Fiserv Reports Modest Small Business Growth Amid Persistent Structural Risks

What happened

Fiserv released its Small Business Index for December 2025, showing a seasonally adjusted index of 144 with year-over-year sales growth of 1.6% and a month-over-month increase of 0.8%. The improvement was driven by higher average transaction sizes and steady demand for essentials, indicating resilient consumer spending in the small business segment. This data suggests potential strength in Fiserv's Merchant Solutions segment, which includes the Clover platform, a key growth driver noted in the DeepValue report. However, the report highlights that despite such positive indicators, Fiserv faces significant risks, including elevated leverage, rising partner payouts, and concerns over Clover's pricing practices that could undermine long-term stability. Therefore, while the December index points to operational resilience, it does not address the deeper structural issues that contributed to a 68% stock price decline over the past year.

Implication

Investors should interpret the small business sales uptick as a temporary positive that reinforces Fiserv's sticky, recurring revenue model, particularly in the Merchant segment. However, this does not alleviate the elevated net debt to EBITDA ratio of 2.68x or the interest coverage of 4.21x, which remain critical balance sheet concerns. The growth in average ticket sizes may help offset some margin compression from higher partner payouts, but sustained improvement is necessary to meet management's ambitious targets. Regulatory and customer satisfaction issues around Clover, as detailed in the report, could still lead to churn or pricing pressures, negating any sales gains. Overall, this news underscores the cautious 'POTENTIAL BUY' stance, emphasizing that while fundamentals show resilience, significant downside risks from leverage and competition persist.

Thesis delta

The thesis remains largely unchanged: Fiserv presents a potential buy opportunity due to its sticky revenues and discounted valuation, but with high execution risk. The December index data provides mild confirmation of merchant segment strength, yet it does not meaningfully shift the risk-reward balance, as core concerns around leverage, partner economics, and Clover-related challenges remain unaddressed.