Visa Inc - Class A

Visa, a major sponsor of the tournament, saw an acceleration of payment volumes. These were both cross-border payments into the US and growth in domestic transactions. Revenue, earnings and volumes all grew double digits. Visa had been seen as a potential ‘AI loser’ earlier in the year, and but there is little evidence of this so far. On the contrary, the company’s payment rails remain essential financial infrastructure. Visa has undergone a reorganisation where it is leveraging AI to help with faster product innovation whilst cutting 7% of the tech workforce.

Visa delivered an exceptional year as it continued transforming from a traditional consumer card network into a diversified financial technology company. A primary highlight of this transition is the company's recent quarterly performance, which generated its strongest net revenue growth since 2022 with a remarkable 17% increase year-over-year. This acceleration is being propelled by its higher growth segments, Commercial & Money Movement Solutions (CMS) and Value-Added Services (VAS), both of which are steadily scaling to represent an increasingly significant portion of the overall business. Looking ahead, Visa has a significant runway for growth beyond traditional credit and debit cards, positioning its network to handle the future of money movement, capturing new growth in areas like stablecoins and agentic commerce.

Visa is the world’s largest payment network, and as AI agents begin making purchases on behalf of consumers and businesses, Visa’s secure credentials, fraud controls, and trusted network rules will become increasingly important. More digital commerce typically leads to more transactions, benefiting Visa’s transaction-based fees. Additionally, agentic commerce may accelerate Visa’s market share gains against domestic card networks that are not widely accepted for online purchases. While there are concerns that AI agents may prefer lower-cost payment methods, we believe that agents will ultimately reflect human preferences for Visa’s wide acceptance and security.

Visa contributed to quarterly performance, reporting accelerating revenue growth of 17%, driven by 11% growth in payment volumes and 21% growth in cross-border volume. Value-added services also grew 25% and now represent almost one-third of the Company's total revenue. Agentic commerce remains nascent but could represent a new addressable market for Visa as the Company tracks and helps autonomous AI agents perform microtransactions. We think Visa's global scale, including acceptance at over 130 million merchants, and deep integration with almost 15,000 financial institutions make it a valuable partner for agentic commerce startups.

Visa has consistently outperformed growth expectations, compounding revenue at 12% annually over the past decade, surpassing our initial conservative growth forecast of 7%. This discrepancy highlights the potential undervaluation of Visa, as our models underestimated its growth trajectory. The analysis indicates that our best businesses, including Visa, have consistently exceeded our long-term growth assumptions, suggesting a strong competitive position and a robust business model. We believe that the margin of safety should be reflected in the price rather than in overly cautious growth forecasts.

Visa is the world’s largest payment network, earning 70% of its revenue from transaction fees. The rise of AI agents making purchases could enhance Visa's importance due to its secure credentials and fraud controls. Increased digital commerce is likely to boost Visa's transaction-based fees. Furthermore, Visa's ability to adapt to new payment technologies positions it well against domestic networks, potentially accelerating market share gains. The main risk is complacency, but Visa's historical response has been to partner with new technologies, ensuring it remains relevant.

We believe Visa can sustain low double-digit revenue growth in the medium term. At ~24x consensus earnings over the next 12 months, the shares trade at the low end of their long-term averages. We find the risk vs reward compelling for a business with stable growth and exceptional economics. Visa has launched its Intelligent Commerce Platform and Trusted Agent Protocol, enhancing its role in an evolving payment landscape. The global picture for cash displacement remains constructive, with significant growth opportunities in consumer-to-business payments.

Visa is mentioned in the context of the evolving payments landscape, highlighting its enduring appeal due to universality and consumer trust. The letter discusses the shift towards real-time payment networks and the impact of stablecoins, but does not provide a directional argument about Visa's future performance. It notes the challenges posed by merchants dictating payment methods and the potential consumer frustration that may arise from these changes.

Our financial services investments focus on non-bank leaders and innovation-led platforms that are integral to global payments systems. Key holdings include international payment leaders such as Mastercard, Stripe, and Visa, which continue to benefit from the secular shift towards digital payments and cashless transactions. This trend supports sustained growth in global financial activity, making Visa a compelling investment in our portfolio.

Visa has been pioneering and productizing AI since the 1990s when it was called 'machine learning'; just starting to monetize their tokenization technology that secures over 50% of ecommerce transactions and will prove crucial for AI-powered 'agentic' commerce in the future. We believe Visa's strong fundamentals and competitive advantages position it well for future growth as it embraces AI in ways that fortify its existing advantages.