair value of about $220, implying 35% upside. $220 implies about 22.5x Broadridge’s NTM EPS of around $9.70, a fair valuation for the quality of its business. As a point of reference, over the past decade, Broadridge’s has averaged a NTM P/E multiple of about 24x.

My SOTP analysis attempts to isolate the earnings contribution from the governance and communications franchise from capital markets and wealth and investment management. Even though capital markets and wealth and investment management represent about 40% of recurring revenue, I estimate it generates 30% or less of Broadridge’s earnings power. So, assuming NTM EPS of $9.70 for Broadridge, implies about $2.90 from capital markets and wealth and investment management, and the remaining $6.80 from governance and communications. Even though I believe the capital markets and wealth and investment management business deserves a higher multiple, the market seems to be giving similar companies a low double-digit multiple currently. If I use 12x, it implies $35 of per share value for Broadridge, implying about $128 of per share value assigned to the governance and communications franchise, implying a multiple of less than 19x:

I think that’s too low. In a reasonable scenario, I would give capital markets and wealth and investment management a multiple in the mid-teens (15x) and the governance and communications franchise something well into the 20s. For this example, I use 22x. Under these set of assumptions, it yields a consolidated multiple of about 20x, or $193 per share, implying about 20% upside.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclosure: As of March 31, 2026, of the stocks mentioned in this report, I am long Broadridge Financial. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Shares of Adyen are off 21% since reporting Q4 and H2 2025 results on February 12th. While the quarter and guide weren’t perfect, I don’t believe they justify this magnitude of sell-off. But alas, this is payments, and Adyen’s multiple was—and still is—on the high side, making the reaction not shocking. For this update, I plan to review Q4 and H2 2025 results and 2026 guidance, identify and discuss investor concerns, some of which I share and others I don’t, and conclude with why I view the sell-off as a buying opportunity, not a sign of weakening fundamentals. In that spirit, I’ve added to my Adyen position, upping it to 35 shares.

Results and Guidance

• Q4 net revenue of €672 million increased 19% on a constant currency basis, down 4-points from Q3 [Adyen attributed the slowdown in Q4 to settlement timing and a difficult prior year comparison, a common refrain across payments]

• H2 2025 constant currency net revenue grew 21%, similar to H1, in-line with Adyen’s lowered guidance [Following its H1 2025 update, Adyen lowered its expectation for 2025 constant currency net revenue growth to being broadly in-line with H1 (+21%), down from its previous guidance for a slight acceleration in 2025 versus 2024 (+23%), due primarily to lower market volume growth]

• The strengthening of the euro against a basket of major currencies created a larger headwind for Adyen in Q4, reducing constant currency revenue growth by 4-points, resulting in reported net revenue growth of 15%

• Processed volume grew 15% in Q4 [After excluding the impact of Cash App and foreign currency, I estimate underlying processed volume grew 23% in Q4, similar to the first three quarters of 2025, notable given the difficult comparison from Q4 2024]

• H2 2025 EBITDA1 of €702 million increased 25%, with margin of 55% expanding 340-bps versus prior year

• 2025 EBITDA of €1,245 million, with a margin of 53%, up 320-bps

• Adyen ended 2025 with available cash2 of €4,426 million and no debt

• Free cash flow, which I define as cash generated from operations adjusted for the impact of settlements (netting receivables from and payables to merchants and financial institutions), was €1,120 million in 2025, representing 105% of Adyen’s net profit

• Adyen’s top 10 merchant customers represented 11% of revenue in 2025, down from 12% in 2024, and 53% in 2017

• Adyen expects 2026 constant currency net revenue growth of 20-22% [With Q3 2025 results, and reiterated at its capital markets day in November, Adyen guided 2026 constant currency net revenue growth of ‘low-to-mid 20%’]

• Adyen expects 2026 EBITDA margin to be ‘broadly in-line’ with 2025 [Adyen did not previously provide specific 2026 EBITDA margin guidance, only an expectation that EBITDA margin would exceed 50% in 2026 and 55% by 2028]

Investor Concerns

Revenue guidance ‘cut’. Over the span of six months, Adyen’s 2026 constant currency net revenue growth outlook fell from ‘low-to-high 20%’ to ‘low-to-mid 20%’ to 20-22%. While the original ‘low-to-high 20%’ range was provided as part of a multi-year outlook, which was ending in 2026, the ‘low-to-mid 20’ range was tailored specifically for 2026, provided as part of the Q3 business update and reiterated at Adyen’s capital markets day in November. Although Adyen prefers to frame the most recent 2026 constant currency net revenue forecast as a refinement based on in-depth customer planning and conversations, the market is taking a decidedly more skeptical view. Optically, the move down to the lower end of the range is never pleasing, especially so soon. However, the reality of the situation is that Adyen’s constant currency net revenue growth for the four years through 2026 is expected to be: 22%, 23%, 21%, and 21%, assuming Adyen lands at the midpoint of its 2026 forecast. I do not view this trend as overly concerning, but a natural moderation in growth as Adyen becomes larger, and one I expected. In fact, an optimist (are there any of those left in payments?) would argue Adyen’s ability to sustain attractive growth as it scales should be celebrated, not denigrated.

Of course, the bears will counter Adyen’s recent guidance track record is decidedly mixed, calling into question the veracity of its 2026 forecast. And they have a point, a strong case in fact. At its 2023 capital markets day, Adyen laid out a constant currency net revenue growth target of ‘low-to-high 20%’ for 2024, 2025, and 2026, and then proceeded to do 23%, 21%, and 21%. Not exactly hitting the lights out. For 2025, Adyen believed constant currency net revenue growth would accelerate ‘slightly’ versus 2024, which was up 23%, suggesting 24% growth, at minimum. They did 21%. Thud. The reality is that while absolute trends are not concerning, Adyen needs improvement properly setting expectations. Until the markets are comfortable that has been done, upside may be capped.

Flat EBITDA margins in 2026 with a reacceleration in headcount growth. To me, this is the most interesting, and potentially concerning development for Adyen. While peers are dialing back headcount, or even slashing it in the case of Block, Adyen plans to hire 550-650 net new employees in 2026, representing 12.5% growth at the midpoint, on top of 10% growth in 2025. While Adyen frames it as investing to capture long-term growth opportunities, the market sees other companies sustaining attractive top line growth with stable-to-declining headcount and asks why Adyen can’t do the same? It’s a fair question and one I don’t have a good answer for. Is it a cultural issue? Maybe pride? Although I’m sure Adyen’s management would like to see the stock price move higher, they’re certainly not moved enough by the declines to change the path they’re on, and their belief that Adyen is still at the early days of its growth potential. In their defense, Adyen is already a highly profitable business, and the company has seen significant expansion in its EBITDA margin since it bottomed in 2023, following Adyen’s significant hiring during 2022 and 2023. Plus, Adyen still expects its EBITDA margin to move above 55% by 2028, suggesting a resumption of gains in 2027 and 2028. However, when it comes to the numbers, Adyen’s performance and standing do not paint a pretty picture:

• Among payments and fintech peers, Adyen’s employment growth has been the most significant since 2019—up 4.5x through 2026—and while some companies are still growing headcount, many are not

• Adyen’s net revenue per average employee of $588k in 2025 is at the very low end of payments and fintech peers and level with 20193

• All of this contributes to no meaningful change in Adyen’s 2026 EBITDA margin versus 2018 and a 10-point drop from its high water mark in 2021

My gut feeling is that Adyen will find ‘religion’ on headcount growth at some point. While that time is not now, I think the market will eventually force its hand if it does not arrive at the decision voluntarily. At that point, I believe inflection in profitability will be more significant.

Lack of capital return or allocation ‘policy’. I really don’t view this criticism as fair. I believe Adyen’s fortress-like balance sheet is a source of strength, giving them significant flexibility to pursue both organic and inorganic opportunities—when the time is right. While it’s natural for investors to want companies to return excess capital when it builds on the balance sheet, I applaud Adyen for not rushing out to buy its own stock when it was excessively high. Of course, with valuations more attractive now, a share buyback would make sense, but I’m not going to punish Adyen for abstaining. Adyen’s priority remains retaining capital on its balance sheet in support of its financial products roadmap, which includes card issuing, accounts, and lending, key attractions for platforms and the small business customers they serve. I, for one, believe this is an excellent use of capital.

Behind in agentic commerce? I tend to side strongly with—or at the least not punish—Adyen’s measured approach to agentic commerce, which has involved more than 100 in-depth customer interviews to gauge their ‘hopes and fears’ regarding the nascent technology. To be clear, agentic commerce today is not measurable. Can it become something much larger over time? Of course. Is that guaranteed to happen? No. What’s happening now is largely theatrics. Dueling press releases. Collaborations teased. Protocols being written. Adyen is responsibly taking action to prepare itself, and its customers, for agentic commerce. But don’t mistake Adyen’s lack of chest thumping as indifference to the threats or opportunities posed by agentic commerce. Ultimately, Adyen’s structural advantages in a world of human commerce is likely to translate to a world of AI agents: a single technology platform with an end-to-end view of transactions in real-time, allowing Adyen to dynamically identify and validate AI agents, boosting conversion, lowering fraud, and building trust in a new system.

My Thoughts on the Stock

From my perspective, very little has changed for Adyen, except a lower share price, which is a good thing! My view of the company’s growth profile, although somewhat below the market’s, is unchanged. While I was hoping for more significant margin expansion over the near-term, I believe Adyen is still capable of reaching a 60% EBITDA margin over the medium-term. The end result is that my fair value for the company is little changed. Here are my key assumptions, and how they’ve changed since my last update:

For 2026, I assume reported net revenue growth of 18%, which is down from my prior forecast of 20%, primarily reflecting a larger FX headwind. My 2026 net revenue estimate assumes 20% constant currency growth, at the low-end of Adyen’s guidance, with 2-points of FX headwind, larger in H1, and moderating in H2. On the expense side, I assume Adyen hires 600 net new employees ratably over the year and cost per employee rises by 6%, as Adyen hires disproportionately in more expensive markets, like the U.S., and for specialized skills. The end result is that people costs4 equal 32% of net revenue in 2026, similar to 2025, following a 310-bps decline from 2024 to 2025. With those changes, my EBITDA estimate falls to €1,468 million, down from my previous €1,548 million estimate. The 2026 EBITDA margin of 52.6% is dead even with 2025 and about 150-bps below my prior estimate.

Beyond 2026, I continue to expect moderation in constant currency net revenue growth, falling to 10% by 2032 and 7% by 2035. Even though I still believe Adyen can—and will—reach an EBITDA margin of 60%, or more, for the sake of conservatism, I now assume a maximum EBITDA margin of 58.5% in 2033, about 2-points below my prior forecast, as people costs fall to only 26.5% of net revenue by 2033, 150-bps above 2018. My forecast for in-transit cash balances and average yield (about 2%) remain largely unchanged versus my prior forecast.

Holding all else equal in my DCF model, specifically the discount rate and terminal growth rate, my new fair value for Adyen is €1,435 per share, about a 4% reduction from my prior €1,499 estimate, and still representing nearly 60% upside from current prices. If I raise my discount rate to 10%, from 9%, and lower my terminal growth rate to 3.5%, from 4%, my fair value estimate declines to about €1,150, still representing more than 25% upside.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclosure: As of March 17, 2026, of the stocks mentioned in this report, I am long Adyen and Block. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Shift4’s Q4 earnings were a mixed bag, to be generous. In reality, there were several red flags that warrant greater scrutiny. Yes, shares are cheap at around 7.5x normalized 2026 EBITDA, which excludes stock-based compensation, but if anything is certain in payments it’s that valuation alone is not a reason for a stock to move higher. My goal for this update is to dig deeper into the red flags I’ve identified, show my math, and discuss my level of concern. I’m still holding my shares of Shift4 because I believe there are too many good parts of the business underappreciated by the market. That being said, the company has its work cut out to restore credibility and push back on bear cases that are gaining traction.

Red Flags

Appreciable slowing of organic revenue growth. After increasing 26% in 2024, Shift4’s organic revenue (GRLNF) growth slowed to the mid-teens during H2 2025, with about 12% growth exiting the year, although that was admittedly up against a difficult compare. For the upcoming year, 2026, Shift4’s guidance implies organic revenue growth of 12%, by my estimate:

Key Assumptions

• Global Blue and Smartpay GRLNF contribution of $315MM in 2025, implying 23% growth for Shift4 excluding these businesses

• Pro-forma Global Blue GRLNF of $535MM in 2025, up 12%, including $304MM contribution in H2 since Shift4 owned ($156MM in Q3, $148MM in Q4)

• $562MM of Global Blue GRLNF in 2026, up 5% pro-forma

• Smartpay GRLNF contribution of $11MM in Q4, representing 1.5 months (deal close mid-November)

• Smartpay GRLNF of $85MM in 2026, up 8% pro-forma

• Shift4 paid 1.5x revenue for Bambora, implying around $50MM of GRLNF in 2026 with about $40MM GRLNF contribution for 10 months (deal close March 2)

If I were to add Global Blue to Shift4’s base (assume Shift4 owned Global Blue since the start of 2025), it would imply pro-forma 2026 organic revenue growth of 10%:

While low double-digit organic revenue growth is good, especially for a company trading at Shift4’s valuation, the trend is not our friend. More importantly, the slowdown adds validity to a key bear argument for Shift4 that acquisitions fuel an unsustainable burst of ‘organic’ growth (i.e., using carrots and sticks to convert captive volume to E2E processing within the first few years following an acquisition), requiring continual M&A to sustain attractive ‘organic’ growth.

Consider this: in 2023 and 2024, Shift4 made seven acquisitions for about $1 billion. Since that time, outside of Global Blue, which had no immediate revenue synergy expectations, Shift4’s only acquisitions were Smartpay (November 2025 close) and Bambora (early March close). A skeptic would say that as these seven deals from 2023 and 2024 enter Shift4’s base, age and are not backfilled, it is not a surprise to see an appreciable slowdown in ‘organic’ growth even as the macro holds in there pretty well.

Verdict: This is the most serious concern for me. The math does not paint a pretty picture either. It also does not help that Shift4 introduced the organic revenue growth disclosure during Q3 only to back away from it in Q4 when it seemingly worsened. The key question is what is the path of travel? Are we moving from 26% organic revenue growth to mid-teens to low double-digits to high single-digits to mid-single-digits over a compressed time period, or is the business going to stabilize at a low double-digit organic growth rate over the medium-term? The good news, I suppose, is that the market has already priced in a move down to the mid-single digits very soon, in my opinion, offering meaningful upside if Shift4 can stabilize organic growth at 10% or more. I, for one, believe organic growth will be closer to double-digits than mid-single-digits, but certainly my confidence is lower than it has been in the past.

2026 guidance does not appear conservative, calling into question a return to beat-and-raise cadence. While not perfectly clear, it appears Shift4 is assuming a continuation of recent same store sales (SSS) trends throughout 2026, which creates a more challenging comparison in H1 2026 before lapping the mid-year 2025 slowdown, setting up an improvement in organic growth during H2 2026. Here’s how Shift4 discussed it on the earnings call:

“In the first half of the year, we’re anticipating that there’s a continuation of the kind of exit rate trends that we were seeing within the Triple S. And that seems to be holding up, because even though we had what looks like a little bit of a continuation of softer trends in January, February was looking strong, but you have to offset some of that with weather events.

But I think in total, you end up with a place that says, that’s the first half of the year, assume similar trends to what you were seeing coming out of the end of the year. And then in the back half, an assumption that there will be an anniversary over some softer comps, and you see some positive rebound. Overall, though, I think the outlook for the year is a fairly neutral view, which is admittedly a couple of points lower, like low single-digit points lower than what might have existed in years past as we were laying out kind of Triple S impact within an overall outlook for the year.”

Christopher Cruz, CFO of Shift4 Payments

Certainly, if the Iran conflict continues for an extended period, causing gas prices to remain elevated, eating into discretionary spending, and global travel is subdued into certain corridors (Shift4 called out the Middle East and Saudi Arabia as increasingly important strategic markets), there are significant risks to Shift4’s outlook, in my opinion.

Verdict: While not a fundamental issue, per se, properly managing expectations and setting the stage for beat-and-raise quarters is table stakes for most successful stocks, and was a hallmark for Shift4 prior to 2025. Even before the Iran development, it did not appear, to me, that Shift4 was baking enough conservatism into its 2026 guidance to assure a return to a beat-and-raise cadence.

Falling blended spreads in Q4. On a year-over-year basis, Shift4’s blended spread (i.e., net take rate) fell by about 3-bps in Q4—from 60-bps in the prior year, to 57-bps in the current year. While Shift4 explained away the decline by a mix shift toward enterprise clients with higher seasonal volume during Q4, under the surface, I believe the decline was a bit more pronounced after considering the contribution from higher yielding Global Blue acquiring and dynamic currency conversion (DCC) volume. Based on my knowledge of Global Blue, which comes from the company’s past filings and Shift4’s disclosures since owning the company, I believe Global Blue’s fully loaded take rate on acquiring and DCC volume is approximately 80-bps. In Q4, I estimate Global Blue’s acquiring and DCC volume contributed roughly $2 billion to Shift4’s $58.9 billion of total E2E processing volume, generating $17 million of net payments revenue. Excluding the contribution from Global Blue, Shift4’s blended spread would have been about 0.8-bps lower than the reported 57-bps, making the year-over-year decline a bit larger:

Verdict: Outside of Q4 2025, the trend in Shift4’s blended spreads have been favorable over the past several quarters. While I’m willing to give Shift4 the benefit of the doubt, if it was indeed a mix issue, it implies meaningful slowing in Shift4’s SMB volume, calling into question the quality of the merchant base and how it would hold up in a more significant economic downturn.

The lack of a clear handle on how FX and geopolitics will impact Global Blue. I’ve written in the past about why I believe the Global Blue acquisition was a mistake for Shift4 (too large, too much debt, precludes Shift4 from smaller lower risk deals without stretching leverage, makes it more unlikely Shift4 will be acquired itself, payments cross-sell conviction is low). While I still believe the strategic merits of the deal are weak, another issue that’s emerged is Shift4’s seeming surprise about how, or the level to which, FX and geopolitics are impacting Global Blue’s business. Recent movements in the U.S. dollar (USD) is an example. With a meaningful amount of Global Blue revenue denominated in euros (EUR), the weakening in the USD relative to the EUR has created a favorable translation impact for Shift4’s financials, which are reported in USDs. However, the weakening USD has impacted certain travel corridors (Americans traveling to Europe), reducing luxury shopping demand by more than the translation benefit. Further, on the Q4 earnings call, Shift4 raised tension between China and Japan as a tourism-related headwind for Global Blue, noting passenger airline seats between China and Japan are currently down 30%.

Verdict: While I don’t blame Shift4 for things that are clearly outside of their control (FX movements and geopolitical tension), I do believe Shift4 was overly optimistic about the underlying growth potential of Global Blue. As I noted back in October, Global Blue’s revenue grew only at a 4% compound annual rate from 2019 to 2025 (fiscal year ending March), falling to about 2% after excluding acquisitions that created the Post-Purchase Solutions segment in 2020 and 2021:

The bottom line is that Shift4 expects Global Blue to grow organically by mid-single digits in 2026, below the low double-digit rate achieved in 2025, and the high single-digit rate over the long-term Shift4 had assumed when they decided to make the acquisition.

Shrinking backlog. At the end of 2025, Shift4’s volume backlog was $32 billion, representing only 15% of 2025’s E2E volume. It was also down from more than $35 billion at the end of Q1, Q2 and Q3. Prior to, and immediately following, the acquisition of Global Blue, Shift4 spoke frequently about its cross-sell funnel, which stood at $1.4 trillion post the Global Blue acquisition:

Verdict: While I’m in no way dismissing the opportunity from the cross-sell funnel, recent backlog performance suggests this volume may be more adjacent than captive, requiring more effort by Shift4 to convert it to actual end-to-end volume. In reality, the backlog issue dovetails with my concerns over Shift4’s slowing organic revenue growth.

Adjusted free cash flow flat in 2026. Shift4 is guiding for adjusted free cash flow (AFCF) of $500 million, at the midpoint, in 2026, flat to 2025:

Further, the company backed away from its prior goal of $1 billion in annualized AFCF exiting 2027, instead preferring to look at the metric on a per-share basis to account for the company’s capital allocation priorities, which have focused on buying back stock ($500 million repurchased, of its $1 billion authorization, during Q4 and Q1, through its reporting date of February 26) at the expense of paying down debt.

One of the primary drivers behind the flat AFCF from 2025 to 2026 is the seasonality of Global Blue, which generates significant AFCF in the second half of the calendar year but may have little, to negative, AFCF in the first half. To put it another way, Shift4 received an outsized benefit from owning Global Blue in the second half of calendar 2025 and not the first half. Shift4 also included a $30 million headwind in 2026 from ‘integration and investment’ which the company framed as the expense required to stand up a sales force to sell its new all-in-one terminal (payments, DCC and tax-free shopping) across 15 European markets. Interestingly, Shift4 added back $92 million of ‘acquisition, restructuring and integration costs’ to arrive at its $500 million of AFCF in 2025. It’s not clear if the $30 million headwind in 2026 is in addition other ‘integration’ costs, but it would certainly be a step in the right direction if Shift4 began excluding these costs from its AFCF, narrowing the gap between GAAP and adjusted FCF.

Verdict: Although the discussion around the puts and takes of the 2026 AFCF bridge makes sense, the bigger issue for me is the seemingly large shortfall to the $1 billion 2027 target. Even if I assume AFCF grows by one-third in 2027, which may be aggressive, $665 million is a far cry from a $1 billion annualized exit rate. Shift4 now prefers to look at this metric on a per-share basis given its preference for buybacks over debt paydown. Fair, but if I assume Shift4 buys back the entire $1 billion authorization, the forfeited interest expense savings would only be about $50 million ($1 billion at 7% and a 25% tax rate), making the $720 million pro-forma AFCF number still notably shy of the $1 billion target, suggesting shortfalls in other parts of Shift4’s business, including Global Blue. Just last quarter, Shift4 said it was on pace to exceed the $1 billion 2027 target. What’s changed?

Changing and inconsistent disclosure. Underpinning most of my concerns and the red flags I’ve outlined above is Shift4’s changing and inconsistent disclosure. While publishing a quarterly shareholder letter is an excellent communication tool, providing a blank canvas for a company to tell its story, it also creates opportunities for criticism when key metrics, tables and charts are not consistently disclosed, or selectively disclosed to serve a company’s preferred narrative (Block is another company that struggles with this). Here are a few examples:

• Introducing an organic revenue growth disclosure during Q3 (+18%) only to not disclose in Q4 when it seemingly worsened (+12%). I would prefer to see this metric disclosed every quarter with historical context provided.

• Providing granular revenue and EBITDA contribution from Global Blue in Q3 but not Q4. Given concerns over the acquisition, I would prefer to see as much detail as possible, for as long as possible.

  

• Failure to provide consistent disclosure of blended spreads by vertical. The below graphic makes its way in and out of shareholder letters, and is particularly helpful when mix shifts impact overall blended spreads despite stable underlying spreads by vertical, as was presumably the case in Q4. The graphic was not provided for Q4 2025.

• Failure to provide updates on Investor Day scenarios. After providing updates on its three scenarios outlined at Investor Day (sit on our hands, with Global Blue, and additional M&A, the most likely case) in both Q2 and Q3 earnings, and at various conferences in between, Shift4 failed to do so on its Q4 earnings call and in the shareholder letter. Good, bad, or indifferent, Shift4 should provide updates on medium-term guidance provided just one year ago.

Verdict: Changing and inconsistent disclosure strikes at the heart of management’s credibility, a precious resource for companies. Everything mentioned here is controllable by Shift4. Failing to do so only hurts them and provides opportunities to write articles like the one I’ve just written.

As always, thank you for reading, and if you’ve enjoyed this, please consider sharing, liking, commenting or subscribing!

Disclosure: As of March 11, 2026, I am long Shift4 Payments. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.

Payments and fintech stocks continued to struggle during the first part of 2026:

A couple of factors likely drove the additional weakening in sentiment: earlier in the year, the President targeted credit card interest rates and interchange in his affordability push—which at the time, and still now, seems more bark than bite; and more recently, the potential impact from AI, which is coming into focus as a risk for businesses across all areas of the economy.

AI + Payments and FinTech

I believe there are two primary concerns regarding AI’s impact on payments and fintech: (1) the proliferation of more affordable software for SMBs; and (2) agentic commerce disrupting the payments value chain.

The most successful payments and fintech companies over the last several years have been those that combine software and payments: Toast in table service restaurants, Shopify for e-commerce, Shift4 Payments in stadiums and entertainment, and Square for cafes and coffee shops. All of these companies, along with other payments and fintech names, sold-off in sympathy with software stocks as investors assessed the potential impact of new AI tools. The most draconian scenario contemplates a significant reduction in software development costs and time that allows upstarts to flood the market with viable alternatives to incumbent providers. At the least, margins will compress as pricing falls. In the worst case, they are displaced completely. Giving credibility to this prospect, the CEO of Paycom Software, a provider of payroll and HCM software to mid-sized businesses, said it “can get into every adjacent industry…now within weeks or months” with Block’s Jack Dorsey envisioning a future where AI allows customers to “build their own features on top of [Block’s] capabilities.”

While AI disruption concerns are valid, and companies should not rest on their laurels, I believe there are a couple reasons why the payments and fintech leaders of today can be the leaders of tomorrow: (1) these are platform companies, not a single point solution: they provide tools across the front, middle, and back-office, with payment flows seamlessly incorporated, integrated with proprietary hardware devices, all backed by financial services, including lending for both consumers and small businesses; (2) these are businesses, not a product concept, with existing brands, salesforce and partner channels for distribution, backed by significant marketing budgets; and (3) scale provides a data advantage, which is important in an AI-first world, allowing leaders to provide significantly better tools and features than start-ups that rely solely on frontier models.

Additionally, the point-of-sale (POS) software market is already highly competitive, with thousands of options for merchants and businesses to choose from, including lower cost options and ones with less robust features. Finally, new AI tools will provide benefits for incumbents too, not just startups.

Agentic commerce is more of a wildcard. Adoption is in its infancy. While AI-assisted shopping searches are way up (because every search on Google is now AI-enabled, isn’t it?), agents completing transactions on behalf of their humans remain very rare.

As of now, players seem more interested in developing rules of the road, announcing partnerships, and consulting customers. Most believe shopping for mundane or commodity-like products will emerge as an initial use case for agentic commerce with customers interested only in finding the cheapest price or fastest delivery time. Shopping for more specialized items seems less certain. After all, don’t some people still enjoy shopping?

Right now, concern centers on how the payments value chain will be impacted if agentic commerce achieves its full potential, as some predict. Could commerce platforms like Shopify become less relevant if their software no longer powers the splashy websites where products are discovered? Yes, there is value in bringing a significant catalog of merchants to model makers and their agents, but is it the same as before?

For now, I don’t believe Visa and Mastercard have much to worry about. After all, agentic commerce may accelerate the shift to online shopping where payment cards are ubiquitous. It also could break-up transactions into several smaller ones as agents optimize for price and other factors. Acquirers seem potentially safer too, as processing capabilities are unlikely to be replicated by the model makers, and have been cited by platforms as key infrastructure they provide.

As always, there’s much to learn as this technology and the associated risks and opportunities develop. This isn’t the final word, and my initial assumptions may look silly sooner rather than later.

Below are my thoughts on some of the ‘biggest’ stories out of earnings season:

Block: The RIF Heard Around the World

While Block delivered strong results, especially for Cash App, which saw acceleration across key metrics, Block’s decision to lay off more than 40% of its staff due to AI advancements stole the show. There seemed to be some doubt as whether this was truly AI-enabled or more about cleaning up bloat that had accrued over time. The data (see below) suggests Block is above average when it comes to efficiency metrics like gross profit per employee, making Jack’s argument seem plausible. After this reduction in force, Block will generate multiples of gross profit per employee when compared to key rivals like Toast and Adyen, potentially placing pressure on them to do more with less. Still, Block’s announcement sparked a broader debate. Will AI truly come for a majority of white-collar jobs? What will the world look like if that happens? I don’t know the answer to these questions. What I do know is that nothing happens in a vacuum. Employers aren’t given free rein to gut their staffs in the pursuit of higher profits. Politicians will step-in and disincentivize this type of behavior. Further, mass layoffs, if they happen, will have a profound impact on consumer spending, potentially destabilizing the economy and slowing the necessary investments to sustain AI advancements.

Adyen: 2026 Guidance Disappoints, Hiring Pick-Up Caps Margin Expansion

Adyen shares fell significantly following fourth quarter results as guidance for the upcoming year failed to impress investors. Even though the outlook for 20-22% net revenue growth (on a constant-currency basis) fell within the ‘low-to-mid 20%’ range provided last quarter, and reiterated at Adyen’s capital markets day in November, it was widely viewed as a guide down, however small. More disappointing was Adyen’s outlook for 2026 EBITDA margin ‘to remain broadly in-line’ with 2025, which came in at 53%. Adyen still expects its EBITDA margin to exceed 55% by 2028. For 2026, Adyen plans to hire 550 to 650 new employees, implying growth of about 12.5% at the midpoint versus its year-end headcount of 4,771. While I’ll never fault a company for investing to grow, Adyen seems out of step with other peers that have been able to accelerate, or sustain attractive, growth with a stable-to-declining headcount. My forecast, which drives my fair value estimate, assumes Adyen reaches a 60.5% EBITDA margin over the long-term (2033) with an EBITDA margin of 58% by 2028. Although I believe my long-term target is achievable, it is possible my profit expectations for Adyen through 2028 are too optimistic. Even so, after a modest adjustment to near-term margin estimates, my fair value for Adyen suggests it is significantly undervalued at today’s prices. Adyen is one of my favorite ideas in payments and fintech right now.

PayPal: Alex Chriss Out, PayPal for Sale?

It’s been quite the past few months for PayPal. Shares declined into earnings as management struck a cautious tone during the conference circuit, warning that a weakening consumer would dent the holiday shopping season and increased incentives would pressure transaction margin dollar growth in 2026. When the time came for actual results, PayPal shocked markets by ousting CEO Alex Chriss and replacing him with Enrique Lores, a member of PayPal’s board and then-CEO of HP. Not surprising, the results and guidance that went along with the CEO change were not good: branded online checkout volume growth slowed to just 1% and the outlook for 2026 implied a small decline in core checkout volume1 and transaction margin dollars to be roughly flat on an underlying basis. After the dust settled, and PayPal shares fell further, Bloomberg reported PayPal was attracting unsolicited takeover interest from multiple parties. A day later, Bloomberg named Stripe as a potential buyer of either the entire business or parts. But a few days later, Semafor reported PayPal was not for sale. I’m not sure exactly what’s going on, but nothing seems settled with PayPal right now. The new CEO, who started on Sunday, will have a lot to say about the future direction of PayPal and whether it’s as a standalone business or part of someone else. While there are logical suitors for most of the major pieces of PayPal, buying legacy assets has gotten payments companies nowhere fast, so I don’t expect any sale to be a slam dunk, especially as valuations across the industry are widely viewed as depressed and PayPal may hold out for a better price down the road.

Shift4 Payments: Softening Results Further Depress Valuation

Shift4 Payments left a lot to be desired with its latest results. Organic growth appeared to slow meaningfully from 18% to 12%. But that’s a guess as they failed to disclose the metric they seemingly promised to deliver on a go-forward basis last quarter. After a couple quarters of expansion on a year-over-year basis, Shift4’s blended take rate fell during the fourth quarter as enterprise customers made up a greater mix of volume and small business volume growth was challenged. Global Blue remains another issue altogether. Foreign currency is impacting the business in multiple and unexpected ways. While it’s having a benefit from a translation perspective, there is a negative impact from discouraging cross-border shopping in certain corridors. Tension between China and Japan also had a negative impact on Global Blue in the latest quarter. Who could have guessed? The bottom line is that Shift4 expects Global Blue to grow at a mid-single-digit rate in 2026, below recent growth and the high single-digit rate Shift4 used when underwriting the deal. While everyone agrees the stock is attractively valued, as former CEO Jared Isaacman confirmed with another significant insider buy disclosed Monday morning, the market remains uncomfortable with its leverage profile, in my opinion, making the company’s insistence on buying back the entire $1 billion authorization all the more puzzling.

Fundamentals: Pockets of Revenue Moderation

Although volume growth remained largely consistent with last quarter, revenue growth slowed in certain areas, with the primary driver being deceleration at PayPal and Fiserv’s Clover. In each case, the companies are making investments in fee reductions and incentives to improve their competitive positioning. Although historical data shows pricing stability across payments, recent developments bear watching as take rates did tick down in the fourth quarter due to the actions by PayPal and Clover. Elsewhere, there was a mix of take rate expansion (Toast), stability (Global Payments, Lightspeed and U.S. Bank), and declines (Block’s Square and Shift4 Payments) with mix and company-specific factors contributing.

Lending growth remained robust across fintechs, including BNPL and liquidity products, with Block’s Cash App taking top prize with 223% growth in Cash App Borrow origination volume during the fourth quarter. Loss rates remain contained and companies across the board have demonstrated falling loss rates as products mature and customers repeat usage.

Publications Update

Below are my recent publications:

Musings on a Potential PayPal Takeover

Long Intuit

Long Adyen

The Bull Case for Integrated SMB Payments

Payroll and HCM Primer

President Trump sets sight on credit card industry in AFFORDABILITY push

Q4 2025: Portfolio Update + Investable Universe

Payments and FinTech in 2026

PayPal: Past, Present and Future

All Roads Lead to Visa and Mastercard

If you like what you read, please consider subscribing, liking, commenting or sharing to expand the report’s reach. Thank you!

U.S. Debit Card

Tracking

• U.S. debit card payment volume for Visa, Mastercard and the EFT networks

• Payment volume for the debit card portfolios of J.P. Morgan, Bank of America, Wells Fargo and U.S. Bank

Difficult Comparison Weighs on Underlying Growth

• Total debit card payment volume2 increased 5.0% during Q4, a 270-bps stepdown from Q3. I believe the conversion of the Capital One debit portfolio to Discover negatively impacted growth by 150-170-bps, suggesting underlying growth slowed by about 110-bps, primarily reflecting a difficult comparison from the prior year (Q4 2024 was up 8.6%, the strongest growth rate since Q4 2021).

• Visa reported 5.9% growth (down 180-bps) and Mastercard 2.4% growth (down 520-bps).

  • Visa cited the loss of Visa Direct volume from a customer moving its money moving capabilities in-house, the loss of Interlink volume from the Capital One conversion, and severe weather.

  • Excluding the Capital One conversion, I estimate Mastercard’s growth was about slightly more than 7%, down about 60-bps from Q3.

• Collectively, J.P. Morgan, Bank of America, and Wells Fargo (all exclusive, or near-exclusive, debit customers for Visa) grew 6.4% during Q4 (down 70-bps vs. Q3). After excluding the Capital One conversion and Visa Direct impact, I estimate all other issuer volume grew about 7.5%, down 50-bps from Q3.

  • In addition to regional and community banks and credit unions, other debit issuers include FinTech banks such as Chime and Cash App.

    • Chime’s card volume, which is mostly debit, grew 13% in Q4 (down 230-bps from Q3) while volume for the Cash App Card increased by an estimated 18.5% in Q4.

U.S. Credit Card

Tracking

• U.S. credit card payment volume for Visa, Mastercard, American Express and Discover

• Payment volume for the credit card portfolios of J.P. Morgan, Capital One, Citi, Bank of America, U.S. Bank and Wells Fargo

• Average loans and net charge-offs for the credit card portfolios of J.P. Morgan, Capital One, Citi, Bank of America, U.S. Bank, Wells Fargo, American Express and Discover

Steady Growth

• U.S. credit card payment volume increased 6.8% during Q4, a 20-bps decline vs. Q3, despite a more difficult comparison from last year’s strong holiday shopping season.

• Adding U.S. BNPL GMV and liquidity product originations to U.S. credit card payment volume raises the pro-forma growth rate by 100-bps during Q4 to about 7.8%, suggesting FinTechs are playing a key role sustaining healthy consumer spending growth in the U.S.

• Visa grew fastest at 7.5%, followed by Mastercard (6.7%) and American Express (6.5%) — Discover volume declined slightly vs. prior year.

  • This was the tenth consecutive quarter American Express failed to gain share of the U.S. credit card market.

• Among major issuers, J.P. Morgan gained share, growing more than 7%.

• Average credit card loans3 increased 4.5% in Q4, down 30-bps vs. Q3.

• The Q4 net charge-off rate4 rose to 3.67%, up 7-bps from Q3 but down 35-bps vs. the prior year period, similar with Q3.

Networks

Tracking

• Volume and net revenue5 for Visa and Mastercard

Value Added Services Lead the Way

• Aggregate global payment volume (PV) for Visa and Mastercard increased 8.3% during Q4, a 100-bps slowdown from Q3.

  • International PV increased 10%, a 70-bps slowdown from Q3, while U.S. PV grew only 6%, a 140-bps decline from Q3. The U.S. slowdown was attributable primarily to the Capital One conversion, the loss of Visa Direct volume, and a more difficult comparison.

• Despite the slowdown in volume, aggregate organic net revenue growth for Visa and Mastercard was about 13.5% during Q4, up 150-bps from Q3.

  • Value added services (VAS) revenue continues to lead the way, with Visa and Mastercard reporting 28% and 22% (19% organic) growth in VAS revenue during the December quarter, respectively.

  • Both Visa and Mastercard noted a decline in FX volatility during the December quarter. The level of FX volatility influences the amount of money the networks make when converting currency on a cross-border transaction. Lower volatility results in lower spreads over current exchange rates, reducing net revenue. The first half of 2025 saw heightened FX volatility, creating difficult compares for H1 2026.

• Visa reported organic net revenue and global PV growth of 13% and 8%, respectively.

  • U.S. and international PV growth was 7% and 9%, respectively.

  • Processed transaction growth slowed by 1-point to 9% while cross-border volume (excluding intra-Europe) growth remained at 11% for a third consecutive quarter.

• Mastercard reported organic net revenue and global PV growth of 14% and 9%, respectively.

  • U.S. and international PV growth was 5% and 11%, respectively.

  • Switched transactions increased 10%, similar to Q3, while cross-border volume grew 14%, a 1-point slowdown from Q3.

Legacy Acquiring

Tracking

• Volume, revenue and take rate for Fiserv, Global Payments, Worldpay, U.S. Bank’s Elavon and J.P. Morgan

Global Payments Shows Relative Strength

• Aggregate revenue growth for Legacy Acquiring slowed to less than 4% in Q4, a 230-bps decline from Q3, due primarily to slowdowns at Fiserv and Worldpay.

• Even though U.S. Bank’s Elavon reported a more than 4-point slowdown in volume growth from Q3 to Q4, revenue growth of 4.5% was down just 70-bps from Q3 as its Q4 take rate of 30.3-bps was up nearly 3% from 29.5-bps in the prior year period.

• Global Payments reported organic revenue and volume growth of 6% and 5% in Q4, respectively, steady with Q3.

• Worldpay6 reported revenue growth of 4%, down more than 400-bps from Q3.

  • Global Payments closed the acquisition of Worldpay in the middle of January. For 2026, Global Payments expects the combined business will grow organic revenue by about 5%, which assumes 6% growth for legacy Global Payments and 4% for Worldpay, and allows for some disruption in revenue momentum as the businesses are integrated in H1 2026.

• Fiserv’s Merchant organic revenue growth slowed to 1% in Q4, a 4-point decline from Q3. Clover’s reported volume growth slipped to 6%, down from 8% during Q3, while the elimination of certain Clover fees reduced Fiserv’s Merchant growth rate by a couple of points. Non-Clover revenue, excluding Argentina, was flat in Q4 after being up around 4% through the first three quarters. For 2026, Fiserv expects mid-single-digit Merchant revenue growth with Clover revenue up low double-digits and ‘slight growth’ in non-Clover revenue. As a reminder, non-Clover sources made up two-thirds of Fiserv’s Merchant revenue in 2026.

Commerce Platforms

Tracking

• Volume7, revenue8 and take rate for Square, Shopify, Toast, Lightspeed, Clover and Shift4 Payments

Revenue Growth Moderates

• Aggregate Commerce Platforms revenue grew 17% in Q4, a 4-point slowdown from Q3 even though Commerce Platforms volume growth slowed only 50-bps to 18.1%.

• For Commerce Platforms, payments-related revenue increased 15% while non-payments revenue (primarily includes fees from software subscriptions and merchant lending) grew nearly 20%.

  • There were a couple factors that contributed to the spread between payments-related revenue and volume growth: a continued move upmarket that places modest downward pressure on take rates (Shift4’s take rate fell approximately 3-bps year-over-year due to a greater mix of enterprise volume in Q4), and company-specific actions that resulted in lower prices for merchants (Clover eliminating certain fees) and higher processing costs (Square gaining flexibility with a processing partner at the expense of higher costs).

• Square’s volume, or GPV, grew 10% in Q4, with U.S. growth slowing to 7%, down 190-bps from the prior quarter, but still outpacing market growth by about 60-bps. Food and beverage GPV growth remained strong at 16%, down only 1-point from Q3. International GPV grew 25% on a constant-currency basis, similar to Q3. Gross profit growth, excluding the processing partner impact, was 9.5%, roughly in-line with volume growth. More significant hardware losses were an additional 2-point headwind to gross profit growth. I estimate Square’s take rate fell by 5-bps from the prior year, or about 2-bps excluding the processing partner impact, reflecting Square’s move upmarket.

• Shopify’s best-in-class volume growth ticked down slightly to 29% during Q4 while revenue growth stayed steady at 24%.

• Toast’s volume growth slowed by 170-bps to 21.8% during Q4. Revenue growth stepped down from 32% in Q3 to 26.5% in Q4 as Toast lapped more significant increases in its take that resulted from a modest pricing change, the introduction of a surcharging product and cost optimization efforts with its network and processing partners.

• Lightspeed reported an uptick in volume growth—from 7% to 8%—while revenue growth of about 14% slowed 250-bps from Q3.

• Clover’s reported volume growth fell to 6%, down 2-points. Fiserv attributed the slowdown to a softer November for U.S. restaurants and retail. On an underlying basis, which excludes the impact of the gateway conversion, volume growth was 9% in Q4. Fiserv did not disclose U.S. volume growth for Clover in Q4. Revenue growth slowed dramatically to 12%, down 14-points from Q3, reflecting slower volume growth and the elimination of select fees, which created a 6-point headwind to Clover revenue growth.

• Shift4 reported volume growth of 23%, down 3-points from Q3. Shift4’s blended spread, or take rate, was 57-bps, down 3-bps vs. the prior year, resulting in payments-related revenue growth of 17%, down significantly from 30% growth in Q3. Shift4 attributed the decline in take rate to a mix shift toward enterprise volume in Q4 with weakness in SMB volume. Excluding Global Blue ($158MM of Q4 revenue, by my estimate), Shift4’s revenue grew 12% in Q4, down from 19% (18% organic) in Q3.

E-Commerce

Tracking

• Volume9, revenue and take rate for PayPal, Shopify and Adyen

PayPal Slows Significantly

• Aggregate E-Commerce revenue grew 9% during Q4, a 5-point drop from Q3, even as volume growth accelerated by 50-bps to 15.6%.

  • Shopify and Adyen represented more than 37% of aggregate E-Commerce revenue in Q4, up more than 450-bps from the prior year.

• PayPal’s volume, or TPV, increased 6% in Q4, a 1-point decline from Q4. Excluding P2P payments, volume was up 9% on a reported basis, reflecting a return to double-digit growth for Braintree, a large, but much less profitable, volume stream for PayPal. Branded online checkout volume growth fell to 1% in Q4, down 4-points from Q3. PayPal attributed the weakness to softness in retail, Germany, and high-growth verticals including gaming, ticketing, travel and crypto. Transaction margin dollars rose 2.5% in Q4, a 3.5-point slowdown from Q3. Revenue for PayPal—which I define as revenue less transaction expense—grew just 1%, down over 7-points from Q3. Excluding interest income from both periods, revenue increased approximately 2% in Q4, down nearly 8-points from Q3. The slower growth reflected deceleration in high margin volume streams and increased incentives to habituate consumer behavior, which act as a contra-revenue.

• Adyen’s net revenue grew 19% on a constant-currency basis in Q4, a 4-point slowdown from Q3, resulting in 21% growth for H2 2025, similar to H1 2025. Volume growth was up 19% on a constant-currency basis when excluding a single large volume customer that generates little net revenue (i.e., Cash App funding transactions).

FinTech Banks

Tracking

• Revenue, active members, card volume and liquidity product origination volume for Cash App, Chime, Dave, The Bancorp Bank and Green Dot

Lending Expansion Drives Significant Revenue Growth

• Aggregate FinTech Bank revenue grew 34% during Q4, a 6-point acceleration from Q3. Card volume growth of 17% matched Q3.

• Cash App gross profit excluding Bitcoin grew 35%, a 10-point acceleration from Q3. The Cash App Card volume grew by an estimated 18.5%, a modest acceleration from Q3. Expansion of Cash App Borrow continues to be a significant driver of Cash App’s growth, with originations up 223% over the prior year in Q4. After multiple quarters of slowing growth, Cash App saw a second consecutive quarter of uptick in monthly actives and inflow growth.

• Chime’s revenue increased 25% during Q4, a 4-point decline from Q3, as it laps the full launch of MyPay (the company’s short-term liquidity product) in July 2024. Card purchase volume growth slowed to 13.1% during Q4, down 230-bps from Q3. Chime noted outbound instant transfers, launched in January, contributed approximately $900 million of volume during Q4. Combining card purchase and OIT volume results in 16% growth over the prior year, down 2-points from Q3. MyPay revenue was $103 million during Q4, up from $49 million in the prior year. If MyPay revenue is excluded from both years, Chime’s revenue growth would have been 15.7% in Q4, a 380-bps slowdown from Q3.

Buy Now, Pay Later

Tracking

• Revenue and volume for Affirm, Afterpay, Klarna, PayPal, Sezzle and Zip

GMV Growth Stabilizes at High Level

• Aggregate BNPL GMV was $80.7 billion in Q4, up 25%, steady with Q3.

  • I estimate U.S. BNPL GMV of $42.3 billion in Q4, up 31% from the prior year and a 2-point slowdown from Q3.

• Aggregate BNPL revenue grew 33%, a 2-point acceleration from Q3.

• BNPL providers are driving attracting volume and revenue growth through the expansion of financing and payment options at its merchant customers, as well as by partnering with payment service providers (PSPs) and digital wallets to increase the number of merchants and consumers utilizing their solutions.

• Affirm’s revenue grew 30%, a 4-point slowdown from the September quarter, as GMV growth of 36% was down 6-points from 42% in the last quarter. Revenue less transaction costs (RLTC) increased 29%, in-line with revenue. As a percentage of GMV, RLTC was 3.96%, down 20-bps vs. the prior year. The Affirm Card generated $2.2 billion of GMV in the December quarter, up 159% from the prior year, and now counts 3.7 million active customers, up nearly 1 million since last quarter.

• Klarna reported GMV and revenue growth of 32% and 38%, respectively. On a like-for-like basis, which adjusts for the sale of Klarna Checkout and currency translation, GMV increased 23%, similar to Q3, and revenue grew 32%, a 6-point improvement from Q3. In the U.S., GMV growth stayed steady at 43% while revenue growth accelerated 7-points to 58%. Fair financing GMV increased 165% during Q4. Fair financing is a longer-term fixed-payment lending product with an interest rate more comparable, but still lower, than a traditional credit card. The Klarna Card, which allows holders to select debit or credit at the point-of-sale, grew GMV 209% in Q4, massive acceleration from a 91% growth during Q3.

Corporate Payments

Tracking

• Volume and revenue10 for BILL Holdings, Corpay, AvidXchange and Payoneer

Mid-Teens Revenue Growth Persists

• Aggregate Corporate Payments revenue grew 14.7% in Q4, a 50-bps slowdown from Q3 despite a more than 3-point acceleration in volume growth to 23.6% in Q4.

• Corpay’s organic revenue grew 15.7% in Q4, an 80-bps slowdown from Q3. Organic spend volume growth accelerated by 7-points to nearly 46% but continues to be influenced by volume from enterprise customers where Corpay generates a lower revenue yield. Corpay noted a 2-point headwind to revenue growth from lower interest rates, up 1-point from Q3.

• BILL Holdings’ core revenue grew 17.4% during the December quarter, up 370-bps from the September quarter, as total payment volume growth ticked up 70-bps to 12.5%. Monetization improved as a result of increased adoption of ad valorem products, including Supplier Payments Plus, the Divvy corporate card, invoice financing for BILL’s SMB customers, and virtual card payments for accounts payable.

• Payoneer’s revenue, excluding interest income, was up 9% in Q4, a 6.5-point slowdown from Q3, even as volume growth accelerated by 1-point to 10%.

Bank Technology

Tracking

• Revenue from Fiserv, FIS and Jack Henry

Fiserv Stabilizes, FIS and Jack Henry Produce Attractive Growth

• Aggregate Bank Technology revenue grew 2.4% in Q4, 130-bps of improvement from Q3.

• Fiserv’s Financial Solutions revenue fell 2% in Q4, a 1.5-point improvement from Q3. As a reminder, following Q3 results, Fiserv highlighted slowing growth for Zelle, a secular decline in the company’s bill pay business, and weakness in its ATM managed services business as headwinds to longer-term growth. Additionally, Fiserv noted the consolidation of its core banking platforms—from 16 to five—is creating confusion among its customer base and allowing competitors to exploit the opportunity to potentially take share. For 2026, Fiserv expects Financial Solutions revenue to be flat to slightly down, with growth returning to a low-to-mid-single-digit range over the medium-term.

• FIS’ Banking revenue increased 8.3% on a reported basis in Q4, which includes 130-bps of contribution from M&A, implying organic growth of 7%. This is the first time since Q4 2020 that FIS grew faster than both Fiserv and Jack Henry. FIS believes its focus on large financial institutions (LFIs) serves it well as these banks grow the fastest—both organically and through consolidation, spend heavily on technology, and have excess capital and stable loss rates.

• Jack Henry’s organic revenue growth was 6.7% during the December quarter, a 210-bps slowdown from the September quarter. Across segments, Core revenue increased 7%, Payments grew 6%, and Complementary expanded 9%. Jack Henry noted consolidation at one of its competitors (i.e., Fiserv) has positively impacted its sales pipeline across Core, Payments and Complementary solutions, with its win rate likely to improve over time.

Disclosure: Of the companies mentioned in this report, I am long Visa, Global Payments, Intuit, Shift4 Payments, Block, and Adyen. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.