Wise PLC: Can Margin Resilience Sustain Valuations Amid Growth Slowdown?

Wise PLC (WPLCF), the UK-based fintech giant, has long been celebrated for its disruptive approach to cross-border payments. Yet, recent financial updates reveal cracks in its growth engine, raising questions about whether its valuation—a 30% decline from its 2023 peak—now reflects underlying risks or presents a buying opportunity. This analysis digs into Wise's margin pressures, slowing customer acquisition, and strategic pivots, while contrasting its execution with peers like New Fortress Energy (NFE) to assess its long-term viability.

The Growth Slowdown: Customer Acquisition and Margin Pressures

Wise's Q2 2025 results underscore a critical inflection point. While cross-border transaction volumes rose 24% year-over-year to £41.2 billion, active customers grew just 17% to 9.8 million, down from 23% growth in FY2024. This deceleration is alarming, given that customer acquisition costs (CAC) have surged as Wise shifts focus to higher-margin SMBs. The company now serves 625,800 SMBs, but onboarding bottlenecks in key markets like the UK/EU—where temporary pauses occurred in late 2024—highlight scalability challenges.

Meanwhile, margin pressures are mounting. Wise's cross-border take rate (the fee charged per transaction) fell 12 basis points year-over-year to 52 basis points, driven by strategic price cuts and a shift toward volume-driven customers. While this aligns with Wise's long-term strategy to “price for market share,” the math is tightening. Gross profit margins held steady at 75%, but administrative expenses rose 25% to £769 million, reflecting costs tied to compliance and global expansion.

Strategic Shifts: Platform Expansion vs. Execution Risks

Wise's response to slowing growth is a dual-pronged strategy:
1. Wise Platform Expansion: Targeting SMEs and institutional partners, the platform now integrates with banks like Raiffeisen and Itau, offering APIs for cross-border payment infrastructure. This could tap a £170 billion revenue pool dominated by legacy banks.
2. Geographic Diversification: Focusing on high-growth regions like India and Southeast Asia, where Wise has secured regulatory approvals, and launching new products like Wise Invoicing to boost SMB engagement.

However, execution remains uncertain. While the Wise Account (used by 53% of personal customers) generates recurring interest income from £21.6 billion in customer balances, the SMB segment's revenue per user (ARPU) lags. Card-only users—now 40% of the customer base—generate less than half the ARPU of Wise Account users, risking margin dilution unless retention improves.

Contrast with New Fortress Energy: Execution in Fintech vs. Energy

To gauge the premium placed on operational excellence, consider New Fortress Energy (NFE), a company facing existential challenges. NFE's revenue fell 31% YoY in Q1 2025, and its debt-to-equity ratio hit 407%, with a net loss of $545 million over the past year. Its stock has plummeted 83% over 12 months, reflecting investor skepticism about its ability to manage debt and execute LNG projects.

Wise's situation is fundamentally different: its free cash flow surged 212% to £486 million in FY2024, and it holds no significant debt. Yet, the comparison underscores the importance of execution in capital-intensive sectors. Wise's challenge isn't solvency but sustaining growth while balancing pricing and margins—a nuance often overlooked by investors.

Valuation: Is the Slump Overdone?

Wise's valuation now trades at 1.8x price-to-sales, a discount to PayPal's 2.5x multiple. This reflects concerns over margin erosion and competition from rivals like Revolut and Stripe. However, three factors suggest the slump may overstate risks:
1. Structural Cost Advantages: Wise's direct payment integrations (e.g., Brazil's Pix) cut costs by bypassing correspondent banks, a moat unappreciated by some analysts.
2. Cash Flow Resilience: Despite margin pressures, free cash flow grew 212% in FY2024, funding expansion without dilution.
3. Undervalued SMB Pipeline: The 600,000 SMBs using Wise's platform represent a nascent revenue stream; scaling this could offset near-term headwinds.

Investment Thesis: Buy the Dip, but Mind the Risks

Bull Case: Wise's long-term vision—dominating cross-border B2B payments—remains intact. If it can stabilize margins (targeting 13–16% PBT by FY2026) and reignite customer growth through its platform, the current valuation offers asymmetric upside. A U.S. listing could also boost liquidity and institutional ownership.

Bear Case: Prolonged margin compression (take rates below 50 bps) or a global recession could derail transaction volumes. Competitors' aggressive pricing in emerging markets could further squeeze margins.

Verdict: Buy Wise at current levels if you believe its platform-driven moat and cash flow can outpace execution risks. Set a price target of £25–£30 (up from £19.50), but exit if Q3 results show further margin erosion or customer stagnation.

In fintech, execution is everything. Wise's headwinds are real, but its structural advantages—low-cost infrastructure, diversified revenue streams, and a $170 billion addressable market—suggest its valuation slump may be overdone. Investors willing to bet on its long game could be rewarded, provided the company proves it can grow without sacrificing profitability.