TLDR
- PayPal (PYPL) posted Q3 adjusted EPS of $1.45, above the $1.31 estimate.
- Revenue of $8.58 billion missed the roughly $8.71 billion forecast.
- Full-year EPS guidance rose to about $5.60 from $5.38.
- Stock closed Monday at $54.99, fell in premarket, then traded near $56.04 on Tuesday.
- Management plans 2027 as an investment year, with similar EPS growth to 2026.
PayPal (PYPL) stock traded near $56.04 on Tuesday, up about 2%, after the company beat third-quarter profit estimates and raised its full-year outlook. The stock closed Monday at $54.99 and had slipped about 3% in premarket trading before turning higher.
Adjusted earnings came in at $1.45 a share. That compares with $1.34 a year ago and the $1.31 Wall Street expected.
Revenue was a different story. Net revenue rose 2% to $8.58 billion, but that fell short of the $8.71 billion to $8.72 billion analysts expected.
Total payment volume rose 7% on a currency-neutral basis to $487.14 billion. Transaction margin dollars grew about 2%, or 3% when interest on customer balances is excluded.
Guidance moves higher
PayPal now expects full-year adjusted EPS of about $5.60, up from $5.38. Wall Street was looking for $5.39, according to FactSet.
Adjusted free cash flow guidance is at least $6.5 billion. The company kept its share repurchase target at about $6 billion.
For the fourth quarter, PayPal expects adjusted EPS of about $1.43. It also sees low double-digit revenue growth on a currency-neutral basis.
Management called 2027 an investment year. Even so, it targets EPS growth similar to 2026, helped by operating leverage and buybacks.
Cost cuts and growth drivers
CEO Enrique Lores, who joined in March, said PayPal has cut its workforce by more than 2,000. It has also removed three layers of management.
The company is on track for at least $1.5 billion in gross run-rate cost savings over two to three years. More than $700 million of that is expected by the end of the fourth quarter.
Non-transaction operating expenses rose just 1%. That helped lift non-GAAP operating income by 3%.
Branded checkout volume growth stayed in the 1% to 2% range. Venmo volume grew at a double-digit rate for the eighth straight quarter, and Braintree volume rose 10%.
Financial services now make up more than 20% of transaction margin dollars. Pay Later volume grew 25% and Pay with Venmo grew 43%.
Wall Street has been wary
The stock is down about 6% this year. It fell 13% on Aug. 28 after a report that Stripe and Advent International walked away from acquisition talks.
Cleveland Research cut PayPal to Underperform last week. Bank of America made the same move the week before, citing a “long road ahead.”
Europe remains a drag. The end of the EU de minimis tax exemption created about 70 basis points of headwind, and management expects it to last into the fourth quarter.
PayPal bought back $1.5 billion of stock in the quarter and $6 billion over the past 12 months. Adjusted free cash flow was $2 billion for the quarter.
On Tuesday, the stock sat well above its 52-week low of $38.46 and below its 52-week high of $79.22. Market value stands at about $47 billion.
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