FIS: Recurring Revenue And Earnings Momentum Will Drive Future Upside

Key Takeaways

• Growing demand for digital and AI-powered payment solutions, coupled with strategic partnerships, is driving higher recurring revenues and long-term margin improvement.
  
• Operational streamlining and international expansion are supporting lower costs, sustained revenue momentum, and an enhanced future earnings outlook.
  
• Rapidly evolving fintech competition, integration risks, and shifts toward decentralized finance threaten FIS's revenue stability, profitability, and ability to maintain industry leadership.

Catalysts

Fidelity National Information Services, Inc.

• Acceleration in digital payment solutions-highlighted by strong client wins in digital banking, embedded finance, and international payment processing (including new digital asset capabilities via partners like Circle)-is positioning FIS to capture a growing share of global transaction volumes and capitalize on the continuing move toward cashless societies. This is likely to drive higher recurring revenue growth.
  
• Increasing client demand for cloud-based and AI-powered fintech solutions, such as the launch of TreasuryGPT and Banker Assist, is allowing FIS to upsell higher-value, "stickier" products to financial institutions modernizing their operations, which should support long-term revenue expansion and improved net margins.
  
• Expansion of bank M&A and consolidation activity continues to play to FIS's strengths as a scaled, deeply-integrated technology partner, leading to new core banking platform wins and cross-selling opportunities with larger, combined clients-providing additional tailwinds to both revenue growth and client retention rates.
  
• Execution of operational simplification (e.g., Worldpay divestiture, focused acquisitions like Everlink and Global Payments Issuer), strong cost reduction programs, and improved working capital management are expected to lower operating expenses and drive EBITDA margin expansion, supporting higher future earnings.
  
• FIS's strategic international push, including newly acquired payment assets and consistent cross-border wins, is expanding its addressable market and positioning the company to benefit from secular growth in global e-commerce and digital finance, sustaining revenue momentum and bolstering the future earnings outlook.

Fidelity National Information Services Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Fidelity National Information Services's revenue will grow by 4.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.5% today to 20.2% in 3 years time.
• Analysts expect earnings to reach $2.4 billion (and earnings per share of $4.71) by about September 2028, up from $158.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.8 billion in earnings, and the most bearish expecting $2.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.9x on those 2028 earnings, down from 226.9x today. This future PE is greater than the current PE for the US Diversified Financial industry at 16.5x.
• Analysts expect the number of shares outstanding to decline by 2.97% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.21%, as per the Simply Wall St company report.

Fidelity National Information Services Future Earnings Per Share Growth

Risks

• The persistent rise of fintech disruptors and digital-native competitors could erode FIS's traditional payment, banking, and processing market share over time, putting sustained pressure on revenue growth and potentially compressing long-term net margins.
  
• Ongoing integration challenges and execution risk related to recent and legacy acquisitions-such as the Issuer acquisition and past Worldpay transaction-may contribute to operational complexity, margin dilution, and a risk of value destruction, negatively impacting return on invested capital and net earnings.
  
• FIS's heavy reliance on large, traditional financial institutions exposes it to risk from industry consolidation, client attrition, and changing buying patterns (e.g., migration to componentized or cloud-based solutions), possibly dampening long-term revenue stability and growth.
  
• Increasing adoption of decentralized finance (DeFi), stablecoins, and blockchain-based payment settlement platforms by the banking industry could disintermediate FIS's core transaction processing model, threatening future transaction-based revenues and requiring costly business model adaptations that weigh on net margins.
  
• Persistent price competition and commoditization in banking and payments services-exacerbated by rivals and evolving customer demands-may limit FIS's ability to defend pricing power, pressuring revenues and profitability as margins compress across the industry.

Valuation

• The analysts have a consensus price target of $85.611 for Fidelity National Information Services based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $100.0, and the most bearish reporting a price target of just $70.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $11.7 billion, earnings will come to $2.4 billion, and it would be trading on a PE ratio of 21.9x, assuming you use a discount rate of 8.2%.
• Given the current share price of $68.64, the analyst price target of $85.61 is 19.8% 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.