V -- FY2026 Q2 Earnings Preview

Visa is not a broken fundamentals story. The FQ2 question is whether a premium network multiple still deserves full credit when the market is worried about U.S. card regulation, merchant litigation, and incentive pressure. FQ1 was a strong starting point: net revenue was $10.90B, reported growth was +15%, and adjusted constant-dollar net revenue growth was +13%.

The preview should focus on three proof points. First, cross-border must remain near the low-teens pace, because it is the highest-quality revenue driver. Second, client incentives need to stay controlled: FQ1 gross revenue was $15.17B from service $4.76B, data processing $5.54B, international transaction $3.65B, and other revenue $1.21B, while client incentives were ($4.27B), or 28.1% of gross revenue. Third, operating leverage has to be real after litigation expense, not just a headline EPS beat.

| Debate | Why It Matters | Good Print | Bad Print | |---|---|---|---| | Cross-border durability | Mix and yield are better than domestic volume | Constant-dollar growth holds near FQ1's +12% | Growth decelerates toward domestic payment volume | | Domestic health | U.S. volume tells us whether consumer spend is fraying | U.S. payment volume remains steady after $1.78T in FQ1 | U.S. trends soften or management flags ticket pressure | | Incentive discipline | This is the cleanest gross-to-net quality check | Incentives stay near 28% of gross revenue | Incentives rise faster than gross revenue and compress yield | | VAS / Other revenue | Non-volume growth leg supports premium growth | Other revenue keeps compounding from $1.21B | Growth slows and the story becomes pure volume beta | | EPS quality | Visa can beat while legal/regulatory costs still cloud quality | Non-GAAP opex guide is intact and litigation is framed as manageable | Expense growth, legal costs, or tax rate absorb revenue upside |

| Item | Setup Into FQ2 | What Would Change the Stock Debate | |---|---|---| | FQ2 net revenue | Management's hurdle is low-double-digit growth, against FQ1 reported growth of +15% | Reaffirming low-double-digit growth with no incentive caveat is constructive | | FQ2 EPS | High end of low-double-digit growth is the qualitative bar | EPS beat only matters if it comes with clean revenue quality | | FY2026 net revenue | Low-double-digit framework; annual FX impact was guided at -0.5% | Any raise would signal confidence in cross-border and VAS durability | | FY2026 operating expense | Annual non-GAAP operating expense growth framework was +16% | Need expense discipline after FQ1 litigation expense of $708M | | FY2026 EPS / tax | Annual non-GAAP EPS adjustment impact was -12%; tax rate guide was 16.5% | Watch whether earnings quality depends on below-the-line help |

| Metric | FQ2 2025 | FQ3 2025 | FQ4 2025 | FQ1 2026 | |---|---:|---:|---:|---:| | Service revenue | $4.40B | $4.33B | $4.60B | $4.76B | | Data processing revenue | $4.70B | $5.15B | $5.39B | $5.54B | | International transaction revenue | $3.29B | $3.63B | $3.80B | $3.65B | | Other / VAS revenue | $0.94B | $1.03B | $1.18B | $1.21B | | Client incentives | ($3.73B) | ($3.97B) | ($4.25B) | ($4.27B) | | Net revenue | $9.59B | $10.17B | $10.72B | $10.90B | | Reported net revenue growth | +9% | +14% | +12% | +15% | | Constant-dollar net revenue growth | +11% | +14% | +11% | +13% |

| Metric | FQ2 2025 | FQ3 2025 | FQ4 2025 | FQ1 2026 | |---|---:|---:|---:|---:| | Nominal payment volume | $3.52T | $3.34T | $3.62T | $3.73T | | U.S. nominal payment volume | $1.72T | $1.65T | $1.77T | $1.78T | | International nominal payment volume | $1.80T | $1.69T | $1.85T | $1.96T | | Processed transactions | 60.7B | 65.4B | 67.7B | 69.4B | | Payments volume growth | +8% | +8% | +9% | +8% | | Processed transaction growth | +9% | +10% | +10% | +9% | | Cross-border constant-dollar growth | +13% | +12% | +12% | +12% | | Net revenue yield | 27.2 bps | 30.4 bps | 29.7 bps | 29.2 bps | | Client incentives / gross revenue | 28.0% | 28.1% | 28.4% | 28.1% |

| Metric | FQ2 2025 | FQ3 2025 | FQ4 2025 | FQ1 2026 | |---|---:|---:|---:|---:| | Operating expenses | $4.16B | $4.00B | $4.58B | $4.16B | | Litigation provision | $1.00B | $0.61B | $0.90B | $0.71B | | GAAP operating margin | 56.6% | 60.7% | 57.3% | 61.8% | | Non-GAAP opex growth | +7% | +13% | +13% | +16% | | Adjusted EPS | $2.76 | $2.98 | $2.98 | $3.17 | | Adjusted free cash flow | $4.37B | $6.31B | $5.85B | $6.40B |

Visa's setup is better than the headline overhang suggests. The company is still producing low-teens revenue growth, payment volume remains high single digit, and cross-border has not cracked. The stock risk is that investors treat regulation and incentives as structural margin pressure rather than episodic noise. That makes this less about whether Visa beats consensus and more about whether management can make the beat feel repeatable.

The cleanest bull case is a quarter where cross-border growth holds near low-teens, Other / VAS revenue continues to outgrow the core, incentives remain around the recent 28% of gross revenue range, and management preserves the FY2026 low-double-digit revenue and EPS growth framework. The miss case is a quarter where reported revenue is fine but the bridge is lower quality: higher incentives, softer U.S. volume, more litigation expense, and cautious regulatory language.

| Topic | Call Question | Investment Read | |---|---|---| | Cross-border | Are travel and card-not-present cross-border still growing at similar rates? | Confirms whether mix stays favorable | | Value-added services | Is Other / VAS revenue growth broad-based across issuing, acceptance, risk, and advisory? | Supports the non-volume growth narrative | | Incentives | Are renewal economics changing in large issuer / co-brand deals? | Tests gross-to-net discipline | | U.S. consumer | Is the U.S. volume trend being driven by transactions, ticket size, debit, or credit? | Separates consumer health from mix | | Regulation | Does management see any practical change from card-fee legislation or merchant settlement activity? | Determines whether overhang remains multiple-only | | FY guide | What would make Visa raise or cut the FY2026 low-double-digit framework? | Forces management to define the risk envelope |

| Outcome | What It Looks Like | Likely Read | |---|---|---| | Clean beat | Net revenue beats, cross-border holds near low-teens, incentives stay disciplined, FY guide intact or better | Stock can look through regulation noise | | Messy beat | Revenue / EPS beat, but incentives or litigation absorb too much of the upside | Multiple relief limited | | In-line constructive | Revenue in line, but cross-border, VAS, and guide commentary are strong | Quality compounder story remains intact | | Miss | Cross-border slows, U.S. volume weakens, incentives step up, or management softens FY guide | Overhang shifts from regulatory noise to fundamentals |