Marqeta

Marqeta generated its second consecutive quarter of GAAP profitability, reporting net income of $8 million while expanding its adjusted EBITDA margin to 21% from last year's 19%.

Why it matters: This quarter reinforces the fact that Marqeta has reached meaningful operating scale. However, the results also continue to illustrate the company's central challenge. Transaction volume is growing substantially faster than revenue as Marqeta's unit economics face persistent pressure. Total processing volume grew 32% year over year, for the fourth consecutive quarter above 30%, driven by over 50% growth in expense management and more than 40% growth in lending programs, which includes Buy Now, Pay Later. Annual gross profit growth, on the other hand, was only 17%, though this did exceed the top end of Marqeta's guidance. This largely reflects Block, its largest customer, hitting lower volume-based pricing tiers. Marqeta has also been signing large new deals and expanding into Europe, further weighing on its average take rate.

The bottom line: We expect to increase our $24.40 fair value estimate for no-moat Marqeta by a mid-single-digit percent. We see the shares as undervalued at the current price. While customer concentration remains an issue, we see the risk as already largely baked into Marqeta's stock price. Marqeta has been making progress on its customer concentration issues, though significant work remains. Management noted that non-Block TPV is now growing more than twice as fast as Block TPV, while international transactions account for approximately 20% of TPV. Adjusted operating expense increased 12% year over year. This lower-than-expected cost reflects active third-party contract negotiations and continued cost discipline.

Coming up: Management has raised adjusted EBITDA growth full-year guidance from the first quarter's mid-to-high 20s percent to low 30s. On the flip side, the 2026 gross profit growth guide has been narrowed to 11%-12% for the full year.

Management noted a visible 10% decline in Cash App new card issuances starting around mid-June. There was a temporary, short-term stabilization step-up in July but should not be viewed as a return to prior high-growth baselines. This sustained contraction in card issuances is headwind to Marqeta's overall gross profit growth for the full year.

We are reducing our fair value estimate for Marqeta to $24 per share from $26, which translates into an enterprise value/sales ratio of 2.15 times our 2026 revenue projection. The decrease in our fair value estimate comes from a steeper drop in projected average pricing once Marqeta's contract with Block comes up for renewal in 2028. While we do expect Marqeta to retain the partnership, we think it will likely require material concessions given the economic power Block holds over Marqeta. Our fair value estimate assumes an 8.9% cost of equity. Our model is sensitive to projections for growth in processing volume on Marqeta’s platform and the amount of interchange revenue shared with Marqeta’s customers.

While we do expect growth to remain well below the extreme highs Marqeta enjoyed in 2021 and 2022, we project that Marqeta will continue to enjoy revenue growth in the low to midteens, driven by its exposure to high-growth firms like Block. We also see the company's international expansion and move into credit card issuance as long-term growth drivers. That said, Marqeta did report shrinking revenue in 2024 due to its new contract with Block, which features both significantly lower prices and a change to the structure of the program.

Block now maintains the relationship with the card networks, including the collection and payment of the network fees, which had been handled by Marqeta. As a result, Marqeta's top line revenue from the program is now reported on a net basis, leading to a sharp decrease in reported revenue starting in the third quarter of 2023. However, this is partially offset by much wider margins as Marqeta no longer records the network fee payments as part of its cost of goods.

We project that revenue will grow at a 13.1% CAGR from 2025 to 2030. That said, we do expect Marqeta to face long-term pressure from take rate compression over time. As a result, we see Marqeta's gross profits increasing at a 9.7% per year average from 2025 to 2030. Ultimately, we anticipate Marqeta will be able to expand its operating margins over time as it benefits from larger scale and better customer diversification as it grows its business.

Our model assumes that Marqeta sees modest success in its expansion into the credit card space, though we expect it will take time to build momentum, and incremental revenue from international debit card payments. By the end of 2032 we project that card products issued on Marqeta’s platform will generate roughly 6.5% of US debit card payment volumes and low single digits of US credit card payments.

We expect Marqeta's international expansion to be a major growth driver, and we see international payments making up 29% of Marqeta’s total processing volume by 2035.

We anticipate that Block will remain a major customer for Marqeta, but that Marqeta will be able to diversify its customer base with new clients and growth from its existing partners. This should give Marqeta more market power and leads Marqeta to achieve an operating margin of around 12.9% by 2035, though the firm's reliance on Block and the upcoming 2028 renewal process is a point of major uncertainty in our projections.

In our view, Marqeta does not have an economic moat. Despite rapid total processing volume, or TPV, growth, expanding operating margins, and achieving US GAAP profitability in the first quarter of 2026, we believe the company's long-term competitive position remains constrained by its dependence on Block and persistent take rate compression.

In the near term, Marqeta is a healthy business. The company runs on a mostly fixed cost structure; as TPV increases, it naturally dilutes fixed costs and expands overall margins, which helped the company reach profitability in first-quarter 2026 for the first time. Marqeta has also had success with its international growth efforts. The company has expanded globally to 30 additional European markets and now gets more than 20% of its volume outside of the US, lengthening its growth profile. Even financial firms with significant resources see value in purchasing Marqeta’s technology over replicating the features internally; in 2020 J.P. Morgan signed an agreement for virtual card services for its commercial cards.

All in all, Marqeta reaching profitability through impressive processing volume growth is an important milestone. However, gross profit growth has trailed volume growth significantly as the firm’s pricing has compressed overtime, a key sign of the firm’s lack of economic power relative to clients.

This is largely a reflection of Marqeta's continued customer concentration problem, specifically with its largest customer, Block. Block accounts for approximately 45% of Marqeta's net revenue, with the commercial agreements up for renewal in June 2028. Given that Marqeta’s ability to scale against its fixed costs is derived from Block’s transaction volumes, the headline figure understates the company’s actual exposure. Marqeta gaining profitability from rising scale cuts both ways. If Block were to leave, Marqeta would not only lose a substantial portion of its revenue but would also take years to get back to breakeven, if it proves possible at all. Secondary effects would also include weakened negotiating leverage with the card networks, Visa and Mastercard, and less transaction data to power enterprise-grade fraud detection in its suite of value-added services.

While it is common for companies to offer customized volume pricing tiers and fee adjustments to their largest enterprise and hypergrowth customers, the outsize importance of a single customer means these concessions have a disproportionate impact on overall profitability. Even if Block remains a customer, Marqeta's bargaining position appears weak. As Cash App has grown, Block has leveraged its scale to renegotiate more favorable commercial terms. In the 2023 contract renewal, management disclosed that the agreement would reduce Marqeta's gross profit take rate—the portion of transaction economics the company retains as net revenue after paying card networks, issuing banks, and customers—by 40%. The same renewal also transferred greater control of the Cash App card program to Block. Rather than relying on Marqeta to manage relationships with Visa, Block assumed responsibility for key program decisions, including commercial negotiations with the card network, card brand selection, and other program parameters. Furthermore, Block has moved some new card issuing and processing business to alternate providers outside of Marqeta that serve as the primary partner for its Cash App debit card program. As a result, as Block's scale has increased, its dependence on Marqeta has diminished, leaving Marqeta with less negotiating leverage.

While migrations between modern issuer processors remain operationally complex, they are not prohibitive. Independent research by Totavi found that 91% of fintechs had switched processors at least once as they scaled, although 70% reported that migrations away from an active modern provider took more than twice as long as expected. This suggests that processor changes create high rates of migration failure, operational regret, and execution risk, but not an insurmountable barrier.

Consequently, customer acquisition among modern issuer processors tends to be gradual and hard-fought. Companies are unlikely to move between platforms such as Stripe and Marqeta without a compelling strategic reason, but they have demonstrated a willingness to do so when the benefits justify the migration costs. Marqeta’s position is further constrained by the narrowness of its value proposition. Its platform is most differentiated when customers require the flexibility to build complex or highly customized card products; in the commoditized general-purpose debit market, however, Marqeta has less to offer and lacks the scale to compete on price.

Even where Marqeta retains a customer against competing third-party processors, successful fintechs may ultimately bring critical infrastructure in-house. Chime’s migration to its internally developed ChimeCore platform, which contributed to a 25% year-over-year decline in SoFi’s technology-platform revenue in the first half of 2026, illustrates this risk. Taken together, these dynamics suggest that migration complexity may slow customer attrition, but it does not prevent customers from switching providers or internalizing processing once the economic or strategic rationale becomes strong enough.

Marqeta’s platform has proven capable of supporting exceptional transaction growth, but scale has not translated into durable economic power. Instead, the benefits of that scale have increasingly accrued to its largest customers through lower pricing, greater strategic control, and the ability to internalize portions of the value chain. We therefore do not believe Marqeta possesses the customer captivity or pricing power necessary to maintain a durable economic moat.

If non-Block processing volume outpaces Marqeta's Block business, the firm will be in a stronger negotiating position for the 2028 contract renewal.

Marqeta’s existing customer base includes disruptive firms like Block and Klarna, which provides Marqeta with strong organic growth from its existing user base. If their growth exceeds expectations, Marqeta is a direct beneficiary.

Marqeta’s cost management has been impressive in 2026. Further discipline in operating expenses could lead the firm to become more profitable than expected.

Marqeta has a highly concentrated customer base with Block responsible for the majority of its net revenue, the firm could be forced to make larger concession than anticipated when the contracts are renewed.

There is a material risk that Marqeta’s competitors will replicate its platform before the company can scale into meaningful profitability.

Marqeta’s efforts to expand into credit cards and international payments are still in their early stages, and it is still highly uncertain if the company’s efforts to break in to these could be less successful than we anticipate.