PayPal Holdings Inc. (NASDAQ:PYPL) reported better-than-expected third-quarter earnings Tuesday, supported by improving margins, resilient consumer spending and cost reductions, although revenue fell short of Wall Street expectations.
Following the results, the stock is trading nearly 2% lower.
The payments company, which owns Venmo, reported revenue of $8.58 billion, up 2% from a year earlier but below the analyst consensus estimate of $8.71 billion. Adjusted earnings were $1.45 per share, beating expectations of $1.31.
Payment Volume Growth Remains Strong
Total payment volume rose 6% year over year to $487.1 billion, while payment transactions increased 7% to 6.8 billion.
Transactions per active account rose 6% to 60.8 on a trailing 12-month basis.
Transaction margin dollars increased to $3.95 billion, exceeding the $3.89 billion consensus estimate, Bloomberg reported.
Active accounts rose 0.6% from a year earlier to 440 million, an increase of 1.6 million from the previous quarter.
Cost Cuts Support Turnaround
Profitability remained under pressure. Operating margin narrowed 173 basis points to 16.3%, while adjusted operating margin was little changed at 18.8%.
CEO Enrique Lores said, “We are making good progress in our multi-year transformation.”
PayPal said it remains on track to achieve $700 million in gross run-rate cost savings by the end of 2026, driven partly by more than 2,000 job cuts and a reduction of more than 25% in managerial roles.
The company is also streamlining operations, optimizing its portfolio and expanding its use of artificial intelligence, including AI-powered customer service agents.
PayPal aims to generate at least $1.5 billion in gross run-rate savings over the next two to three years.
The company generated $1.59 billion in operating cash flow, $1.43 billion in free cash flow and $2.05 billion in adjusted free cash flow during the quarter.
As of Sept. 30, PayPal held $15.1 billion in cash, cash equivalents and investments, compared with $14.8 billion at the end of 2025.
The board declared a quarterly dividend of 14 cents per share, payable Dec. 24.
PayPal also returned $1.5 billion to shareholders through the repurchase of about 28 million shares during the quarter.
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Resilient Consumer Spending Supports Growth
PayPal benefited from steady consumer spending despite economic uncertainty and persistent inflation.
The company is also expanding beyond its traditional checkout business and targeting higher-value consumers as it seeks to diversify revenue sources and strengthen long-term growth.
Competition and Strategic Changes Remain in Focus
PayPal continues to face stiff competition from Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG) Google and emerging financial technology companies as it seeks to regain momentum following its pandemic-era growth surge, Reuters reported Tuesday.
The company has also undergone a CEO transition and restructuring while attracting takeover interest.
A reported bid from Stripe and Advent International valued PayPal at about $53 billion, but the board considered the offer inadequate.
PayPal Raises 2026 Earnings Outlook
PayPal expects fourth-quarter adjusted earnings of about $1.43 per share, above the analyst consensus estimate of $1.35.
The company also raised its full-year 2026 adjusted earnings forecast to about $5.60 per share, up from its previous outlook of about $5.38.
Analysts expect full-year adjusted earnings of $5.39 per share.
PYPL Stock Price Action
PYPL Price Action: PayPal Holdings shares were down 1.98% at $53.90 during premarket trading on Tuesday, according to Benzinga Pro data.
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