By Arasu Kannagi Basil
(Reuters) -Visa's third-quarter revenue growth fell short of Wall Street targets in a rare miss for the world's largest payments processor as steep borrowing costs limited consumer spending, sending its shares down 4.6% in extended trading.
The U.S. Federal Reserve's efforts to curb inflation have taken interest rates to their highest since the global financial crisis of 2008, stretching the budgets of lower-income Americans who live paycheck to paycheck.
"In the U.S., while growth in the high-spend consumer segment remained stable compared to prior quarters, we saw a slight moderation in the lower-spend consumer segment," Chief Financial Officer Chris Suh told analysts.
Rival credit card giant American Express (NYSE:AXP) also missed expectations for second-quarter revenue last week.
"Visa (NYSE:V) was priced for perfection back in March but has eased since then as unemployment, payment and loan delinquencies, and continued consumer disposable income concerns tick higher," said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.
"There is room for business and consumer spending growth, especially if Fed interest rates decline."
Visa's quarterly net revenue of $8.90 billion came in below analysts' estimates of $8.92 billion, according to LSEG data. It was the company's first such miss since early 2020.
Payments volume growth cooled down in its Asia-Pacific market, driven primarily by the macroeconomic environment in mainland China. The post-pandemic recovery in the region's travel demand is progressing at a slower pace than what Visa anticipated.
Visa's payments volume rose 7% in the quarter on a constant dollar basis, while cross-border volumes excluding transactions within Europe jumped 14%, signaling robust international travel demand.
It expects net revenue growth in the "low double-digit" percentages for the fourth quarter ending Sept. 30, compared with 10.6% reported last year. The company also reaffirmed its annual profit and revenue growth forecasts.
Visa earned $2.42 per share on an adjusted basis for the third quarter, in line with expectations.