Marqeta (MQ)

Leading edge card issuer Marqeta (NASDAQ: MQ) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 17.9% year on year to $139.1 million. On the other hand, next quarter’s revenue guidance of $140.3 million was less impressive, coming in 3.8% below analysts’ estimates. Its non-GAAP loss of $0.02 per share was $0.03 above analysts’ consensus estimates.

Company Overview

Founded by CEO Jason Gardner in 2009, Marqeta (NASDAQ:MQ) is an innovative card issuer that provides companies with the ability to issue and process virtual, physical, and tokenized credit and debit cards.

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.

A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Marqeta’s demand was weak over the last three years as its sales fell at a 2.8% annual rate. This was below our standards and is a tough starting point for our analysis.

This quarter, Marqeta reported year-on-year revenue growth of 17.9%, and its $139.1 million of revenue exceeded Wall Street’s estimates by 2.4%. Company management is currently guiding for a 12% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 16.8% over the next 12 months, an acceleration versus the last three years. This projection is commendable and indicates its newer products and services will catalyze 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 $84.47 billion in Q1, and over the last four quarters, its growth was fantastic as it averaged 29.5% 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 measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.

Marqeta is extremely efficient at acquiring new customers, and its CAC payback period checked in at 0.8 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 69.4% gross margin over the last year. Said differently, Marqeta had to pay a chunky $30.63 to its service providers for every $100 in revenue.

In Q1, Marqeta produced a 71% gross profit margin, in line with the same quarter last year. Zooming out, Marqeta’s full-year margin has been trending up over the past 12 months, increasing by 13.1 percentage points. If this move continues, it could suggest a less competitive environment where the company has better pricing power and leverage from its growing sales on the fixed portion of its cost of goods sold (such as servers).

Marqeta has done a decent job managing its cost base over the last year. The company has produced an average operating margin of 1.3%, higher than the broader software sector.

Looking at the trend in its profitability, Marqeta’s operating margin rose by 43.8 percentage points over the last year, showing its efficiency has meaningfully improved.

This quarter, Marqeta generated an operating profit margin of negative 13.3%, up 28.9 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Marqeta has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 11.4% over the last year, slightly better than the broader software sector.

Marqeta’s free cash flow clocked in at $2.66 million in Q1, equivalent to a 1.9% margin. This result was good as its margin was 1.6 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

Companies with more cash than debt have lower bankruptcy risk.

Marqeta is a profitable, well-capitalized company with $988.4 million of cash and $26,000 of debt on its balance sheet. This $988.4 million net cash position is 53.9% 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 were impressed by how significantly Marqeta blew past analysts’ EBITDA expectations this quarter. We were also happy its total payment volume narrowly outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter missed significantly. Overall, this print was still decent. The stock traded up 2.6% to $4.20 immediately following the results.

Updated: May 16, 2025 at 10:28 PM EDT

Before making an investment decision, investors should account for Marqeta’s business fundamentals and valuation in addition to what happened in the latest quarter.

Marqeta isn’t a terrible business, but it doesn’t pass our quality test. For starters, its revenue has declined over the last three years.

Marqeta’s price-to-sales ratio based on the next 12 months is 4.2x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $5.29 on the company (compared to the current share price of $4.92).

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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