San Jose, California – PayPal Holdings reported its third-quarter earnings on Tuesday, surpassing estimates for earnings but falling slightly below revenue expectations. The company witnessed a 22% increase in earnings to $1.20 on an adjusted basis for the quarter ending September 30. Revenue also saw a 6% climb to $7.85 billion.
Analysts had projected PayPal to report earnings of $1.07 per share on revenue of $7.88 billion. Total payment volume from merchant transactions increased by 9% to $422.6 billion, in line with estimates.
For the fourth quarter, PayPal anticipates revenue growth in the low single digits and adjusted earnings per share ranging between $1.07 and $1.11, attributing the growth to new product and marketing initiatives. Analysts had estimated adjusted earnings per share of $1.10 with revenue growth at 5% to $8.44 billion.
Following the earnings report, PayPal’s stock dropped by 3.2% to nearly $81 in midday trading. The company had seen a 35% increase in its shares in 2024, reaching a 20-month high the day before the earnings report.
Analyst James Friedman from Susquehanna expressed optimism about PayPal’s stock, highlighting the consistent growth in transaction margin dollars. However, there has been concern about slowing revenue growth possibly impacting earnings in 2025.
PayPal has been strategizing to improve transaction margins and profitability by raising prices at its subsidiary Braintree, which processes transactions for various companies including Uber, Airbnb, DoorDash, Spotify, Paymentus, and more. However, analysts have noted that these initiatives might lead to lower payment volumes and revenue in the short term.
CEO Alex Chriss emphasized the importance of negotiating with merchants to enable strategic growth opportunities and drive long-term benefits for both parties. He mentioned that Braintree’s payment volume and revenue are expected to continue declining in 2025.
Despite the challenges, PayPal saw a 1% increase in active accounts compared to the previous year, marking the first year-over-year growth since the second quarter of 2023. The company also introduced a new loyalty rewards program in September, resulting in one million new debit card users.
In conclusion, PayPal remains focused on enhancing its services and expanding partnerships, aiming to continue its growth trajectory despite increasing competition in the digital payment industry.