TLDR:
- PayPal reported Q1 adjusted EPS of $1.33, beating Wall Street estimates of $1.16
- Revenue grew 1% to $7.8 billion, slightly missing some analyst expectations
- Transaction margin dollars increased 7% year over year to $3.7 billion
- The company maintained its full-year guidance despite the earnings beat
- PayPal stock dropped around 2-3% following the earnings report
PayPal Holdings (PYPL) released its first-quarter earnings report on Tuesday, showing mixed results that prompted a stock decline despite some positive metrics. The payment processing giant reported a 1% increase in revenue to $7.8 billion, which was generally in line with consensus estimates but fell short of some analysts’ expectations of $7.85 billion.
The company’s adjusted earnings per share of $1.33 surpassed Wall Street’s predicted $1.16, representing a solid 23% increase from the same period last year. This marks PayPal’s fifth consecutive quarter of profitable growth under CEO Alex Chriss, who took the helm in 2023.
Transaction margin dollars, a key performance metric for the company, grew 7% year over year to reach $3.7 billion. This figure represents total revenue minus transaction expenses and credit losses.
PayPal’s active user base showed modest growth with monthly active accounts increasing 2% to 224 million. Transactions per active account also grew by 4%, excluding the company’s payment-processing business.
Despite these encouraging figures, investors appeared unimpressed with the company’s decision to maintain its previous full-year guidance rather than raising expectations following the earnings beat.
Cautious Outlook Maintained
PayPal reaffirmed its February guidance for the full year, citing “global macro uncertainty” as a reason for caution. The company projected adjusted earnings between $4.95 and $5.10 per share, representing 6% to 10% growth from the previous year.
The maintained guidance includes expectations for transaction margin dollars to reach between $15.2 billion and $15.4 billion, reflecting 4% to 5% growth for the year.
For the upcoming second quarter, PayPal forecasts adjusted EPS to range from $1.24 to $1.26, which would exceed Wall Street’s estimate of $1.21 per share.
“PayPal had a great start to the year and our strategy is working,” CEO Alex Chriss stated. He highlighted progress across the company’s focus areas including branded checkout, Venmo, and “omnichannel” integration of payment methods.
Market Reaction and Stock Performance
The market response to PayPal’s earnings was decidedly negative. The stock dropped approximately 2.14% following the Tuesday morning report, after already declining 0.63% the previous day in anticipation of the results.
In premarket trading, PYPL shares were down 3.2% at $62.88, contrasting with competitor SoFi Technologies (SOFI), which climbed 5.6% after releasing its own earnings and raising guidance.
The recent decline adds to PayPal’s difficult 2025, with the stock already down nearly 24% year-to-date as of the earnings announcement.
Total payment volume for the quarter grew 3% to $417.2 billion, but payment transactions decreased 6% to 6 billion, highlighting some of the challenges the company faces in maintaining growth momentum.
Wall Street sentiment on PayPal remains cautiously optimistic. The consensus rating is a Moderate Buy, based on 17 Buy, 16 Hold, and two Sell ratings over the last three months. The average price target stands at $84.69, suggesting a potential 30.43% upside from current levels.
These analyst ratings and price targets will likely see updates as financial experts digest the latest earnings report and management’s conservative outlook despite the earnings beat.
The latest results reflect PayPal’s ongoing efforts to transform from a traditional payment processor into a more profitable and diversified financial services company. While the quarterly profit growth shows progress in this transition, the market appears to be waiting for more concrete signs of accelerating revenue growth before rewarding the stock.
PayPal’s quarterly report comes as the broader financial technology sector faces challenges from rising competition and evolving consumer payment preferences.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
