Key Highlights

● Adjusted Earnings of $5.31 a share beat the $5.17 consensus.

● Net Revenue climbed to $9.8 billion in the quarter.

● Cross-border Volume grew faster than gross dollar volume despite elevated oil prices.

● Hot September PCE Inflation means some spending reflects higher prices rather than more purchases.

Mastercard (NYSE:MA) topped profit forecasts on Thursday as travel and international spending kept expanding faster than its overall payment volumes, sending the stock higher on a rough day for big tech.

A clean beat before the bell

Mastercard reported before Thursday's open on October 29 and delivered the kind of quarter investors were looking for. Adjusted earnings came in at $5.31 a share, ahead of the $5.17 consensus, and net revenue climbed to $9.8 billion, according to market data.

The stock rose throughout the session and closed solidly higher, according to market data. An afternoon snapshot showed an even larger gain at one point. Mastercard ranked among the top contributors to the S&P 500 on a day when the index slipped 23.59 points to 7,720.39.

The cross-border engine

The most closely watched figure was cross-border volume, which measures card spending that crosses national borders. It grew faster than Mastercard's gross dollar volume, the total value of transactions on its network, according to one report.

That matters because cross-border transactions are among the most profitable for card networks. They typically carry higher fees than domestic purchases, and they are driven by travel, E-commerce from foreign merchants and Business spending abroad. When cross-border outpaces overall spending, it tends to lift revenue more than volume alone would suggest.

The growth came despite a difficult backdrop for travel. Oil prices remained elevated, with Brent Crude settling at $114.88 a barrel on Thursday, according to media reports, amid tensions in the Middle East. Higher fuel costs can weigh on airfares and travel demand, but Mastercard's numbers suggested consumers were still crossing borders.

Consumers still spending

Mastercard's results lined up with the morning's economic data. The Commerce Department's advance estimate showed third-quarter GDP accelerating from the second quarter and beating forecasts, with consumer spending rising solidly, according to market data.

There was a catch. September PCE inflation ran hot, and part of that increase came from energy and gasoline prices, according to one report. Some of what consumers are spending reflects higher prices rather than more purchases. For a network that earns fees on the value of transactions, inflation can lift reported volumes even when real activity is flatter.

Financials join the rotation

Mastercard's gain was part of a wider shift. Media reports said investors rotated into health care, financials and real estate on Thursday, limiting the damage from Alphabet (NASDAQ:GOOGL)'s worst day since its 2004 IPO. A midday market snapshot showed financials rising alongside real estate and utilities.

Other financial companies also had good days. Merchants Bancorp (NASDAQ:MBIN) surged after beating earnings estimates, and Perella Weinberg (NASDAQ:PWP) rose on strong advisory revenue.

Payments companies have a quality the AI megacaps struggled to show on Thursday: they do not require heavy Capital spending to grow. A card network earns a small fee on each transaction it processes, so rising spending flows through to revenue without the need for new data centers or factories.

Rates and the Fed

The Federal Reserve held rates steady on Wednesday after hiking in September, and Chair Warsh said, "It's our responsibility to get inflation down." Markets were pricing a strong chance of another hike in December, according to futures pricing. Higher rates can slow borrowing on Credit cards, though Mastercard earns its fees from transaction processing rather than lending.

What to watch

Visa (NYSE:V), Mastercard's closest rival, and other payments companies will be read through the lens of cross-border strength. Investors will also watch Friday's Employment Cost Index for wage trends that drive consumer spending, and whether the Fed's December decision, due December 8 to 9, cools the travel and spending that powered Mastercard's quarter.