Is Adyen a great investment?
Adyen. Equity Research! Part 3/3
Welcome to Part 3 of Adyen Deep Dive.
In Part 1, we explored Adyen’s business model and competitive advantages.
In Part 2, we looked at Adyen’s competitors such as Stripe, Block, PayPal, and Dlocal.
We are concluding this Deep Dive by analysing their opportunities for growth, financial health, and valuation.
Let’s jump in.
1. Opportunities
2. Financial Analysis
3. Valuation
4. Conclusion
1. Opportunities
Continuous Growth in Developed Economies
While it might seem that in Europe and the US, everyone uses cards, and there is no growth left for digital payment companies, that simply isn’t the case.
According to the Federal Reserve Bank of St. Louis, as of Q1 2025, only 16.2% of all US retail sales are done online!
Depending on the estimates, this is approximately half of China, leaving a lot of room for improvement. As the share of people who shop online increases, trillions of dollars of payment volumes will move from the legacy on-premises payment processors to the digitally native ones, such as Adyen.
Furthermore, a lot of the volume moving online will probably displace cash, further increasing digitally processed payment volumes.
Analysts at Market Research Future estimate that revenues of the US digital payment market will grow with a 16.84% CAGR till 2035, reaching $92.86B!
With their suite of products, Adyen is well-positioned to be a market share taker well into the next decade!
In Adyen’s home region of Europe, the situation is similar.
According to eMarketer, as of 2024, only 12.7% of all Western European retail sales are done online!
This is below the US and well below China. Also, the share is even lower in Eastern and Southern Europe.
This gives Adyen ample room to increase payment volumes as e-commerce penetration grows, as Adyen is especially strong in the e-commerce vertical.
Analysts at Market Research Future estimate that revenue of the European digital payment market will grow with a 15.01% CAGR till 2035 to reach $131B!
Adyen’s focus on serving the fastest-growing areas of this market positions them well to continue gaining market share.
Geographic Expansion
As I mentioned before, Adyen has a strong market position in Europe and North America, but these markets are maturing, while growth is still strong, it is slowing, and the competitive environment is intensifying.
This means that in the next few years, Adyen will look towards other regions for growth, particularly Asia and Latin America!
We can see this new strategy in action by looking at their employee hiring trends. In 2019, they had 60 employees in Latin America and 115 in Asia Pacific.
Today, the company employs 260 people in Latin America and 354 in Asia Pacific, more than tripling its workforce.
Using their new acquiring bank licenses in Mexico, Brazil, and India, Adyen hopes to expand in these fast-growing emerging markets.
In its 2023 Investor Presentation, Dlocal said that based on a report commissioned by them,
researchers at Americas Market Intelligence forecasted digital payment volumes in emerging markets to grow with a 16-20% CAGR, reaching $3.7T by 2028!
Most of this growth will come from a small number of countries, Brazil, India, Mexico, Argentina, China, and Indonesia. Adyen has positioned itself well to grow in these markets.
While the regulatory environment there is more complex, higher take rates and faster growth make these hurdles worthy of tackling.
Platforms
Though their Platforms offering Adyen can expand to new verticals easily, and without needing a huge sales force or large infrastructure investments. Adyen simply partners with platforms that integrate Adyen’s services into their offering.
Earlier, we discussed how, through Spendesk, Bill.com, and Lightspeed, Adyen serves small and medium-sized businesses.
Now, let’s look at another avenue to grow the Platforms offering, B2B digital payments.
Analysts at S&S Insider forecast the global B2B digital payment volumes to grow with a 16.79% CAGR to reach $27.8T by 2032!
This is a truly massive and highly promising segment in which even capturing just a 1% market share could generate close to $300B in payment volumes for Adyen.
The growth in B2B payments will be driven by a strong demand for real-time transactions and cross-border flows in sectors such as cloud, SaaS, telecom, logistics, retail, and healthcare.
In the SaaS vertical, Adyen has partnered with Salesforce, enabling its B2B clients to easily integrate Adyen to accept payments.
Meanwhile, through Adyen’s partnership with Billie, the company enables their B2B clients across various other verticals to use BNPL products!
Adyen B2B merchants can offer their clients a BNPL option to delay invoice payment by 30 days for a fee. The merchant receives the payment instantly, but the purchaser pays after 30 days. Adyen handles payment processing, whilst Billie handles credit assessment, underwriting, and default risk.
The merchant benefits as BNPL drives more sales, the purchaser benefits from having more flexibility in the payment process, Billie earns interest income, whilst Adyen collects payment processing fees.
Through partnerships with companies such as Salesforce, Billie, and others, Adyen is likely to be a market share gainer in the global B2B payments market.
Their Platforms offering will be a huge growth driver in the next decade as Adyen is embedding itself in some of the fastest-growing and digitizing parts of our global economy!
Lending
As Adyen processes transactions, it has access to an essentially live camera feed of a merchant’s entire business.
This positions Adyen well to quickly and accurately assess a merchant’s creditworthiness!
They see the money coming in, so the company can use historical data, advanced algorithms, and third-party data to create a somewhat accurate picture of a merchant’s business.
Furthermore, these loans are guaranteed to have lower default rates than bank loans. This is because the merchant doesn’t have a choice whether to repay it or not.
Adyen will just withhold a certain share of new incoming payments till the loan is repaid. In other cases, businesses might delay loan repayments to preserve cash when a financial situation deteriorates.
Moreover, Adyen could originate loans relatively cheaply compared to other lenders!
Banks, fintechs, and alternative lending platforms spend 10,20, and sometimes even 30% of their revenues on marketing to acquire customers and originate loans.
With a simple email or a notification, Adyen can offer a merchant a €20,000 loan that can be easily repaid using new incoming payments. Furthermore, through Adyen’s Platforms offering, their partners will originate loans on behalf of Adyen. So Adyen doesn’t need to do anything.
There is huge potential for Adyen to generate significant net interest income in the years to come!
2. Financial Analysis
In 2024, Adyen had revenues of €2B, an increase of 24% Y/Y, while operating income grew 32% to €900M, and net income grew 32.5% to €925M.
The traditional FCF of operating cash flow minus capex is not a valid metric to assess Adyen’s operating performance, because, as a payment processor, it holds on to cash for a bit before it is deposited in the merchant account. This dynamic creates distortions and large cash swings depending on the timing of cash flows. For instance, in 2021, their FCF margin was 177% and obviously, they didn’t generate more cash than their revenues.
However, Adyen adjusts for these dynamics and defines its FCF as EBITDA minus capex and leases, which was €860M in 2024, an increase of 34% Y/Y.
Revenue
Adyen’s revenue growth has been quite impressive.
As we can see in the graph above, Adyen has grown its revenues from €100M to €2B.
That is an increase of 20X in 9 years, or a CAGR of 39.6%!
As we explored in the business model section, the main drivers of this growth were strong processed payment volume growth in all segments.
Since 2019, when Adyen started reporting the segments separately, they achieved a 30% CAGR in the Digital segment, 49% in Unified Commerce, and 116% in Platforms.
Overall, since 2015, payment volumes have grown with a CAGR of 49%, significantly above the revenue CAGR of 39.6%. This discrepancy is the result of falling take-rate, as discussed in the take-rate compression risk section.
As of 2024, 56.9% of Adyen’s revenues come from EMEA, 26.6% from North America, 10.3% from Asia Pacific, and 5.3% from Latin America.
The regional split has changed quite a lot in the last 7 years.
In 2017, 70.4% of Adyen’s revenues came from EMEA, 10.7% from North America, 6.9% from Asia Pacific, and 11.4% from Latin America.
Since then:
EMEA has grown with a 33.3% CAGR to reach €1.15B.
North America with a 56.5% CAGR to €536M.
APAC with a 45.4% CAGR to €207M.
Latin America with a 23.1% CAGR to €106M.
These results show us how Adyen’s revenues in EMEA and North America have exploded, but Latin America has underperformed!
As I mentioned earlier, Adyen recently got acquiring bank licenses in Mexico and Brazil. These are the biggest digital payments markets in the region, and Adyen hopes to accelerate growth there. In the next few years, we will see if these efforts are bearing fruit.
Regarding segment revenues, Adyen only recently started disclosing them, but they are somewhat in line with segment processed payment volumes.
Digital is the largest segment, generating €1.3B or 63% of total revenues, a take-rate of 0.17%.
Unified commerce is the next largest, generating €590.5M, 29% of total revenues, with a take-rate of 0.16%.
Platforms have the smallest take-rate, around 0.10%, generating €176M, or 8% of total revenues.
Margins
Thanks to the incredible scalability of the payment business, their technological prowess, and low-cost structure, Adyen runs a very high-margin business.
Gross Margin of 65.6%
EBITDA of 47.4%
Operating Margin of 44.7%
Net Income Margin of 45.9%
Gross margins have declined from 77% in 2019, largely as a result of a lower take rate. However, the trend reversed in 2024, with the gross margin improving again from 62% to 65.6%. I think we have seen the bottom in gross margins, however, it is unlikely they could return to the 2019 peak of 76%.
But what Adyen loses in gross margin, the company can get back in operating margin through better scale efficiencies!
Adyen runs a tight and lean ship, enabling it to turn a higher share of gross earnings into operating and net earnings compared to competitors. Stripe is barely profitable, while other payment processors have much smaller margins.
Net margin is actually higher than 43.9% in 2019, increasing to 45.9%!
Despite keeping a smaller share of the processed volumes, Adyen can achieve higher profitability thanks to scale.
Despite take-rates falling, Adyen’s scale will continue to increase, and Adyen will be able to earn higher profits with a similar expense base.
Profitability
In 2024, Adyen earned €900M in operating income, an increase of 31.9% Y/Y.
Since 2016, the company has grown its operating income with a 36.4% CAGR!
In the graph above, we see that while the Y/Y growth has fluctuated a lot over the years, the growth has consistently been quite strong.
The cost of sales is the largest expense category for the company, responsible for €694M and 34.4% of revenues.
Interestingly, last year Adyen spent €58M on sales and marketing expenses, only 2.8% of revenues. That is quite low considering their size, global presence, and high payment volumes.
Looking at net income, we see that Adyen is one of those rare and lucky companies to have a higher net income than operating income.
This is because, as the company processes payments for its clients, it holds on to the cash before it is deposited into a client’s bank account. This is for a short amount of time, but as they process over a trillion EUR, there is a tiny percentage that is always sitting, waiting to be moved, amounting to billions of EUR.
In 2024, Adyen had €9.97B on its balance sheet as cash. Of that €6.7B was sitting as a liability of payables to merchants. Adyen invests these funds in short-term investments, generating €323M in net interest income, a yield of 3.55%.
This supported the net income growing by 32.5% to €925M!
Since 2016, net income has grown with a CAGR of 32.5%!
As margins are already at 45.9%, there isn’t much room for them to grow, so earnings are more likely to grow in line with top-line growth.
3. Valuation
As of August 9, 2025, Adyen trades for €1,495 a share, resulting in a market cap of €47B.
As we just discussed, Adyen earned just shy of €1B in 2024, meaning it trades for a premium multiple of 51!
While Adyen is certainly a high-quality company with a great product offering and incredible margins, the multiple it currently trades at demands serious growth. And according to Wall Street analysts, Adyen is on track to deliver said growth.
Adyen is expected to grow revenues by 20.8% in 2025 and 84.8% over the next 3 years. Moreover, analysts expect the company to improve operating margins, as EBIT is set to grow by 27.6% in 2025 and 119.1% by 2027.
However, not all of those operating gains will transfer into EPS, as analysts forecast 2025 EPS to grow by 18%, and 2027 EPS by 85.5% compared to 2024.
This is likely due to analysts expecting the interest income to come down as central banks in the EU and the US lower interest rates.
Taking analyst estimates into account, Adyen trades for a 2027 P/E of 27.
To see what kind of returns investors could expect by 2030, I built a simple valuation model.
Valuation Model
I model Digital and Unified Commerce payment volumes to grow with a 16% CAGR.
Platforms with a 40% CAGR.
This would result in total payment volumes to grow with a 21% CAGR, reaching around €4T by 2030!
Next, I model the overall take rate to decrease from 0.16% to 0.13%.
In such a scenario, 2030 revenues would reach €5.18B, an increase of 157% from 2024 levels.
In terms of profitability, I model the operating margin to stabilize at 50%, and the net income margin at 49%. With lower interest rates, I don’t expect interest income to be high enough to fully cover taxes anymore.
The result is a net income of €2.54B, an increase of 174% from 2024 levels, achieving a CAGR of 18%!
Furthermore, as Adyen is not a highly dilutive company, I model a modest 1% yearly increase in shares outstanding, slightly above the 0.78% average yearly increase rate of the past decade.
Using a multiple of 40, we get to a market cap of €101.6B, or €3,038 per share.
That would be an upside of 103.2% or a CAGR of 12.5%!
However, if Adyen manages to sustain the P/E of 50 it currently trades at today, then the upside could increase to 154.1% or a CAGR of 16.8%.
A caveat, though. This valuation model could be wrong if, due to increased competition or other reasons, the take rate is much lower. If I lower the take rate from 0.13% to 0.10%, the upside at a 40x multiple falls to 56%.
So, I would be paying very close attention to the take rate if I were an Adyen investor.
4. Conclusion
Adyen is possibly one of the highest-quality companies I have ever analyzed.
Firstly, the management team and especially the CEO are highly experienced in the payments industry and have a great understanding of where this industry is going. I trust their strategy for growth is sound and will be proven effective.
Secondly, the margins of this company are truly spectacular!
47% EBITDA margin and 45.9% net income margin are not only unique for a company of their size in the payments industry, but also in any industry period. They run a lean ship and don’t rely on massive acquisitions and over-hiring to chase growth at any cost.
Let’s recall that despite operating on a comparable scale to Stripe, Adyen has half the employees.
Thirdly, their product strategy puts them in a great position to benefit from some of the fastest-growing verticals of the global economy.
In the Digital segment, Adyen serves the fast-growing new-age app and e-commerce-based internet companies.
In Unified Commerce, Adyen helps businesses simplify on-premise and digital payments, enabling a unified and seamless commerce experience.
In Platforms, Adyen enables SaaS, e-commerce, enterprise software, and other platforms to embed financial services into their offering.
Nevertheless, all these qualities matter very little if a company trades for an obscene valuation. While with a P/E of 51, Adyen certainly trades for a premium valuation, I don’t find it to be obscene. As the valuation model showed, if Adyen capitalizes on its growth opportunities well and grows payment volumes with a 21% CAGR, investors could see a 103-154% upside.
However, buying a company at a premium valuation always exposes investors to a potential underperformance if growth expectations don’t materialize!
As explored in the risk section, Adyen is exposed to serious risks in the cybersecurity, regulatory, and competitive areas. If take-rates decrease, Adyen’s growth could seriously suffer.
In conclusion, an investment in Adyen is a bet that global digital payment industry trends will continue and Adyen will not lose its position in the market. If that happens, long-term investors could do quite well.
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