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The profitability of Adyen NV, one of Europe’s largest payments companies, has been impacted as shares plummeted by over a third. Increased competition in the US, particularly from rivals like Stripe, and the costs of an extensive hiring spree contributed to this decline.
Adyen’s market capitalization suffered a loss of over €10 billion as a result, tarnishing the reputation of the company that has been seen as a pioneering tech firm in Europe ever since its listing on the Amsterdam stock exchange in 2018.
The Dutch company raised concerns when it reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of €320 million in the first half of the year, falling short of the expected €365 million. Additionally, its revenue of €739.1 million, although showing a 21% increase, fell below analysts’ forecasted €754 million.
Adyen’s EBITDA margin for the first half was 43%, compared to 59% in the same period the previous year and the expected 48.6%. As the company continues to expand not only in Europe but also aggressively in the US, its employee count rose by almost 15%, reaching 3,883 in the first six months of the year. Compensation costs also surged by 80% to €247 million due to recruitment efforts and salary increases.
CFO Ethan Tandowsky defended the hiring actions, stating that the company plans to hire a similar number of employees in 2023 as it did in 2022, although he anticipates a slowdown in hiring for the following year.
Adyen’s primary rivals in online payment processing, Stripe and Checkout.com, have affected its performance in the US market. Stripe, which was founded in 2010, announced staff reductions of 14% last November. Although Adyen’s revenues in the US increased by 23% to €187.5 million, the growth rate was less than half of what it was in the same period last year.
Hannes Leitner, an analyst at Jefferies, attributed Adyen’s weaker US performance to aggressive pricing strategies employed by competitors such as Braintree, owned by PayPal, and Stripe. The company’s struggle in the US market raises concerns about its future performance.
The challenging market conditions in the sector, coupled with persistent high inflation impacting consumer spending, have contributed to a 36% decline in Adyen’s shares over the past year. Moreover, private competitors like Stripe and Checkout.com have also seen a significant decrease in their valuations.
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