In plain words
Mastercard earns a fee every time one of its cards is used, and it also sells services to banks and merchants, such as fraud checks, data and marketing. In the third quarter, its net revenue rose 14% to $9.8 billion. Revenue from the card network rose 11%. Revenue from services rose 19%. Profit grew faster than sales: net income rose 18% to $4.6 billion and earnings per share rose 22% to $5.28, helped by buybacks that cut the share count. People paid 7% more on Mastercard cards than a year earlier, and spending across borders rose 11%. Per the Investing.com transcript of the call, management said part of the quarter's strength was services work and deals that moved forward from the fourth quarter, and that this will reverse.
The finding
The Editor's view: services, not swipes, now set Mastercard's pace, and part of this quarter's beat was borrowed from the next one. Card volume grew 7%, yet net revenue grew 14%. The gap is pricing, a richer mix and a services business growing almost twice as fast as the network. Costs grew 11%, slower than revenue, so the operating margin widened to 59.8%. The catch is timing: per the Investing.com transcript of the call, the CFO said services projects and deal signings moved from Q4 into Q3, and that "You will see a similar offset in Q4".
For educational purposes only; not investment advice.