Mastercard's services business outgrows its card network as customer incentives climb

Mastercard (NYSE: MA) said its value-added services and solutions revenue rose 19% in the third quarter, faster than the 11% growth of its payment network, while the rebates and incentives it gives customers rose 18%, according to its third-quarter earnings release issued on Thursday.

What happened

Net revenue was $9.8 billion, up 14% from the third quarter of 2025 on a reported and a currency-neutral basis. Net income was $4.6 billion and diluted earnings per share were $5.28, up 22% from $4.34 a year earlier, the company said.

The release splits revenue into two parts. Payment network net revenue, which depends on how much cardholders spend and how many transactions the network switches, rose 11%. Mastercard cited gross dollar volume growth of 7% on a local-currency basis to $3.0 trillion, cross-border volume growth of 11% and switched transactions growth of 9%.

Value-added services and solutions, the second part, rose 19%. The company said the growth was driven "primarily by our underlying key drivers, strong demand across several of our services, and pricing."

Payment network rebates and incentives, which the company gives to customers and which reduce the revenue it reports, rose 18%. Mastercard said the increase was "primarily due to an increase in our key drivers, as well as new and renewed deals."

Why earnings grew faster than revenue

Operating expenses rose 11% to $3.9 billion, slower than revenue, and the operating margin was 59.8%, up 0.9 percentage point from 58.8%. The effective income tax rate was 19.4%, down from 21.5%, which the company attributed to higher net discrete tax benefits and other tax impacts.

The share count also fell. Mastercard repurchased 5.3 million shares at a cost of $3.0 billion in the quarter and paid $763 million in dividends. Diluted weighted-average shares were 876 million, 3.2% fewer than the 905 million of a year earlier (computed), which is part of why diluted earnings per share rose 22% while net income rose 18%.

Interest expense was $250 million, 34.4% more than the $186 million of the third quarter of 2025 (computed). Mastercard said other income and expense was unfavorable by $59 million, primarily because of interest on debt outstanding and a net loss on its equity investments.

The nine-month picture

Over the first nine months of 2026, net revenue was $27.5 billion, up 15% (13% on a currency-neutral basis). Amortization of customer incentives in the cash flow statement was $2.03 billion, 33.0% more than the $1.53 billion of the same period of 2025 (computed).

Net cash provided by operating activities was $11.9 billion, 6.2% less than $12.6 billion a year earlier (computed). The cash flow statement shows prepaid expenses absorbing $4.7 billion, compared with $2.9 billion in 2025; the release does not itemize what the prepaid expenses contain.

Purchases of treasury stock were $11.9 billion in the nine months, 45.6% more than $8.2 billion in 2025 (computed). Long-term debt was $22.2 billion at September 30, compared with $18.3 billion at December 31, 2025, and cash paid for acquisitions of businesses, net of cash acquired, was $1.4 billion; there was none in the same period of 2025.

What the company says

Michael Miebach, Mastercard's chief executive, said in the release: "Another strong quarter for Mastercard, delivering net revenue growth of 14%." He pointed to "Agentic Commerce" and "our new Global Money Platform through BVNK" as areas the company is building.

Mastercard said its customers had issued 3.8 billion Mastercard and Maestro-branded cards as of September 30, 2026.

What to watch

The company said $4.9 billion remained under approved share repurchase programs after it bought back 1.1 million shares for $0.6 billion between the start of the fourth quarter and October 26. Whether incentives keep growing faster than the network's volume drivers is visible in the same release each quarter: in the third quarter, rebates and incentives rose 18% while gross dollar volume rose 7% and switched transactions 9%.