After Its Disappointing Quarter, Concerns Rise Over Fiserv

A day after Fiserv Inc. released disappointing third-quarter results, stock analysts are showing little confidence in the payments company’s ability to make a course correction.

In a note to investors, William Blair & Co. analyst Andrew W. Jeffrey said the financial-services firm can “no longer recommend Fiserv given what we consider a shocking third-quarter revenue and EPS miss and abrupt management transition.”

It is William Blair’s view that Fiserv chief executive Mike Lyons, who took over in May from former CEO Frank Bisignano, is “now in a difficult position as he and his team try to figure out what went wrong,” Jeffrey said. “In addition, we have low conviction in the underpinnings of Fiserv’s merchant competitive position. While we have adjusted or model, we have little visibility into how accurate our assumptions are.”

Bisignano left Fiserv earlier this year when he was tapped by the Trump Administration to run the Social Security Administration. A few months later, Bisignano added the Internal Revenue Service to his duties.

Fiserv did not comment on analyst opinions or recommendations.  

For the third quarter, Fiserv reported revenue of $4.92 billion, significantly off from analyst estimates of $5.35 billion. In addition, revenue in its financial solutions business declined 3% year-over-year.

As a result, Fiserv lowered its organic-revenue growth projections for 2025 from 10% to a range of 3.5% to 4%. The company’s earnings-per-share target was also cut from $10.15–$10.30 to $8.50–$8.60.

During the call, Lyons told analysts Fiserv’s top brass conducted a “rigorous analysis of the company’s operations, technology, financials, and forecasting, including thousands of client and employee meetings and external benchmarking.”  

One of the key takeaways of this analysis was that Fiserv’s “growth and margin targets need to be reset,” Lyons said. “This change is driven by a combination of four factors, including slowing cyclical growth in Argentina, the recalibration of optimistic growth assumptions in the original guidance, the impacts of certain deferred investments, and the deprioritization of short-term revenue and expense initiatives.”

In addition, Fiserv realized its strategy to defer certain investments and cut certain costs to improve short-term margins limit the company’s ability to “serve clients in a world-class way, execute product launches to our standards, and grow revenue to our full potential. The good news on this front is that these circumstances are entirely fixable,” Lyons said.

Also impacting earnings, Lyons added, is that Fiserv has increasingly relied on short-term initiatives that place too much emphasis on quarterly results rather than building long-term relationships by prioritizing client needs and high recurring-revenue strategies. “As a result, we have made the decision to deprioritize these short-term revenue and expense initiatives, which, of course, has some near-term impact on our growth and profitability,” Lyons said.   

Other fixes being implemented include changes to Fiserv’s leadership team and board of directors. Lyons announced Takis Georgakopoulos will assume the position of head of merchant solutions and technology, while Dhivya Suryadevara has joined the company as head of financial solutions, sales and operations. Prior to assuming his new position, Georgakopoulos was global head of payments for JP Morgan. Dhivya was most recently CEO of Optum Financial Services and Optum Insight at UnitedHealth, a Fiserv client. Before that, she served as chief financial officer at Stripe Inc.

Despite Fiserv’s stated plans to remedy the situation, William Blair’s Jeffrey argues that Fiserv’s focus on short-term margins impaired the company and will be difficult to recover from.

“The bottom line for us is that Fiserv has been over-earning in both of its core businesses for at least two years,” Jeffrey says. “Putting it together. We argue that Fiserv is not a broken business, but it is now a broken stock.”

If nothing else, Fiserv’s third quarter results reveal that despite the company’s “industrial strength power” as a payment and bank processor, “the thesis that its enormous scale and broad range of bank and payment processing and payment network assets under one roof is a superior model is being put to the test,” says Eric Grover, principal at the consultancy Intrepid Ventures, by email.

“We’ve seen other massive payment processing consolidators like Worldline, FIS, and Global Payments, reverse course, looking to simplify,” Grover continues. “Fiserv competes with traditional processors and networks and a host of nimbler, newer players. It’s never going to act like a Silicon Valley startup. Nor should it. However, it needs a booster shot of dynamism.”