Mastercard's quarterly profits beat estimates amid resilient customer spending

Mastercard Inc.’s profits in Q1’23 beat economists’ estimates as customer spending rose in the midst of a slowing economy. Its adjusted EPS of $2.80 beat estimates by 3.3%. Besides, its net revenue increased by 11% YoY to $5,748 million.

Mastercard’s growth

Among the major factors that led to the recorded growth is the resilience in customer spending. This is despite the Fed’s aggressive monetary policy and subsequent concerns over a slowing economy.

With the steady spending by consumers, the company’s gross dollar volume rose by 15%; from $1.92 trillion a year ago to $2.1 trillion. At the same time, the purchase volume and switched transactions increased by 17% and 12% respectively.

During the company’s latest earnings call, its CEO noted that cross-border travel has been showing “continued recovery”. In Q4’22, the firm indicated that most regions had recovered “well above 2019 levels”. Evidently, the trend has continued into 2023. Cross-border travel increased by 35% in the first three months of the year compared to a year ago.

While travel has largely been behind Mastercard’s growth in the past two quarters, the company acknowledges the risk that lies ahead with the persistent recession woes. Granted, its payments businesses will likely hold steady as a slowing economy may not necessarily stop customers from swiping their cards. What may happen is people altering how much they spend and their preferred places to shop. However, travel is more likely to slow down in a weak economy.

In the ensuing months, partnerships and entering new markets is set to further boost Mastercard’s growth. In fact, by the end of March 2023, the issuance of branded cards was at 3.2 billion compared to 2.9 billion a year ago. Besides, Q1’23 saw the firm exceed “100 million acceptance locations worldwide”.