Marqeta (MQ)

Payment technology company Marqeta (NASDAQ:MQ) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 27.6% year on year to $163.3 million. On top of that, next quarter’s revenue guidance ($167 million at the midpoint) was surprisingly good and 5.6% above what analysts were expecting. Its GAAP loss of $0.01 per share was in line with analysts’ consensus estimates.

Company Overview

Powering the cards behind innovative fintech services like Block's Cash App, Marqeta (NASDAQ:MQ) provides a cloud-based platform that allows businesses to create customized payment card programs and process card transactions.

Consumers want the ability to make payments whenever and wherever they prefer – and to do so without having to worry about fraud or other security threats. However, building payments infrastructure from scratch is extremely resource-intensive for engineering teams. That drives demand for payments platforms that are easy to integrate into consumer applications and websites.

Marqeta competes with traditional payment processors like Fiserv (NASDAQ:FISV) and Fidelity National Information Services (NYSE:FIS), as well as newer fintech platforms including Galileo (owned by SoFi, NASDAQ:SOFI), Stripe (private), and Adyen (OTC:ADYEY).

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Marqeta grew its sales at a decent 19.2% compounded annual growth rate. Its growth was slightly above the average software company and shows its offerings resonate with customers.

Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Marqeta’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 12.1% over the last two years.

This quarter, Marqeta reported robust year-on-year revenue growth of 27.6%, and its $163.3 million of revenue topped Wall Street estimates by 9.7%. Company management is currently guiding for a 23% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 16% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and implies its newer products and services will spur better top-line performance.

TPV, or total processing volume, is the aggregate dollar value of transactions flowing through Marqeta’s platform. This is the number from which the company will ultimately collect fees, and the higher it is, the more chances Marqeta has to upsell additional services (like banking).

Marqeta’s TPV punched in at $97.96 billion in Q3, and over the last four quarters, its growth was fantastic as it averaged 29.4% year-on-year increases. This alternate topline metric grew faster than total sales, which could mean that take rates have declined. However, we can’t automatically assume the company is reducing its fees because take rates can also vary depending on the type of products sold on its platform.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Marqeta is extremely efficient at acquiring new customers, and its CAC payback period checked in at 0.6 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give Marqeta more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.

For software companies like Marqeta, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Marqeta’s gross margin is slightly below the average software company, giving it less room than its competitors to invest in areas such as product and sales. As you can see below, it averaged a 70.6% gross margin over the last year. Said differently, Marqeta had to pay a chunky $29.40 to its service providers for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Marqeta has seen gross margins improve by 26.8 percentage points over the last 2 year, which is elite in the software space.

This quarter, Marqeta’s gross profit margin was 70.1%, in line with the same quarter last year. On a wider time horizon, Marqeta’s full-year margin has been trending up over the past 12 months, increasing by 1.8 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as servers).

Marqeta’s expensive cost structure has contributed to an average operating margin of negative 12.8% over the last year. Unprofitable, high-growth software companies require extra attention because they spend heaps of money to capture market share. As seen in its fast historical revenue growth, this strategy seems to have worked so far, but it’s unclear what would happen if Marqeta reeled back its investments. Wall Street seems to be optimistic about its growth, but we have some doubts.

Looking at the trend in its profitability, Marqeta’s operating margin decreased by 4 percentage points over the last two years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Marqeta’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

Marqeta’s operating margin was negative 6.4% this quarter.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Marqeta has shown impressive cash profitability, driven by its cost-effective customer acquisition strategy that gives it the option to invest in new products and services rather than sales and marketing. The company’s free cash flow margin averaged 21.4% over the last year, better than the broader software sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Marqeta’s free cash flow clocked in at $78.5 million in Q3, equivalent to a 48.1% margin. This result was good as its margin was 42.4 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends carry greater meaning.

Companies with more cash than debt have lower bankruptcy risk.

Marqeta is a well-capitalized company with $1.06 billion of cash and $4.84 million of debt on its balance sheet. This $1.06 billion net cash position is 53% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We liked that Marqeta's total payment volume outperformed Wall Street’s estimates by a wide margin. Looking ahead, revenue guidance came in ahead of expectations. Zooming out, we think this quarter featured some important positives. The stock traded up 9.1% to $4.90 immediately after reporting.

Updated: December 3, 2025 at 9:33 PM EST

Before deciding whether to buy Marqeta or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Marqeta isn’t a bad business, but we have other favorites. First off, its revenue growth was solid over the last five years, and analysts believe it can continue growing at these levels. And while Marqeta’s declining operating margin shows it’s becoming less efficient at building and selling its software, its efficient sales strategy allows it to target and onboard new users at scale.

Marqeta’s price-to-sales ratio based on the next 12 months is 3x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $6.18 on the company (compared to the current share price of $4.75).