Adyen Earnings: Slowing Growth and Elevated Hiring Drop Shares; We Don't See Structural Step Change

Adyen’s share price is down about 26% on Aug. 17 as we are writing this, as the payment services provider reported EBITDA of EUR 320 million for the first half, down 10% from the year-ago period. Revenue growth of 21% also did not mirror the strength we expect to see from Adyen. In particular, 23% growth in North America disappointed, as the region had been a growth driver for Adyen lately. Higher net interest income on the back of higher interest rates offset the growing cost base (up 66%) entirely due to the continued high pace of hiring, resulting in flat earnings per share. Nevertheless, management will have to field difficult questions about the mismatch of slowing revenue growth and heavy investment in the business depressing margins (EBITDA margin declined to 43% versus 59% last year). Before adjusting our model, we will wait for greater granularity around the revenue growth outlook for North America as well as the pace of further hiring this year, which we hope Adyen will provide during its earnings call later today. Given what we know now, and with the view that Adyen’s margins should recover in mid-2024, we don’t expect to make a material change to our EUR 1,870 fair value estimate. Our wide economic moat rating is unchanged.