PayPal Holdings Inc. (NASDAQ: PYPL) reported better-than-expected first-quarter results on Tuesday, sending shares up more than 2% in premarket trading. The payments giant posted revenue of $8.35 billion, up 7% year-over-year and above the $8.05 billion consensus estimate compiled by LSEG. Adjusted earnings came in at $1.34 per share, also topping the analyst forecast of $1.27.
The results provide a modest boost for new CEO Enrique Lores, who took the helm amid lingering investor concerns about slowing user growth and intensifying competition from Apple and Google in the digital wallet space. The company had entered the report with weakened sentiment following a disappointing fourth quarter and doubts about its core branded checkout business.
Mixed Profit Picture
While non-GAAP metrics impressed, GAAP net income fell 14% to $1.11 billion, and GAAP earnings per diluted share dropped 6% to $1.21. The company attributed an $0.08 per share drag to its strategic investment portfolio and crypto holdings. On a non-GAAP basis, transaction margin dollars—revenue after transaction expenses and credit losses—improved 3% to $3.81 billion.
Branded Checkout Growth Remains Stuck in Low Gear
Total payment volume rose 11% to $464.0 billion, or 8% on a currency-neutral basis. Active accounts ticked up 1% to 439 million, while payment transactions increased 7% to 6.5 billion. However, the closely watched branded checkout segment—where customers opt to pay via PayPal or Venmo—saw payment volume grow just 2%, underscoring persistent challenges in revitalizing this high-margin business.
Lores announced a strategic reorganization into three divisions: Checkout Solutions & PayPal, Consumer Financial Services & Venmo, and Payment Services & Crypto. Each unit will have its own leadership. The company expects at least $1.5 billion in gross run-rate cost savings over the next two to three years, with proceeds reinvested into technology, branded checkout, and Venmo.
Competitive Landscape and Outlook
PayPal faces mounting pressure from Apple Pay and Google Wallet, which have eroded the pandemic-era advantage the company built in online payments. Shares remain more than 80% below their mid-2021 peak. Analysts note that while the reorganization could sharpen focus, execution will be critical. "PayPal still has a stable of strong assets," said James Wester, co-head of payments at Javelin Strategy & Research, "but those assets don't always translate to clear value for merchants or consumers."
Looking ahead, PayPal guided for second-quarter non-GAAP EPS to decline by roughly 9%, with transaction margin dollars slipping about 3%. Full-year non-GAAP EPS is expected to see a low-single-digit decline or possibly edge into slightly positive territory. The muted outlook suggests the turnaround under Lores will take time.
Prior to the report, Seeking Alpha contributor Millennial Dividends maintained a "sell" rating, citing slowing active account growth, tighter take rates, and a lack of near-term catalysts—concerns that Tuesday's update did little to dispel.
