PayPal NASDAQ: PYPL executives used the company’s first-quarter 2026 earnings call to outline a broad transformation agenda that includes reorganizing around three core businesses, accelerating technology modernization, and launching a multi-year cost savings program, while reiterating full-year guidance amid a “complex” macro and competitive backdrop.
New CEO frames strategic reset around three businesses
President and CEO Enrique Lores, newly in the role, said he joined PayPal “at an important moment” and believes the company can “accelerate the growth of the company while improving profitability and cash flow,” but added that PayPal needs “significant changes to improve the strategic and operational issues the company has faced.”
Lores said his early observations included a strong foundation in brand, risk and underwriting, technology, and scale, but also pointed to “years of underinvestment” that require faster modernization—particularly becoming “cloud native” and adopting AI to increase developer productivity and reduce time to market.
He also said PayPal has leaned too heavily toward the merchant side of its two-sided network in recent years, and that strengthening value for “hundreds of millions of consumers who choose PayPal and Venmo” is now a priority. “Doing that, we increase the value of our platform for merchants and create a stronger foundation for sustainable growth,” Lores said.
As part of the reset, Lores said management is aligning around three market opportunities and associated business lines:
- Checkout (checkout solutions and PayPal), which he called the company’s “highest priority.”
- Consumer financial services (consumer financial services and Venmo), with a goal to help consumers “send, spend, save, invest, and borrow seamlessly.”
- Payment services (payment services and crypto), unifying unbranded processing such as Braintree with value-added services including fraud management and authorization optimization.
Lores said the prior structure—organized around customer groups—created “organizational complexity with multiple dependencies and handoffs that slowed decision-making and weakened execution.” The new model is intended to simplify decision-making and clarify accountability under “a single leader” for each line of business.
Cost program targets at least $1.5 billion in gross run-rate savings
Both Lores and Chief Financial and Operating Officer Jamie Miller highlighted a cost initiative expected to generate “at least $1.5 billion of gross run rate savings over the next two to three years,” according to Lores. Miller described two “waves of savings,” with the first tied to structural realignment and the second tied to “accelerating AI adoption and automation.”
Lores said PayPal created a new AI transformation and simplification group reporting to him to drive redesign “function by function, process by process.” He emphasized that the effort is intended to go beyond pilots and focus on reengineering processes first, then applying AI to drive savings and improve speed and customer experience.
In Q&A, Miller and Lores pointed to customer support and technology development as near-term areas of opportunity for AI-driven efficiencies. Lores said customer support is “a large cost” and that AI could both lower costs and improve service, including across multiple languages and businesses.
Miller added that PayPal expects to reinvest some savings for growth, including initiatives across branded checkout, Venmo financial services, and payment services, while noting the company plans to provide more detail “in the coming months” on savings cadence and reinvestment. She also said PayPal intends to provide external reporting, including segments, “sometime next year.”
Quarter results: TPV growth accelerated; branded checkout improved modestly
Miller said PayPal delivered a “solid quarter,” with transaction margin dollars and non-GAAP earnings per share “moderately better than our guide.” Total payment volume grew 11% on a spot basis and 8% on a currency-neutral basis to more than $460 billion, which she later specified as $464 billion.
Revenue grew 7% at spot and 5% currency-neutral, Miller said. Transaction margin dollars excluding interest on customer balances grew 3%, driven by “credit performance, Venmo monetization, PSP profitability, and loss improvement across multiple products,” which more than offset headwinds from investments to strengthen branded checkout.
Non-GAAP EPS rose 1% to $1.34. However, Miller said non-transaction operating expense increased 8%, above the company’s expectations, because PayPal “pulled forward” technology, marketing, and product investments, making operating expenses more weighted to the first half of the year. Non-GAAP operating income fell 5% to $1.5 billion.
Among operating metrics, Miller said monthly active accounts increased 1% to 225 million. Transactions per active account, excluding PSP, grew 6% sequentially.
On volume trends, management pointed to mixed performance across PayPal’s portfolio:
- Branded checkout: Online branded checkout TPV growth improved to 2% on a currency-neutral basis, with “a slight improvement in the U.S.” and “softer performance continuing in Europe,” Miller said.
- Venmo: Venmo TPV accelerated to 14% growth year over year, marking the sixth consecutive quarter of double-digit growth, Miller said.
- PSP: PSP volume growth accelerated to 11% from 7% in the second half of 2025, with enterprise payments in the mid-teens, driven by growth in “profitable front book business,” retention, and expansion with existing merchants, according to Miller.
Miller also said Pay with Venmo and buy now, pay later continued to outpace the market, growing 34% and 23%, respectively. Debit card and tap-to-pay spend, while still a small part of branded experiences volume, grew 60% year over year.
Capital return and balance sheet
PayPal repurchased $1.5 billion of shares in the quarter, bringing trailing 12-month repurchases to $6 billion, Miller said. The company ended the quarter with $13.5 billion in cash, cash equivalents, and investments, and $11.6 billion in debt.
Adjusted free cash flow—excluding the timing impact from origination and sale of pay later receivables—was $1.7 billion for the quarter, or nearly $6.8 billion on a trailing twelve-month basis, according to Miller.
Guidance reiterated; second-quarter comparisons expected to be tough
Management reiterated full-year 2026 guidance. Miller said PayPal expects slightly positive to low single-digit branded checkout TPV growth for the year, noting quarter-to-date trends were at the “low end” of that range, which is reflected in the second-quarter guide. She cited slower growth in the travel vertical and muted growth in Europe.
For the second quarter, Miller guided to low single-digit currency-neutral revenue growth, transaction margin dollars down low single digits (about 3%), transaction margin dollars excluding interest down low single digits (about 2%), mid-single-digit growth in non-transaction operating expense, and non-GAAP EPS down high single digits (about 9%). She said the quarter faces the “most demanding” year-over-year comparison, including prior-year transaction margin benefits from a partner relationship renewal and strong credit performance, as well as certain non-recurring expense items and tax-rate effects.
For the full year, Miller reiterated expectations for transaction margin dollars to decline slightly or be roughly flat (excluding interest on customer balances), approximately 3% growth in non-transaction operating expenses, and non-GAAP EPS ranging from down low single digits to slightly positive. Guidance also assumes approximately $6 billion in share repurchases and at least $6 billion of adjusted free cash flow, she said.
In Q&A, Lores also addressed questions about assets and strategy, saying his “number one priority is to maximize shareholder value” and that he believes the best approach is to invest in the three core businesses—PayPal, Venmo, and Braintree—citing synergies in cross-selling, technology, and capabilities such as risk management and identity.
Lores said the company’s near-term focus is on execution, including continued rollout of the updated checkout experience. He said 45% of non-vaulted customers are already experiencing the “new, simplified version” of checkout, and he emphasized that improved results depend on end-to-end execution, including pairing checkout with financial services and BNPL and improving marketing and presentment.
About PayPal NASDAQ: PYPL
PayPal Holdings, Inc operates a global digital payments platform that enables consumers and merchants to send and receive payments online, on mobile devices and at the point of sale. The company provides a broad set of payment solutions, including a digital wallet, merchant payment processing, checkout services, invoicing and fraud-management tools. PayPal's platform is designed to support e-commerce, in-person retail and person-to-person transfers, targeting both individual consumers and businesses of varying sizes.
Key products and services in PayPal's portfolio include the PayPal wallet and checkout ecosystem, the Venmo peer-to-peer mobile app, Braintree's developer-focused payment gateway, Xoom for international money transfers, and PayPal Credit and buy-now-pay-later options.
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