Grade: C — Some Red Flags, Investigate
Framework: Schilit *Financial Shenanigans* + forensic accounting principles (bank-adjacent fintech analysis)
Data: SEC EDGAR 10-K (Filed 2026-02-19) + Yahoo Finance
Auditor: Deloitte & Touche LLP — Unqualified opinion (2 Critical Audit Matters)
One-line verdict: Fiserv's core payments and financial technology business continues to execute — $21.2B in revenue (+4% YoY), $6.1B operating cash flow, CFFO/NI ratio of 1.74, and an M-Score of -2.57 well below the manipulation threshold. EPS grew 18% to $6.34 on the back of aggressive share repurchases. But the balance sheet carries $47.9B in goodwill and intangibles — 186% of total equity — a legacy of the First Data acquisition that makes the company structurally vulnerable to impairment. Cash of $798M covers only 3% of $29.1B in total debt. Operating income actually declined 1% despite revenue growth, with both Merchant and Financial segment margins contracting. The company is not a financial institution in the traditional sense, but its heavy M&A-driven balance sheet demands scrutiny.
| Metric | Result |
|---|---|
| Red Flags (Engine) | **2** (C4: cash/debt ratio 3%, D1: goodwill+intangibles 186% of equity) |
| Watch Items | **0** |
| Checks Completed | **17/18** (1 N/A) |
| Beneish M-Score | **-2.57** (clean; threshold -2.22) |
| F-Score (Fraud Probability) | **1.83** (0.68% probability) |
| Altman Z-Score | **2.15** (grey zone — not distressed but not safe) |
| Auditor | Deloitte & Touche LLP — Unqualified opinion |
| Fiscal Year | 2025 (ended December 31, 2025) |
| Report Date | 2026-04-05 |
Note on classification: Fiserv is a fintech/payments company, not a bank or insurance company. Standard screening checks apply, but Beneish M-Score and Altman Z-Score should be interpreted with caution given the acquisition-heavy business model. M-Score and Z-Score are calculated but may be less meaningful for a company whose balance sheet is dominated by acquired intangibles.
Revenue: Steady Growth, Margin Compression
Per the 10-K:
| Metric | 2023 | 2024 | 2025 | Trend |
|---|---|---|---|---|
| Total Revenue | $19,093M | $20,456M | **$21,193M** | +4% |
| Operating Income | -- | $5,879M | **$5,818M** | -1% |
| Operating Margin | -- | 28.7% | **27.5%** | -1.2pp |
| Net Income (to Fiserv) | $3,068M | $3,131M | **$3,480M** | +11% |
| EPS (diluted) | $4.98 | $5.38 | **$6.34** | +18% |
Revenue grew 4% to $21.2B, but operating income declined 1% to $5.8B. The operating margin contracted from 28.7% to 27.5%. Net income growth of 11% and EPS growth of 18% were driven substantially by share buybacks — diluted shares dropped from 582M to 549M.
The filing states processing and services revenue represented 80% of total revenue, generated from "account- and transaction-based fees under multi-year contracts that generally have high renewal rates."
Segment Performance: Both Segments Saw Margin Decline
Per the 10-K segment data:
| Segment | 2025 Revenue | 2024 Revenue | Growth | 2025 Margin | 2024 Margin |
|---|---|---|---|---|---|
| Merchant Solutions | $10,140M | $9,631M | +5% | 34.5% | 37.0% |
| Financial Solutions | $9,664M | $9,477M | +2% | 45.3% | 47.3% |
| Corporate & Other | $1,389M | $1,348M | +3% | Loss | Loss |
| **Total** | **$21,193M** | **$20,456M** | **+4%** | **27.5%** | **28.7%** |
Both operating segments saw margin contraction — Merchant dropped 250 basis points to 34.5%, Financial dropped 200 basis points to 45.3%. This is a concern: revenue is growing but profitability per dollar of revenue is declining. Interest expense surged 25% from $1,195M to $1,493M, reflecting the debt burden of the acquisitive model.
The Goodwill Problem: 60% of Total Assets
Per the 10-K: "Our balance sheet includes goodwill and intangible assets that represent approximately 60% of our total assets." Goodwill and intangibles of $47.9B are 186% of total equity — meaning if even a portion were impaired, it would devastate the equity base.
This is the legacy of the $22B First Data acquisition in 2019. The filing warns: "The impairment of a significant portion of these assets could negatively affect our results of operations."
At December 31, 2025, total debt was approximately $26.4B (principal) with carrying value of $28.997B. Cash was only $798M. The company relies on continuous cash flow generation to service this debt load — FCF of $4.3B provides adequate coverage of interest and near-term maturities, but any disruption to the payments business would create severe stress.
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | PASS | DSO 69 days, +2 days YoY. Normal |
| A2 | AR vs Revenue Growth | PASS | AR growth 6.9% vs revenue growth 3.6% |
| A3 | Revenue vs CFFO | PASS | Revenue +3.6%, CFFO -8.6% |
| B1 | Inventory vs COGS | PASS | No material inventory |
| B2 | CapEx vs Revenue | PASS | CapEx growth 12.4% vs revenue 3.6% |
| B3 | SG&A Ratio | PASS | SG&A/Gross Profit = 54.7% |
| B4 | Gross Margin | PASS | Gross margin 59.4%, -1.5pp. Stable |
| C1 | CFFO vs Net Income | PASS | CFFO/NI = 1.74. Cash-backed earnings |
| C2 | Free Cash Flow | PASS | FCF $4.3B, FCF/NI = 1.24 |
| C3 | Accruals Ratio | PASS | -3.2%. Low accruals |
| C4 | Cash vs Debt | **FAIL** | Cash $798M covers only 3% of $29.1B debt |
| D1 | Goodwill + Intangibles | **FAIL** | $47.9B = 186% of equity |
| D2 | Leverage | PASS | Debt/EBITDA = 3.3x |
| D3 | Soft Asset Growth | PASS | Other assets 6.4% vs revenue 3.6% |
| D4 | Asset Impairment | N/A | No write-off data |
| E1 | Serial Acquirer FCF | PASS | FCF after acquisitions positive |
| E2 | Goodwill Surge | PASS | Goodwill+Intangibles change 3% YoY |
| F1 | Beneish M-Score | PASS | M-Score = -2.57 (< -2.22) |
Auditor Critical Audit Matters
Deloitte flagged two Critical Audit Matters:
1. Revenue Recognition: The auditor noted the complexity of the Company's revenue systems, requiring "increased extent of effort and involvement of professionals in our firm having expertise in information technology (IT) to identify, test, and evaluate the Company's systems and automated controls." Revenue recognition across multiple processing platforms, contract types, and geographies creates inherent complexity.
2. Goodwill Impairment Assessment: Given that goodwill represents approximately 60% of total assets, the annual impairment test involves significant judgment around "revenue growth rates and operating margins used to calculate estimated future cash flows, risk-adjusted discount rates and future economic and market conditions."
Key Financial Trends (4-Year)
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Total Revenue | $17.7B | $19.1B | $20.5B | $21.2B |
| Net Income | $2.5B | $3.1B | $3.1B | $3.5B |
| EPS (diluted) | -- | $4.98 | $5.38 | $6.34 |
| Gross Margin | 54.9% | 59.8% | 60.8% | 59.4% |
| Net Margin | 14.3% | 16.1% | 15.3% | 16.4% |
| CFFO | $4.6B | $5.2B | $6.6B | $6.1B |
| FCF | $3.1B | $3.8B | $5.1B | $4.3B |
| Total Debt | $21.5B | $23.2B | $25.0B | $29.1B |
| Cash | $0.9B | $1.2B | $1.2B | $0.8B |
Summary
Grade: C. Some red flags. A high-quality payments franchise burdened by acquisition debt and goodwill concentration.
Fiserv's earnings quality is solid at the operating level — M-Score of -2.57 is clean, CFFO/NI ratio of 1.74 confirms cash-backed earnings, and accruals are low at -3.2%. The payments business generates reliable, recurring revenue.
The concerns are structural:
This is not an earnings manipulation story. It is a leverage and concentration risk story. Watch the goodwill impairment test, the debt maturity schedule, and whether segment margins stabilize.
**Disclaimer**: This report is based on Fiserv's fiscal year 2025 10-K filed with the SEC on February 19, 2026. This is NOT investment advice.
**About EarningsGrade**: We screen earnings reports for financial red flags using an 18-point forensic framework. Grade C means the company has some red flags that warrant investigation.