PayPal NASDAQ: PYPL reported third-quarter 2026 results that exceeded its guidance, as transaction margin dollar growth, lower operating expenses and momentum in financial services and Venmo supported an 8% increase in non-GAAP earnings per share.
Chief Executive Officer Enrique Lores said the company is pursuing a broader strategy designed to diversify growth beyond branded checkout and expand its role in consumers’ financial lives. He said financial services, Venmo and payment services are expected to account for a larger share of transaction margin dollar growth over time.
“This quarter, we are beginning to see our strategy translate into financial results,” Lores said. PayPal generated approximately 2% growth in transaction margin dollars, non-GAAP EPS growth of 8%, $2 billion in adjusted free cash flow, and more than $1.6 billion in capital returned through buybacks and dividends during the quarter.
Financial Services and Venmo Drive Growth
Financial services represented more than 20% of PayPal’s transaction margin dollars in 2026 and were growing at a double-digit rate, according to Lores. The company cited momentum in buy now, pay later offerings, credit products, debit products, tap to pay and merchant lending.
PayPal expanded Pay Later distribution through merchants including Amazon in Germany and Austria, American Eagle, Aerie and Dick’s Sporting Goods. The company said Pay Later grew 25% during the quarter, while Pay with Venmo grew 43%.
Venmo sustained double-digit total payment volume growth for an eighth consecutive quarter, while average revenue per active account also rose at a double-digit rate. Venmo’s debit card reached 6.7 million monthly active accounts, up more than 55% from a year earlier, with 1.6 million first-time users during the third quarter.
Lores said only 23% of Venmo customers currently use its financial-services products, leaving room to increase adoption. He said the company sees a “4x to 5x opportunity” to increase Venmo average revenue per active account relative to benchmarked peers.
PayPal also relaunched the Venmo credit card with rewards for customers who split purchases with friends. Monthly active accounts using both the Venmo debit card and Pay with Venmo nearly doubled year over year, management said.
Branded Checkout Stabilizes, While Europe Remains a Challenge
Online branded checkout total payment volume growth remained in the 1% to 2% range for the fourth consecutive quarter. Management pointed to continued improvement in the U.S. and stabilization in Germany, but said the removal of the European Union’s de minimis tax exemption created about 70 basis points of headwind to total branded checkout growth.
Chief Financial and Operating Officer Jamie Miller said the de minimis impact continued into October and is expected to persist through the fourth quarter. The company expects low-single-digit currency-neutral online branded checkout total payment volume growth for the full year and similar 1% to 2% growth in the fourth quarter.
In the U.S., PayPal is applying a merchant playbook centered on checkout experience, product presentment, consumer marketing and increasing selection of PayPal at checkout. Lores said the company has seen improved checkout performance at merchants where it has deployed multiple elements of the program.
Management plans to extend that approach across more merchants and international markets. Miller said Germany had been stable and was showing slight improvement, while Italy and France were stable and growing. The United Kingdom remained challenging but consistent with trends earlier in the year.
Cost Program Supports Investment Plans
PayPal reduced headcount by more than 2,000 and removed three organizational layers across most of the company, Lores said. The company also reduced management roles by more than a quarter, increased spans of control and resized procurement spending.
Non-transaction operating expenses increased just 1% in the third quarter, helping drive 3% growth in non-GAAP operating income. PayPal remains on track to produce at least $1.5 billion in gross run-rate cost savings over two to three years and now expects more than $700 million in run-rate savings exiting the fourth quarter.
The company intends to reinvest a significant portion of those savings in financial services, product development, consumer lifecycle marketing, specialized sales teams and merchant initiatives. Miller cautioned investors not to annualize the third-quarter expense performance because PayPal expects to continue funding growth opportunities.
PayPal also said it is modernizing its technology infrastructure. During the quarter, it migrated 7.5 billion customer records to cloud infrastructure and said its AI-based risk platform nearly halved credit decision times in Canada, Italy and Spain. Its AI chat agents have resolved more than 24 million customer-service contacts year to date across 190 countries and six languages.
Guidance Raised; 2027 Investment Expected
For full-year 2026, PayPal raised its outlook and now expects approximately $15.7 billion in transaction margin dollars, or $14.6 billion excluding interest on customer balances. It expects non-GAAP EPS of approximately $5.60, adjusted free cash flow of at least $6.5 billion and approximately $6 billion in share repurchases.
For the fourth quarter, PayPal expects low-double-digit currency-neutral revenue growth, slightly positive transaction margin dollar growth, flat to low-single-digit non-transaction operating expense growth and non-GAAP EPS of approximately $1.43.
Looking further ahead, Lores said PayPal believes it can achieve sustainable mid-single-digit transaction margin dollar growth over time and solid double-digit EPS growth, supported by operating leverage and capital allocation. The company plans to increase investment in 2027 while targeting non-GAAP EPS growth similar to 2026.
In response to an analyst question about strategic alternatives, Lores said the board and management would evaluate any options objectively but believe executing the company’s current plan offers the best path to shareholder value. He added that PayPal expects to continue returning significant capital to shareholders while considering selective acquisitions that meet strategic, financial and operational criteria.
About PayPal (NASDAQ:PYPL)
PayPal Holdings, Inc operates a global digital payments platform that enables consumers and businesses to send, receive, and manage money online and through mobile devices. Its services support online checkout, peer-to-peer payments, money transfers, payment processing, invoicing, and other commerce-related transactions.
The company's portfolio includes the PayPal and Venmo brands, Braintree's payment processing technology, and Xoom's international money transfer service. PayPal also offers merchant tools, digital wallets, payment solutions, and consumer financing products through its platform and related services.
PayPal traces its origins to 1998 and became an independent publicly traded company after separating from eBay in 2015.
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