Months of high inflation and rising borrowing costs are starting to weigh on the post-pandemic rebound in consumer spending, putting card companies on the defensive as customers rethink their travel plans and big-ticket purchases.
"The cross-border tailwind has started to slow. Consumer demand for travel remains strong, which we expect to continue albeit at a slower pace," said Edward Jones analyst Logan Purk.
International transaction revenue at Visa climbed 14%, lower than expectations of an 18% growth.
"We continue to believe that the primary driver of the step-down in U.S. payments volume growth since March is moderating inflation," CFO Vasant Prabhu said.
A slowdown in inflation typically hurts credit card companies, which charge a percentage on the dollar value of transactions.
Last week, American Express (AXP.N) kept its full-year profit forecast unchanged despite reporting record spending in its quarterly report. Mastercard is scheduled to report quarterly earnings on Thursday.
"We will deliver low double-digit net revenue growth and mid-teens EPS growth in fiscal year '23 despite concerns about a slowdown and an exchange rate drag," Prabhu said.
Analysts are expecting an 11% revenue growth and a 14.6% jump in earnings per share, according to Refinitiv IBES data.
Excluding one-time costs, Visa posted a profit of $2.16 per share for the three months ended June 30, up 7% from a year ago and above expectations of $2.12.
However, the single-digit percentage growth was the smallest since the second quarter of fiscal 2021, when profit had contracted.
Shares of the San Francisco, California-based company were down nearly 1% in aftermarket trading.
