Digitization And Cloud Adoption Will Transform B2B Payments

Key Takeaways

• AI-enabled workflow advances and new platform features could radically boost subscription revenue and margin mix beyond current expectations.
  
• Viral network effects, embedded partnerships, and international expansion may swiftly accelerate growth and customer acquisition, outpacing analyst forecasts.
  
• Slowing core growth, tighter SMB spending, and increased reliance on AI features raise execution risks and margin pressures amid evolving competition and regulatory uncertainty.

Catalysts

Provides financial operations platform for small and midsize businesses worldwide.

• Analyst consensus expects AI-driven margin expansion and efficiency gains, but the true scale of BILL Holdings' Agentic AI platform-moving from automation of processes to full workflow elimination-could rapidly transform SMB financial operations, driving not just higher net margins, but also sparking a powerful mix shift toward high-margin subscription revenue that is not yet reflected in forecasts.
  
• While many expect product launches like Supplier Payments Plus and expanded ad valorem offerings to steadily grow monetization, these innovations could actually accelerate BILL's revenue trajectory by unlocking entirely new revenue streams from large suppliers, catalyzing a step-change in take rate and transaction revenues far beyond conservative analyst models.
  
• As businesses globally accelerate the switch from legacy, paper-heavy payment processes to digital platforms, BILL's unique scale and two-sided real-time network positions it to capture outsized share of a rapidly expanding addressable market-potentially powering sustained double-digit revenue growth as B2B digitization enters its next phase.
  
• The ongoing proliferation of embedded finance and integration partnerships-with recent deals bringing BILL's platform into the heart of enterprise and software ecosystems-could provide the company with viral network effects and exponential customer acquisition, materially compressing customer acquisition costs and amplifying both top-line and long-term earnings growth.
  
• With record adoption of the BILL Divvy card and rapid expansion into international markets, the company's deepening presence in spend management and global payments not only boosts total payment volume but also supports a shift toward higher-value, cross-border and card-based transactions, further accelerating revenue and ARPU expansion.

BILL Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on BILL Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming BILL Holdings's revenue will grow by 18.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 1.6% today to 8.6% in 3 years time.
• The bullish analysts expect earnings to reach $207.7 million (and earnings per share of $1.98) by about September 2028, up from $23.8 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 bullish analyst cohort, the company would need to trade at a PE ratio of 49.0x on those 2028 earnings, down from 217.4x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
• Analysts expect the number of shares outstanding to decline by 1.8% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.42%, as per the Simply Wall St company report.

BILL Holdings Future Earnings Per Share Growth

Risks

• SMBs, BILL's primary customer base, are showing tighter spending behavior due to macroeconomic pressures such as tariffs and cost inflation, which management cited as drivers of flat volume per customer and suppressed take rates; this may create headwinds for revenue growth and transactional monetization over the long term.
  
• The company's core revenue growth is decelerating, with guidance indicating only a 9% to 11% increase for fiscal 2026 compared to 16% in the prior year; this slowing organic growth poses a risk to future revenue expansion and may pressure earnings and market expectations.
  
• Increased reliance on launching and scaling new AI-driven features and embedded finance partnerships may expose BILL to heightened technological execution risk and competitive pressures, especially as larger incumbents and startups intensify automation and AI adoption in the B2B payments space, potentially compressing both revenue per customer and long-term net margins.
  
• The company's penetration into the SMB segment appears to be maturing, with signs that further acquisition of new customers could increasingly depend on expanding into more complex mid-market clients and embedding partnerships, which might lead to higher customer acquisition costs and put downward pressure on net margins over time.
  
• Pricing pressure and cost sensitivity from both SMBs and suppliers, in combination with macroeconomic uncertainty and ongoing regulatory developments, could limit the company's ability to expand take rates and may increase compliance and operational costs, ultimately impacting gross margins and long-term profitability.

Valuation

• The assumed bullish price target for BILL Holdings is $80.88, which represents two standard deviations above the consensus price target of $57.81. This valuation is based on what can be assumed as the expectations of BILL Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $89.0, and the most bearish reporting a price target of just $42.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $2.4 billion, earnings will come to $207.7 million, and it would be trading on a PE ratio of 49.0x, assuming you use a discount rate of 9.4%.
• Given the current share price of $50.92, the bullish analyst price target of $80.88 is 37.0% higher.
• 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.