CBDCs And Fierce PayPal Competition Will Compress Margins

Key Takeaways

• Disintermediation by digital currencies, rising compliance demands, and increased competition threaten Adyen's transaction volumes, revenue stability, and margin sustainability.
  
• Heavy reliance on major clients and aggressive expansion spending risk further margin pressure and long-term earnings volatility.
  
• Expanding large-client base, regional growth, innovative product launches, and scalable tech investments drive margin expansion and strengthen long-term industry leadership in digital payments.

Catalysts

Operates a payments platform in Europe, the Middle East, Africa, North America, the Asia Pacific, and Latin America.

• Rapid emergence of Central Bank Digital Currencies and direct-to-consumer digital wallet solutions could increasingly bypass private payment processors like Adyen, threatening to disintermediate the company and compress both transaction volumes and long-term revenue growth as merchants and consumers switch to alternative rails.
  
• Proliferation of global data privacy regulations and tightening cross-border compliance requirements may force Adyen to allocate significantly higher resources to legal, IT, and operational compliance, which is likely to inflate operating costs and pressure net margins for years to come.
  
• Intensifying competition from larger, well-capitalized players such as Stripe, PayPal, and incumbent banks will likely accelerate, pushing Adyen into price wars or incentive-heavy client retention strategies, thereby eroding fee-based revenue and putting additional downward pressure on industry-wide margins.
  
• Overreliance on a small cohort of large enterprise clients-combined with increasing consolidation among merchants-raises the risk of major customers defecting or negotiating materially lower fees, introducing meaningful volatility and downside to Adyen's earnings and revenue stability.
  
• Aggressive ongoing investments in technology innovation, global expansion, and product development without proportional acceleration in top-line growth could lead to diminishing incremental returns, margin dilution, and increased inefficiency, jeopardizing long-term sustainable earnings growth and capital efficiency.

Adyen Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Adyen compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Adyen's revenue will grow by 23.0% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 45.9% today to 40.4% in 3 years time.
• The bearish analysts expect earnings to reach €1.5 billion (and earnings per share of €46.58) by about August 2028, up from €925.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 34.9x on those 2028 earnings, down from 47.6x today. This future PE is greater than the current PE for the NL Diversified Financial industry at 9.6x.
• Analysts expect the number of shares outstanding to grow by 1.38% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.62%, as per the Simply Wall St company report.

Adyen Future Earnings Per Share Growth

Risks

• The continued increase in wallet share among existing enterprise clients, combined with a record pace of adding new large customers in 2025, suggests resilient long-term net revenue growth may outpace expectations, contradicting a thesis of share price decline.
  
• Sustained double-digit expansion in underpenetrated regions-including accelerated traction in Latin America and APAC through local product investments and regulatory licenses-points to a robust long-term total addressable market, supporting elevated top-line growth prospects.
  
• The successful launch and monetization of modular solutions like Intelligent Payment Routing and Protect, alongside the build-out of value-added financial products and card issuing, indicates margin expansion and deeper monetization opportunities, likely to bolster long-term EBITDA margins.
  
• Continuous investment in proprietary, scalable technology and operating leverage is resulting in rising EBITDA margins, with management reiterating confidence in multi-year margin expansion even as hiring continues, which could drive stronger than expected earnings.
  
• Strong evidence of customer demand for unified, omnichannel platform flexibility-alongside Adyen's ability to quickly respond to emerging trends such as stablecoins and autonomous commerce-positions the company well for secular digital payment adoption, supporting long-term revenue growth and industry leadership.

Valuation

• The assumed bearish price target for Adyen is €1400.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Adyen's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €2450.0, and the most bearish reporting a price target of just €1400.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €3.7 billion, earnings will come to €1.5 billion, and it would be trading on a PE ratio of 34.9x, assuming you use a discount rate of 5.6%.
  
• Given the current share price of €1396.4, the bearish analyst price target of €1400.0 is 0.3% higher. The relatively low difference between the current share price and the analyst bearish price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.