Executive Summary / Key Takeaways

• Marqeta is a leading modern card issuing and payment processing platform driving the secular shift towards embedded finance and digital-first payment experiences, positioning itself to capture market share from legacy systems despite its current small footprint.
• The company's differentiated, real-time API-based technology and strategic investments in areas like portfolio migration, flexible credentials, and program management provide a competitive edge, enabling faster innovation and broader use cases across consumer and commercial segments globally.
• Recent financial results demonstrate improving momentum, with robust TPV growth (27% in Q1 2025) translating into solid gross profit expansion (17% in Q1 2025) and significant Adjusted EBITDA margin improvement (14% in Q1 2025), signaling a clear path towards sustainable profitability.
• While facing near-term headwinds from a heightened regulatory environment impacting program launch timelines and instances of sophisticated customers insourcing services, management views these as temporary timing issues, actively implementing solutions like adding bank partners and optimizing processes.
• Outlook for 2025 anticipates continued gross profit growth (14-16%) and further Adjusted EBITDA margin expansion (10-11%), supported by new program contributions, European growth (bolstered by the planned TransactPay acquisition), and ongoing expense discipline, reinforcing confidence in achieving quarterly GAAP profitability by exiting 2026.

The Architecture of Modern Payments: Marqeta's Foundation

Marqeta, Inc. (NASDAQ: MQ), founded in 2010, set out with a mission to modernize financial services, envisioning a world where payment experiences are seamlessly embedded and delightful. At its core, Marqeta operates a cloud-based, open API platform for modern card issuing and transaction processing. This foundational technology empowers businesses, from disruptive fintechs to established enterprises, to create highly customized and innovative payment card programs. Unlike traditional, often rigid, legacy systems, Marqeta's platform offers unparalleled configurability and flexibility, allowing customers to embed payments directly into their applications and services.

The company serves a dual role for its customers: providing essential issuer processor services and, for the majority, acting as a comprehensive card program manager. This positions Marqeta as a critical infrastructure layer in the evolving payments landscape, enabling a wide array of use cases across consumer and commercial domains, including neobanking, accelerated wage access, Buy Now, Pay Later (BNPL), SMB lending, expense management, and on-demand delivery.

Despite its pioneering role and significant growth, Marqeta currently accounts for only a small fraction, estimated around 2%, of the issuer processing volume in its operational markets. This indicates that the broader transformation from legacy systems to modern platforms is still in its nascent stages, presenting a substantial long-term market opportunity for companies like Marqeta that are equipped to handle the complexities and scale required by today's digital innovators. The competitive landscape is dynamic, featuring larger, more established players like Fiserv (FISV) and Global Payments (GPN) with deep ties to traditional financial institutions, as well as agile fintech competitors such as Adyen (ADYEN) and Block (SQ), each with distinct market focuses and technological approaches. Marqeta's strategy is centered on leveraging its technological differentiation, expanding its solution set, and demonstrating operational excellence to capture an increasing share of this vast market.

Technological Edge: The Engine of Innovation

Marqeta's competitive position is fundamentally underpinned by its differentiated technology. The core of its platform is a cloud-native, open API architecture designed for speed, flexibility, and scale. A key technological differentiator is its patented Just-in-Time Funding (JIT Funding) capability. This allows customers to authorize transactions based on real-time data and logic, enabling dynamic decisions at the point of sale.

The tangible benefits of this technology are significant. The API-first approach facilitates faster integration for developers, potentially reducing time-to-market for new card programs. While specific, directly comparable speed metrics across all competitors are not publicly detailed, Marqeta's architecture is designed for high transaction throughput and real-time control, crucial for innovative use cases like instant issuance, dynamic rewards, and complex authorization flows. The cloud-based infrastructure supports high scalability, demonstrated by the platform processing over $1 billion in TPV on 17 separate days in Q4 2024, a notable increase from just one such day in Q1 2024.

Marqeta continues to invest heavily in R&D to extend its technological lead. Recent initiatives include:

• Portfolio Migration Product: Developed in 2024, this tool aims to simplify and de-risk the process of migrating existing card programs from competitor platforms onto Marqeta's, reducing complexity and minimizing disruption. This capability is critical for attracting established brands with existing card portfolios.
• UX Toolkit and White-Label App: The UX Toolkit provides pre-built UI components to accelerate front-end development for customers. Expected later in 2025, a standalone white-label app will offer a fully branded, out-of-the-box solution for rapid program launches, providing a "Duel Path" for customers to quickly establish a market presence and later transition to a fully embedded experience using the same underlying SDKs.
• Flexible Credentials: Marqeta was the first U.S. issuer processor certified by Visa (V) to support its Flexible Credential, allowing a single card to access multiple funding sources (debit, credit, BNPL, rewards) per transaction. Progress is also being made with Mastercard (MA) One and Marqeta Flex, a solution slated for mid-2025 rollout to embed BNPL options directly within payment apps and wallets, expanding distribution for BNPL providers like Affirm (AFRM), Klarna, and Branch.
• Enhanced Risk and Compliance Tools: Building on the success of its real-time decisioning risk product, which saw revenue more than double from 2023 to 2024 with significantly higher gross margins, Marqeta plans to offer additional services in 2025 for business insights and compliance visibility.

For investors, these technological advancements are central to Marqeta's competitive moat. They enable the company to serve a broader range of innovative use cases, attract customers seeking advanced capabilities not readily available on legacy platforms, and potentially command better pricing for value-added services with higher gross margins. While competitors like Adyen offer integrated platforms and Block boasts a powerful ecosystem, Marqeta's focus on the core issuing infrastructure and its developer-friendly, real-time capabilities provide a distinct advantage in enabling the next wave of embedded finance innovation.

Competitive Dynamics and Strategic Execution

Marqeta operates in a fiercely competitive environment, vying for market share against a diverse set of players. Larger processors like Fiserv and Global Payments have deep-rooted relationships with traditional financial institutions and vast scale, offering reliability and comprehensive service suites. However, their legacy technology can be less agile compared to Marqeta's modern platform. Fintech rivals like Adyen and Block offer integrated solutions and strong brand recognition in specific niches. Adyen's unified commerce platform and global reach are formidable, while Block's Square ecosystem and Cash App provide strong customer loyalty, particularly in the SMB and consumer segments.

Marqeta differentiates itself through its API-first approach, emphasizing developer control, speed to market, and flexibility. This resonates strongly with digital-first companies and those building embedded finance solutions. While competitors may offer lower upfront costs or broader integrated toolsets, Marqeta's ability to enable highly customized, real-time payment experiences is a key selling point. The company's strategic response to this competitive landscape involves several key initiatives:

• Expanding Platform Breadth: Adding the American Express (AXP) network later in 2025 will provide customers with access to all major card networks, enhancing choice and differentiation. Expanding credit card issuing capabilities, demonstrated by the Perpay migration and other signed programs, opens up a significant new market segment where unit economics are typically more favorable than debit.
• Deepening Program Management: Recognizing that many customers, especially larger brands entering embedded finance, prefer to focus on their core business rather than the complexities of payment operations, Marqeta is enhancing its program management services. The planned acquisition of TransactPay in Europe is a critical step, providing BIN sponsorship and EMI licensing to offer a more holistic, single-provider solution comparable to its U.S. offering, addressing a key customer pain point and facilitating seamless geographic expansion.
• Targeting Embedded Finance: Marqeta's pipeline increasingly consists of embedded finance opportunities, representing roughly two-thirds of its current pipeline. These are often larger, established brands looking to integrate financial services, including card issuing, into their existing platforms to drive engagement and monetization. Marqeta's comprehensive solution set across debit, credit, and BNPL, coupled with its global capabilities, positions it well for these complex deals, reducing the competitive set.
• Addressing Regulatory Headwinds: A heightened regulatory environment has impacted smaller banks that partner with fintechs, leading to increased scrutiny and delays in program launches. Marqeta is actively addressing this by optimizing processes with existing bank partners, planning to add at least two new bank partners by the end of 2025 to increase capacity, and standardizing procedures. While this has created a backlog and impacted near-term growth timing, management views it as a temporary challenge, not a structural impediment to long-term growth.
• Managing Customer Concentration: Marqeta has significant concentration risks, with Block accounting for 45% of net revenue in Q1 2025 and Sutton Bank settling 67% of TPV. While Block concentration is decreasing over time (down from 49% in Q1 2024), diversification remains a strategic imperative. The growth of non-Block TPV (more than 2x Block TPV growth in Q1 2025) and the increasing contribution from a broader base of customers (TPV from non-top 5 customers grew 64% in Q1 2025) demonstrate progress on this front.

While a few sophisticated customers have recently insourced certain services or reduced reliance on card usage, impacting volume and take rates in specific instances, management believes this is not a broad trend and that most companies lack the scale and desire to take on such complex tasks. Marqeta's investment in compliance and program management is seen as a strategic response to the evolving regulatory landscape and customer needs, strengthening its moat against competitors.

Financial Performance and Path to Profitability

Marqeta's financial performance in recent quarters reflects a business gaining momentum and demonstrating increasing operating leverage, particularly after lapping the significant impact of the Cash App contract renewal on year-over-year comparisons in Q3 2024.

In the first quarter of 2025, Total Processing Volume (TPV) grew a robust 27% year-over-year to $84 billion. This strong volume growth translated into Net Revenue of $139 million, an 18% increase year-over-year. While Net Revenue growth lagged TPV growth due to factors like a mix shift towards lower take-rate PxM customers and the accounting impact of a renegotiated platform partner agreement (which reduces revenue but not gross profit), Gross Profit grew a solid 17% year-over-year to $99 million, maintaining a healthy Gross Margin of 71%. The Q1 2025 Gross Profit growth outperformed management's expectations, driven by favorable business mix and the early termination of a planned migration.

Operating expenses are showing increasing discipline and scale benefits. Adjusted Operating Expenses grew only 5% year-over-year in Q1 2025 to $79 million, significantly slower than Gross Profit growth. This operational efficiency is driving a rapid improvement in profitability. Adjusted EBITDA reached $20 million in Q1 2025, translating to a 14% margin on revenue and a 20% margin on gross profit – new all-time highs for the company. This follows achieving positive Adjusted EBITDA for the full year 2024 ($29 million, 6% margin), marking a significant milestone on the path to profitability.

Liquidity remains strong, with $988.4 million in cash, cash equivalents, and short-term investments as of March 31, 2025. The company believes this is sufficient to fund operations for at least the next 12 months, even as it continues to invest in growth initiatives and platform development. Cash flow from operations turned positive in Q1 2025 ($10.0 million provided), a notable improvement from the prior year. Marqeta is also actively returning capital to shareholders, having repurchased $110.8 million in shares in Q1 2025 under its authorized programs, with $269.7 million remaining under the 2025 Share Repurchase Program as of quarter-end.

Marqeta's outlook for 2025 signals continued progress towards sustainable, profitable growth, albeit with some near-term timing impacts. For the second quarter of 2025, management guided for Net Revenue growth between 11% and 13%, Gross Profit growth between 23% and 25% (reported, including an 8-point lift from an incentive accounting change), Adjusted Operating Expense growth in the low to mid-single digits, and an Adjusted EBITDA margin between 10% and 11%.

For the full year 2025, Marqeta expects Net Revenue growth of 13% to 15% (reduced by 3 points due to the revenue presentation impact of the renegotiated partner agreement), Gross Profit growth of 14% to 16% (expecting to be at the higher end of the range based on Q1 outperformance), and an Adjusted EBITDA margin of 10% to 11% (raised by 1 point due to lower expenses and the revenue denominator impact). Management assumes consistent macroeconomic conditions for the remainder of the year, acknowledging this as a potential risk factor.

Key factors influencing the 2025 trajectory include the contribution from new programs launched since 2024 (expected to add over $40 million in revenue, contributing ~5% to growth, though behind prior targets), the impact of expected contract renewals with two top 10 customers (estimated 2 percentage points headwind to full-year gross profit growth, concentrated in the second half), and the inclusion of the TransactPay acquisition from Q3 2025 (expected to add ~1 point to revenue/gross profit growth, neutral to EBITDA in 2025).

The primary challenge impacting the timing of growth is the backlog of programs awaiting launch due to the heightened regulatory environment affecting bank partners. While this pushes the ramp-up curve for new programs later into 2025, management views this as a temporary issue, not fundamentally altering the long-term growth trajectory beyond 2025. They remain confident in their ability to deliver approximately $50 million in Adjusted EBITDA in 2025, consistent with prior targets, and are on track to achieve GAAP profitability on a quarterly basis by exiting 2026, driven by Gross Profit growth continuing to outpace operating expense growth.

Investment in Marqeta hinges on its ability to execute against its strategic pillars: leveraging its technological edge to capture the embedded finance opportunity, successfully integrating acquisitions like TransactPay to expand its global offering, navigating the temporary headwinds from regulatory impacts and customer insourcing, and continuing to demonstrate operating leverage to drive profitability. The strong Q1 2025 results and upward revision to the 2025 Adjusted EBITDA margin outlook provide tangible evidence of progress on the profitability front, reinforcing the investment narrative centered on a market leader poised for sustainable, profitable growth in the modern payments ecosystem.

Conclusion

Marqeta stands at the forefront of the secular shift towards modern card issuing and embedded finance. Its differentiated API-first technology provides a foundational advantage, enabling rapid innovation and supporting a diverse range of high-growth use cases. While the company has navigated challenges related to large customer contract renewals and recent regulatory-driven launch delays, its strategic focus on expanding platform capabilities, enhancing program management globally, and targeting the burgeoning embedded finance market positions it well for long-term growth. The improving financial profile, marked by accelerating Gross Profit growth and significant Adjusted EBITDA margin expansion, underscores the increasing operating leverage inherent in its scalable platform. As Marqeta continues to execute on its strategic initiatives, including integrating TransactPay and working through the program launch backlog, its trajectory towards sustainable profitability and capturing a larger share of the modern payments market appears increasingly clear, making it a compelling consideration for investors focused on the future of financial services.