Adyen Shares Plunge as Earnings Miss Expectations and Inflation Hits Margins

Adyen Shares

Adyen, a Dutch fintech company that provides online payment services for many of the world’s largest internet platforms and retail stores, saw its shares drop by more than 20% on Thursday after reporting disappointing first-half earnings. The company missed analysts’ estimates and its own targets, citing slower growth in North America, increased competition, and higher operating costs due to hiring and inflation.

Adyen Shares

Adyen’s Revenue Growth Slows Down in North America

Adyen reported a 21% increase in revenue to 739 million euros ($848 million) for the first half of 2023, below its medium-term forecast of more than 25% growth. The company said that its net revenue growth in North America, which has been an important contributor in recent years, was lower than anticipated. Adyen attributed this to a slowdown in the recovery of travel and hospitality sectors, which were hit hard by the COVID-19 pandemic, as well as to increased competition from rivals such as Stripe, Fiserv, and PayPal.

Adyen’s processed volume, which measures the total value of transactions handled by its platform, grew by 67% to 216 billion euros ($248 billion) in the first half of 2023, compared to a 40% growth in the same period last year. However, this also fell short of analysts’ expectations of 224 billion euros ($257 billion), according to Refinitiv data.

Adyen’s Profit Margin Shrinks as Hiring and Inflation Weigh

Adyen’s earnings before interest, tax, depreciation and amortisation (EBITDA) were 320 million euros ($367 million), down 10% from a year earlier and below analyst forecasts of 386 million euros ($443 million), Refinitiv data shows. Adyen’s EBITDA margin, which measures its profitability as a percentage of revenue, fell to 43% from 59%, which the company said was mostly because of higher wage costs as it takes on more staff. Adyen said it hired 467 new employees in the first half of 2023, bringing its total headcount to 2,135.

The company also said that inflationary pressures had an impact on its margins, as it had to invest more in hardware terminals for point-of-sale payments and cloud infrastructure for online payments. Adyen said it expects these costs to normalize in the second half of the year.

Adyen Maintains Its Long-Term Growth Outlook

Despite the disappointing results, Adyen maintained its medium-term targets for revenue growth above 25% and an improving EBITDA margin that it expects to reach 65% in the long term. The company said it was confident in the long-term benefits of building its team at an accelerated pace and consciously embracing its short-term impact. Adyen also said it was optimistic about its growth prospects in new markets such as Latin America, Asia-Pacific, and Africa.

Adyen’s co-founder and CEO Pieter van der Does said in a letter to shareholders that the company was focused on delivering value to its customers and partners, rather than on short-term fluctuations in its share price. He said that Adyen was well-positioned to capitalize on the secular trends of digitalization, globalization, and sustainability that are driving the payments industry.

Adyen’s shares closed at 1,145 euros ($1,314) on Thursday, down 22% from the previous day. The stock is still up about 13% year-to-date, but has fallen by more than 40% from its all-time high of 1,878 euros ($2,156) reached in February.

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