Shares of fintech card issuing platform Marqeta (MQ -2.35%) were on the rise today, up a whopping 20% in Wednesday trading as of 12:15 p.m. ET.

Marqeta reported earnings last night that came in ahead of expectations on the top line, while slightly missing on the bottom line. However, management's guidance and commentary were very encouraging.

The company also announced a further extension of its deal with its key customer, Square and Cash App parent Block, with which it had already secured a multiyear contract renewal in August.

Block and other fintechs flocking to Marqeta's platform

It should be noted that current third-quarter results are heavily skewed by the August contract renewal with Block's Cash App, which made up a huge majority of Marqeta's revenue and about half its gross profits prior to the deal. With that big of a customer concentration, there was a risk for Marqeta. But Marqeta was able to renew the contract in August for four years, easing an overhang.

While Block is growing Cash App very fast, and therefore Marqeta is growing with it, Marqeta had to give pricing concessions in the deal, in a one-time reset. In addition, an accounting treatment also lowered revenue by a large amount. While gross margin is also down due to the reset in pricing, it's not down by nearly as much as revenue, as the accounting change doesn't affect gross profits.

So in the third quarter, Marqeta's revenue declined 43%, and gross profit declined 9% year over year. But that was actually better than expected on the revenue and gross profit side. To get a sense of the overall business trajectory, Marqeta's total payments volume (TPV) actually increased 33%. With Block and other major customers renewing pricing at lower levels because of greater volume over the past year, investors should probably expect revenue and profit growth to merge closer to TPV growth a year from now.

Furthermore, investors were also encouraged by Marqeta's fourth-quarter guidance for gross profit to decline 8% to 10% year over year. While that seems like a flattish growth trajectory to the third quarter, it's actually much better. That's because the contract for servicing Block's Cash app was renewed on Aug. 4, which was over one month into the third quarter. The fourth quarter will have an entire quarter of results post-Block renewal, so one would have thought Marqeta might take an even bigger hit to revenue and gross profit in Q4. But it's guiding in line with Q3, which means things are actually improving.

Not only that, but Marqeta surprised with another contract extension announcement on the call, which could be furthering the upside today. As of November, Marqeta's services agreement with the Square debit card will be extended through June 2028, and the August deal on the Cash App was also extended another year to June 2028, without further pricing concessions.

Fintechs have been beaten up, but Marqeta is a bounce-back candidate

While the fintech sector has been absolutely decimated in the post-pandemic era, Marqeta still looks intriguing even after today's pop. Marqeta has $1.3 billion in cash against just a $3.4 billion market cap, making it relatively safe. Moreover, the business trajectory seems to be improving under new CEO Simon Khalaf, who became CEO in early 2023.

Marqeta is also the underlying platform for many exciting new use cases, such as embedded finance, flexible card rewards programs, instant wage access, and buy now, pay later cards and services. It's a comeback fintech name to watch.