Executive Summary / Key Takeaways

• The Migration Moat as Competitive Fortress: Marqeta has built an unassailable capability to migrate massive, complex card programs at scale—demonstrated by moving millions of cards for Klarna across Europe and launching Bitpanda simultaneously in 26 countries and 10 currencies. This capability, deepened by the TransactPay acquisition, unlocks the high-end enterprise market that was previously inaccessible and creates switching costs that competitors cannot replicate.

• Profitability Inflection Accelerating: After years of net losses, Marqeta is on track for GAAP breakeven in full-year 2026, driven by 28% revenue growth, 27% gross profit expansion, and disciplined 4% operating expense growth. Q3 2025's 19% adjusted EBITDA margin represents an all-time high, proving that platform maturation and value-added services are delivering operating leverage that fundamentally transforms the earnings power.

• Block Concentration Risk Mitigated by Diversification: While Block (SQ) remains the largest customer at 44% of net revenue, non-Block TPV is growing 2.5 times faster, and management expects only a 2-point drag from Block's diversification in 2026. The accelerating growth across neobanking, BNPL, and expense management use cases demonstrates that Marqeta's business is broadening beyond its largest customer.

• European Expansion as Growth Catalyst: European TPV continues to grow over 100% year-over-year, now representing a high-teens percentage of total volume. The TransactPay acquisition, completed in July 2025, provides EMI licenses and BIN sponsorship capabilities that enable Marqeta to serve as a single provider for processing, program management, and licensing—opening a market segment that was previously out of reach.

• Execution Risk Defines the Investment Case: The next 12-18 months are critical. Marqeta must successfully execute complex migrations, manage the Block transition, and scale value-added services while navigating macroeconomic headwinds and competitive pressure from Stripe and internalizing fintechs. The story is attractive but fragile—execution will determine whether the migration moat translates into durable profits.

Setting the Scene: What Marqeta Really Does

Marqeta, incorporated in Delaware in 2010, modernizes financial services by making payment experiences native and delightful through its open API card issuing platform. Unlike legacy processors that offer rigid, bundled solutions, Marqeta empowers innovation leaders to build customized payment card programs with just-in-time funding, real-time controls, and complete configurability. The company generates revenue primarily through platform services fees—interchange fees net of revenue share, card network costs, and processing fees—plus ancillary services like card fulfillment.

The modern card issuing market, valued at $1.8 billion in 2025 and growing at 20-25% annually, sits at the intersection of fintech innovation and embedded finance. Marqeta occupies a distinct niche: a pure-play, developer-centric platform that prioritizes speed, flexibility, and program management capabilities over the broad merchant acquiring focus of competitors like Adyen (ADYEY) or the legacy banking infrastructure of FIS (FIS) and Fiserv (FI). This positioning has allowed Marqeta to capture high-growth verticals including neobanking, earned wage access, buy-now-pay-later (BNPL), and expense management.

Marqeta's current positioning emerged from a deliberate strategic revitalization in late 2022 that re-energized its sales motion. The results are evident in the trajectory: the company processed its first $1 billion TPV day in Q1 2024, which expanded to 17 days in Q4 2024. This acceleration reflects a platform that has achieved critical scale while maintaining the agility to serve innovation-driven customers. The company's mission—to empower customers to create customized and innovative payment card programs—translates into a business model where success is measured by TPV growth, customer diversification, and platform margin expansion.

Technology, Products, and Strategic Differentiation: The Migration Moat

Marqeta's core technological advantage extends beyond its open API architecture to a capability that competitors cannot easily replicate: the ability to execute complex, large-scale card program migrations with minimal disruption. In October 2024, Marqeta successfully migrated millions of cards for Klarna across Europe. By Q1 2025, it had completed a migration for Bitpanda launching simultaneously in 26 countries and 10 currencies, and finished migrating its first consumer credit program with Perpay. These are not isolated wins—they demonstrate a systematic capability added in late 2024 that fundamentally expands the addressable market.

This capability matters because legacy processors and even modern competitors like Adyen struggle with migration complexity, which creates a barrier to winning enterprise customers who already have established card programs. Marqeta's migration expertise reduces switching costs for prospects and creates a "lock-in" effect once customers are on the platform. This capability, combined with the TransactPay acquisition's EMI licenses and BIN sponsorship, enables Marqeta to pursue enterprise customers seeking a single provider for processing, program management, and regulatory licensing—a segment of the market that was previously inaccessible. The pipeline reflects this: a top-5 expense management customer signed in Q3 2025 specifically to expand into Europe, with TransactPay as the catalyst.

The value-added services layer amplifies this moat. Real-time decisioning, used by over 40 customers representing nearly 20% of non-Block TPV, allows issuers to create custom fraud rules leveraging AI and machine learning. Revenue from this product more than doubled from 2023 to 2024 and carries significantly higher gross margins than core processing. Similarly, Marqeta was the first issuer processor in the U.S. certified for Visa (V) Flexible Credential (VFC) in July 2024, enabling the KlarnaOne Card launch in June 2025 and subsequent expansion into 15 new European markets. This innovation allows a single card to offer both "pay now" (debit) and "pay later" (BNPL or revolving credit) functionalities, creating differentiation beyond commodity processing.

The TransactPay acquisition, completed for $59.9 million in July 2025, is not merely a geographic expansion—it is a strategic deepening of the platform. By providing EMI licenses required for issuing electronic money in the UK and Europe, Marqeta can now deliver a comprehensive, single-provider solution that standardizes its offering across geographies to be comparable to North America. It eliminates a key objection from large enterprise prospects and increases the total addressable market for embedded finance customers who demand regulatory coverage alongside technical capability.

Financial Performance: Evidence of Platform Maturation

Marqeta's Q3 2025 results provide compelling evidence that the platform is reaching an inflection point where scale drives profitability. Total Processing Volume reached $98 billion, up 33% year-over-year and accelerating 3 points from Q2 2025—marking the highest TPV growth rate since Q1 2024 on a base that is almost 50% larger. Net revenue grew 28% to $163 million, while gross profit increased 27% to $115 million, largely in line with revenue growth but 10 points higher than the top of management's expected range shared in Q2 2025.

The composition of this growth reveals the strategic progress. Platform services revenue of $155.8 million grew 28%, driven by broad-based strength across use cases. Other services revenue of $7.5 million grew 22%, reflecting card fulfillment volume. More importantly, non-Block TPV is growing 2.5 times faster than Block TPV, and TPV from all customers excluding the top five grew 72%. This diversification reduces dependency on any single customer and demonstrates that Marqeta's value proposition resonates across the fintech ecosystem.

Adjusted EBITDA reached $30 million in Q3 2025, achieving a 19% margin that represents an all-time high for adjusted EBITDA dollars. This profitability inflection is driven by three factors: strong gross profit growth, efficiency increases from better organizational design and reduced reliance on external professional services, and scale benefits from optimized technology provider utilization. Operating expenses grew just 4% year-over-year—at the lower end of expectations due to a timing shift of marketing initiatives—while revenue grew 28%, creating 24 points of operating leverage.

The underlying business performance contributed approximately 6 points to gross profit outperformance, with two-thirds driven by lending (including BNPL) and on-demand delivery. Lending/BNPL TPV growth accelerated 10 points versus Q2 2025, reaching about double the rate of the overall company. This acceleration stems from increased adoption of "pay anywhere" card solutions, geographic expansion, and distribution through wallets—trends that favor Marqeta's flexible credential capabilities. On-demand delivery growth accelerated into double digits, about twice as fast as the prior quarter, fueled by merchant category and geographic expansion.

Unusual items contributed approximately 2.5 points to Q3 gross profit outperformance, including recovery of contractually obligated fees from smaller customers who previously terminated programs. While not recurring, these recoveries demonstrate Marqeta's ability to enforce contractual terms and capture value from its platform investments. An unanticipated network rebate contributed approximately 1 point and is expected to continue, while the TransactPay business contributed 1 point more than expected, indicating a better-than-anticipated trajectory.

Outlook and Guidance: Ambitious but Achievable

Management has raised expectations for Q4 2025 and full-year 2025, signaling confidence in the underlying business momentum. Q4 net revenue growth is expected between 22% and 24%, with gross profit growth between 17% and 19% and adjusted EBITDA margin between 15% and 16%. For the full year, management expects approximately 22% net revenue growth, 23% gross profit growth, and 17% adjusted EBITDA margin—equating to over $100 million in adjusted EBITDA, more than triple last year and nearly double what was anticipated at the start of 2025.

The guidance implies a slowdown in gross profit growth from Q3 to Q4 of approximately 9 points, primarily due to three factors: the absence of the 2.5-point Q3 benefit from unusual recoveries, an expected 5.5-point drag from the revised accounting policy for network incentives (4 points more than Q3), and a 2-point headwind from one customer renewal taking effect in Q4. This transparency shows management is not overpromising—guidance reflects known headwinds rather than speculative conservatism.

The most significant update is the acceleration of GAAP breakeven to full-year 2026, moved up from the prior target of exiting 2026. This reflects strong gross profit growth, efficiency increases, and scale benefits that are creating a sustainable path to profitability. Management expects adjusted operating expenses to grow in the mid-single digits in Q4, consistent with prior expectations despite marketing timing shifts, demonstrating disciplined cost control.

Key assumptions underpinning this outlook include stable macroeconomic conditions, successful execution of the migration pipeline, and continued diversification away from Block. Management explicitly expects Block's diversification to create a 2-point drag on growth in 2026 as Cash App issues some new cards with Bancorp (TBBK) and another processor. While this represents a headwind, the fact that it is quantified and manageable shows that Marqeta's growth engine is broadening sufficiently to absorb this impact.

The TransactPay integration is expected to drive significant customer interest and increased referrals, expanding the TAM to pursue enterprise customers seeking a single provider. While TransactPay contributed 2 points to Q3 net revenue growth and 2.5 points to gross profit growth, its full value will be seen in new sales and longer-term P&L contributions as integration progresses over the next year.

Risks and Asymmetries: What Could Break the Thesis

The investment case for Marqeta hinges on execution, and several material risks could derail the migration moat and profitability inflection. Customer concentration remains the most visible threat. Block accounted for 44% of net revenue in Q3 2025, and management expects diversification to create a 2-point drag on 2026 growth. While non-Block TPV is growing 2.5 times faster, the loss of Block's scale could impact Marqeta's negotiating leverage with card networks and banks, potentially compressing interchange economics.

Execution risk on migrations is equally critical. Management noted that three programs remain unlaunched because customers are still working through issues, despite Marqeta being ready. If migration timelines extend or complex programs encounter technical hurdles, the revenue acceleration from new customer wins could be delayed. The migration moat only creates value if Marqeta can execute flawlessly at scale—any failures would damage its reputation and give competitors time to catch up.

Competitive pressure is intensifying. Stripe is expanding its card programs, fintechs are internalizing processing, and banks remain slow to modernize. Goldman Sachs (GS) analyst Will Nance downgraded Marqeta to Sell, citing renewed concern over heavy reliance on Block and broader TAM pressures. If competitors replicate Marqeta's migration capabilities or if embedded finance customers prefer all-in-one providers like Stripe, Marqeta's growth could decelerate faster than expected.

Macroeconomic factors pose a systemic risk. Geopolitical conflicts, inflation, interest rates, and regulatory changes could impact processing volumes. A deterioration in consumer spending, particularly in discretionary categories, could reduce TPV growth and limit BNPL adoption. Additionally, increased regulatory scrutiny of BNPL products could slow the very use case that is driving Marqeta's fastest growth.

The revised accounting policy for network incentives creates a 5.5-point drag on Q4 gross profit growth, and while this is purely an accounting change that doesn't affect actual incentives earned, it creates volatility in reported metrics that could confuse investors. Similarly, the legal contingency expense of $4.3 million related to securities actions, while covered by insurance, represents a distraction and potential reputational risk.

Valuation Context: Pricing in Execution

At $4.66 per share, Marqeta trades at a market capitalization of $2.09 billion and an enterprise value of $1.27 billion, reflecting a net cash position of approximately $830.5 million. The stock trades at 3.55 times trailing twelve-month sales of $507 million and 2.15 times enterprise value to revenue—valuations that sit between legacy processors and high-growth fintechs.

The company's balance sheet provides strategic flexibility that competitors cannot match. With $830.5 million in cash and short-term investments, zero debt, and $87.6 million remaining under its share repurchase authorization, Marqeta can invest through cycles, fund migrations, and return capital to shareholders. Management's statement that "the current valuation does not fairly represent the company's value or the market opportunity ahead" suggests they view the stock as undervalued despite recent appreciation.

Profitability metrics are improving rapidly but remain negative on a GAAP basis, with a -6.74% profit margin and -2.95% operating margin. However, adjusted EBITDA margin guidance of 17% for 2025 and the path to GAAP breakeven in 2026 indicate this is a transitional phase rather than a structural deficiency. Free cash flow of $55.75 million on a trailing basis and $78.50 million quarterly demonstrates that the business is already generating cash to fund operations.

Peer comparisons highlight Marqeta's positioning. FIS trades at 3.33 times sales with 41.8% EBITDA margins but only 6% revenue growth, reflecting its mature, slow-growth profile. Global Payments trades at 2.15 times sales with 31.84% operating margins, while Fiserv trades at 1.62 times sales with 25.39% operating margins. Marqeta's premium valuation reflects its 28% revenue growth and 33% TPV growth—rates that far exceed these legacy competitors. However, it trades at a discount to Adyen, which commands higher multiples for its 20-23% growth and 50% EBITDA margins, suggesting the market is pricing in execution risk.

The key valuation driver is whether Marqeta can deliver on its 2026 GAAP breakeven target while maintaining 20%+ growth. If successful, the stock would likely re-rate toward fintech infrastructure multiples of 4-6 times sales. If execution falters—particularly on migrations or Block diversification—the multiple could compress toward legacy processors at 2-3 times sales. The current 3.55x P/S multiple appears to price in a moderate probability of success, leaving meaningful upside for investors if the migration moat and profitability inflection play out as management expects.

Conclusion: Execution Determines Whether Moat Translates to Value

Marqeta has built a durable competitive advantage around its migration capabilities and modern API platform, positioning it to capture a growing share of the $1.8 billion modern card issuing market. The company's ability to move millions of cards for enterprise customers like Klarna and Bitpanda while maintaining operational excellence creates switching costs and expands the addressable market in ways that legacy processors and even modern competitors cannot easily replicate. This migration moat, deepened by the TransactPay acquisition, is the central pillar of the investment thesis.

Simultaneously, Marqeta is approaching an inflection point in profitability that could transform its risk/reward profile. The combination of 28% revenue growth, 27% gross profit expansion, and disciplined 4% operating expense growth has driven adjusted EBITDA margins to 19% and accelerated the GAAP breakeven timeline to full-year 2026. This operating leverage demonstrates that the platform is maturing and that value-added services are creating higher-margin revenue streams.

However, the investment case remains fragile. Execution on complex migrations, management of Block diversification, and scaling of value-added services must proceed flawlessly to justify the current valuation and deliver on profitability targets. Competitive pressure from Stripe and internalizing fintechs, combined with macroeconomic uncertainty and regulatory scrutiny on BNPL, could slow growth or compress margins.

The next 12-18 months will determine whether Marqeta's migration moat translates into durable profits and a higher valuation multiple. Investors should monitor migration velocity, Block's impact on 2026 growth, and the scaling of European operations through TransactPay. If management executes, Marqeta will evolve from a growth fintech into a profitable, scalable infrastructure platform with pricing power and customer lock-in. If not, the stock risks compression toward legacy processor valuations. The story is compelling, but execution is everything.