Mastercard (MA) Q1 FY26 earnings call: guidance and Q&A

How is Mastercard's VAS strategy evolving, particularly in the context of embracing new networks like A2A payments and the planned divestiture?

Michael Miebach affirmed the multi-rail strategy, noting that cards are not the answer for everything and real-time payments are a key focus for governments. He highlighted the application of services like cybersecurity to these new payment rails, which provides a seat at the table with governments. Sachin Mehra clarified that the mentioned disposition refers to Session M, their loyalty business.

“So that strategy still holds. There is no question about that because real time is very much in focus. A lot of governments choose real-time payment systems to go and facilitate payments of all types across their respective markets, where a known and respected partner in this space.”

asked by William Nance · answered by Michael Miebach

Could management elaborate on the assumptions for the Middle East conflict ending in Q2, its impact on cross-border, and what offsets are supporting guidance? Also, how do portfolio shifts impact cross-border going forward?

Sachin Mehra stated the base case assumes the conflict ends in Q2, with the largest impact on cross-border travel in Q2, followed by gradual recovery in H2. He noted the full-year guidance is unchanged on a currency-neutral basis, with strong Q1 performance and VAS growth providing buffers. Portfolio shifts will continue to impact cross-border for quarters, especially travel-heavy portfolios.

“The impact is most pronounced and assumed to be most pronounced in cross-border travel. That is a correct statement on your part. The second point I'd make there is that the impact would be in our assumptions, most pronounced in the second quarter.”

asked by Sanjay Sakhrani · answered by Sachin Mehra

Why has Switch transaction growth decelerated to 9% (10% ex-Capital One) from historical low double-digit rates, and what is the growing importance of VAS in achieving medium-term revenue objectives?

Sachin Mehra explained that mix of portfolio, including the exit from Russia (a low average ticket size market), influences Switch transaction growth. He emphasized the continued focus on driving switched transactions, noting the proportion is now over 70%. Michael Miebach added that winning volume from domestic schemes and closed loops by offering superior digital capabilities like tokenization is a key driver. VAS, representing 40% of revenues, continues to perform strongly, delivering 18% currency-neutral growth in Q1, and is crucial for the company's growth algorithm.

“I think one of the bigger factors that influences Switch transaction growth is the mix of our portfolio. And so I'll give you a real life example, right? So back in the days when we were operating in Russia, before we suspended our operations in Russia, right? We had significantly higher growth in Switch transactions.”

asked by Harshita Rawat · answered by Sachin Mehra

Does the challenge in passing the Clarity Act in D.C. delay the stablecoin industry's timeline, or is there enough momentum to continue, and how does BVNK help shape this trajectory?

Michael Miebach believes stablecoins and tokenized deposits are here to stay and will be an important part of the financial ecosystem, regardless of the Clarity Act. He stated that while the Clarity Act would be beneficial for a clear regulatory framework, its absence doesn't hold Mastercard back. The BVNK acquisition is crucial for driving interoperability, trust, and licensing in a future world of multiple coins and changes, addressing a pressing need for clients.

“So fundamentally, what we see is that stable coins and tokenized deposits are actually not just stable coins here to stay. They're going to be an important part of the financial ecosystem, the financial fabric going forward.”

asked by Adam Frisch · answered by Michael Miebach

How should cross-border growth be normalized for timing shifts and portfolio impacts? Also, is there an inflection in demand for cyber and fraud VAS offerings due to rising AI-related fraud?

Sachin Mehra explained that the Q1 to April cross-border travel decline (8% to 2%) is due to the Middle East conflict, portfolio shifts, and holiday timing, listed in order of significance. He emphasized that the conflict is external and portfolio shifts are part of disciplined deal-making. Michael Miebach confirmed a significant demand for safety and security solutions, especially with rising AI-powered fraud. He highlighted Recorded Future's acquisition in 2024 as timely, providing broader threat intelligence and a unique position as a trusted partner to governments and companies.

“And every one of these calls, we talk about wins and losses and shifts. So if you just think about what I said earlier, Aeromexico, United Airlines, Canada, for travel agency wins. So there is a lot going on in the space.”

asked by Darrin Peller · answered by Michael Miebach

Has competitive intensity for deals changed, and how should rebates and incentives trend this year?

Michael Miebach stated that competitive intensity hasn't dramatically changed, but Mastercard's ability to provide value through its services portfolio has. This allows them to win deals by offering a strong value exchange. Sachin Mehra indicated that rebates and incentives, as a percentage of payment network assessments, are expected to be slightly lower sequentially in Q2 compared to Q1.

“I think our ability to provide value that has dramatically changed. So if you look at our services portfolio today and the kind of bells and whistles that we put on our Mastercard payment, that is a lot of value that we can bring and that we can have considered as we engage customers on what kind of value exchange works for these deals, and that's why we continue to win.”

asked by Andrew Schmidt · answered by Michael Miebach

How does Mastercard view the economic contribution of a stablecoin transaction versus a local currency transaction, and is it economically agnostic in a future with more stablecoin utilization?

Michael Miebach explained that current stablecoin volumes largely involve on/off-ramp opportunities, often leveraging existing card economics through co-brand programs. He sees the space as a significant net new growth opportunity, with the BVNK acquisition aimed at deepening capabilities to drive more value through interoperability layers and new services. Sachin Mehra added that BVNK's revenue model is based on basis points on volume for services like convert, send, receive, and store, addressing a market Mastercard doesn't currently participate in.

“So generally, when you see where are most of the volumes today, there's a lot of on and off ramp opportunities. So we have these co-brand programs. And in that, you basically have card economics. So that's just as straightforward.”

asked by Unknown Analyst · answered by Michael Miebach

What are the most fertile new categories for acceptance growth, and was VAS growth in Q1 organic, given the Recorded Future acquisition last year?

Michael Miebach identified underpenetrated verticals like insurance and housing, along with driving VCN acceptance, as significant opportunities for new acceptance growth, in addition to the ongoing efforts against domestic schemes and closed loops. Sachin Mehra clarified that Q1 VAS revenue growth of 18% had no impact from acquisitions, meaning it was organic. He contrasted this with Q4 of last year, which had 22% VAS growth, including about 3 points from acquisitions.

“So underpenetrated verticals, I think, is a significant opportunity for us. And then it's the bread and butter business of just driving acceptance every day, small business, for example.”

asked by Jason Kupferberg · answered by Michael Miebach