PayPal Holdings, Inc. (PYPL) Earnings & Analysis

Latest quarter

PayPal reported Q2 FY2026 revenue of $8.7 billion, compared with $8.3 billion a year earlier, and the reported result was above the consensus revenue estimate of $8.5 billion. The company reported adjusted EPS, as the consensus counts it, of $1.38, above the consensus estimate of $1.28.

The filing said revenue growth was driven primarily by 10% growth in total payment volume and favorable hedging activity. It said transaction revenue increased as revenue from Braintree and Venmo products and services rose, while PayPal product and service revenue declined primarily because of higher co-marketing campaigns with large merchants and lower foreign-exchange fee revenue. The filing reported gross margin of 39.6%, versus 41.4% a year earlier, and operating margin of 16.4%, versus 18.1%. It attributed the operating-margin decline to transaction expense growing faster, partly offset by lower transaction and credit losses. PayPal reported free cash flow of $1.8 billion, compared with $693.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chief Executive Officer Enrique Loris said revenue increased 5%, transaction margin dollars grew 1%, and transaction margin dollars excluding interest on customer balances grew 3%, with Venmo, credit and Braintree contributing to that growth. He said branded checkout total payment volume increased 2% on a currency-neutral basis, consistent with the prior quarter, while Venmo and Braintree total payment volume grew in the mid-teens.

Chief Financial and Operating Officer Jamie Miller said total payment volume was $486 billion and grew 9% on a currency-neutral basis. Miller said transaction revenue increased 5% to $7.8 billion, while transaction take rate declined seven basis points to 1.61%, citing branded co-marketing investments and mix dynamics including faster Venmo growth. She said transaction expense as a percentage of total payment volume increased slightly year over year because of a mix shift to Braintree, while transaction losses as a percentage of total payment volume improved to seven basis points.

Miller said PayPal invested more heavily during the quarter in platform and cloud modernization, risk capabilities and priority growth initiatives, which increased non-transaction operating expense. She said some of the expense increase reflected timing ahead of savings that PayPal expects to become more material in the fourth quarter. Loris said PayPal plans to focus on financial services, Venmo, payment services and higher-value consumer segments, while technology modernization is intended to support innovation over time.

In response to analysts’ questions about branded checkout, Miller said U.S. growth improved sequentially and core European markets improved to a lesser extent, while travel experienced pressure earlier in the quarter that moderated later. She also said European growth had normalized after previously high growth rates and cited greater competitive intensity. Loris said PayPal would not comment on market speculation or potential M&A discussions, while stating that the company’s focus was executing its strategic plan.

Guidance

PayPal raised its FY2026 outlook for transaction margin dollars to approximately $15.6 billion and its non-GAAP EPS outlook to $5.38, according to Miller. The company now expects FY2026 non-transaction operating expenses to grow approximately 7% to 8%, compared with its prior expectation of approximately 3% growth. PayPal now expects low-single-digit currency-neutral online branded checkout total payment volume growth for FY2026, compared with its prior outlook of slightly positive to low-single-digit growth.