PayPal Holdings, Inc.
PYPL · Nasdaq
Next quarter
Reports Oct 27, 2026.
Consensus is $1.32 EPS for Sep 2026 across 11 estimates, ranging $1.29 to $1.40.
PYPL Jun 2026
- 7.81%
- +0.05%
- $1.28
- $1.38
- —
- —
Highlights
- Earnings beat: Non-GAAP diluted EPS was $1.38 versus the $1.28 consensus estimate, a 7.81% surprise; GAAP diluted EPS was $1.25.
- Payment growth: TPV increased 10% year over year to $486.4 billion, or 9% FX-neutral, while payment transactions rose 8% to 6.8 billion.
- Revenue: Net revenue grew 5% to $8.68 billion, including 3% FX-neutral growth; revenue was up 4% sequentially from $8.35 billion in Q1.
- Profit pressure: Non-GAAP operating income declined 8% to $1.51 billion and margin contracted 248 basis points to 17.4%; GAAP operating income fell 5% to $1.43 billion.
- Core monetisation: Transaction margin dollars increased 1% to $3.90 billion, or 3% excluding $281 million of interest on customer balances; transaction margin fell to 44.9% from 46.4%.
- Engagement: Payment transactions per active account rose 3% year over year to 60.0, while active accounts increased just 0.3% to 439 million and declined by 0.2 million sequentially.
- Guidance raised: FY2026 non-GAAP EPS guidance moved to approximately $5.38 from prior guidance ranging from a low-single-digit decline to slightly positive growth; GAAP EPS guidance remains a mid-single-digit decline from $5.41 in FY2025.
- Cash returns: PayPal generated $1.78 billion of free cash flow and repurchased approximately 33 million shares for $1.5 billion in the quarter; trailing-12-month shareholder returns reached $6.0 billion.
- Transformation costs: The April reorganization targets at least $1.5 billion of annualized gross savings over two to three years, with a potential $120 million-$140 million transformation charge in the second half of 2026.
Analysis
PayPal’s second quarter was a volume-growth and execution print rather than a margin-growth quarter. Non-GAAP EPS of $1.38 exceeded the $1.28 consensus by 7.81%, although it declined 1% from $1.40 a year ago; GAAP EPS was $1.25 versus $1.29 a year ago. Revenue rose 5% year over year to $8.68 billion and 4% sequentially from $8.35 billion, while GAAP operating income fell to $1.43 billion from $1.50 billion in Q2 2025 and $1.49 billion in Q1 2026. Net income was $1.10 billion, roughly flat sequentially but down from $1.26 billion a year ago.
The defining feature was stronger payment activity, with TPV up 10% to $486.4 billion and transactions up 8%, but limited earnings conversion. Non-GAAP operating margin fell to 17.4% from 19.8%, reflecting higher technology, customer operations and administrative costs, while transaction margin dollars grew only 1%. PayPal nevertheless raised full-year non-GAAP EPS guidance to approximately $5.38, alongside improving cash generation and substantial buybacks. Management is also undertaking a broad reorganization aimed at at least $1.5 billion of annualized savings, though second-half transformation charges and continued branded-checkout execution remain important parts of the outlook.
Payment activity
PayPal delivered its strongest operating momentum in payment volumes and engagement, with management describing branded checkout as further stabilised and highlighting momentum in Venmo and Braintree. The improvement was driven more by usage than account additions.
- TPV: Total payment volume increased 10% year over year to $486.4 billion, or 9% on an FX-neutral basis, and rose 5% sequentially.
- Transactions: Payment transactions increased 8% to 6.8 billion; excluding PSP transactions, growth was 7%.
- Engagement: Trailing-12-month transactions per active account rose 3% to 60.0, while the ex-PSP measure increased 7%.
- Accounts: Active accounts increased only 0.3% to 439 million and fell by 0.2 million sequentially, indicating that higher activity per account—not user-base expansion—was the main growth driver.
Margin and transformation
The quarter’s main weakness was earnings conversion. Payment growth translated into only modest transaction-margin-dollar expansion, while investment and restructuring spending weighed on operating margins.
- Transaction economics: Transaction margin dollars increased 1% to $3.90 billion, or 3% excluding $281 million of interest on customer balances. Transaction margin declined to 44.9% from 46.4% a year earlier.
- Operating income: Non-GAAP operating income fell 8% to $1.51 billion and non-GAAP margin contracted 248 basis points to 17.4%; GAAP operating margin declined 171 basis points to 16.4%.
- Cost mix: Technology and development expense rose to $849 million from $767 million, customer support and operations increased to $462 million from $413 million, and general and administrative expense rose to $503 million from $461 million.
- Reorganization: The April strategic reorganization is intended to simplify the operating structure and increase AI and automation adoption. PayPal expects at least $1.5 billion of annualized gross savings over two to three years, with roughly $400 million of potential run-rate savings from actions targeted for completion by year-end.
Raised financial outlook
Management raised the full-year non-GAAP outlook despite the margin contraction in the quarter, reflecting confidence in payment-volume execution and the broader transformation plan. The raise is concentrated in the adjusted measure rather than GAAP earnings.
- FY2026 non-GAAP EPS: Guidance is now approximately $5.38, up from prior guidance calling for a low-single-digit decline to slightly positive growth; FY2025 non-GAAP EPS was $5.31.
- FY2026 GAAP EPS: Guidance remains a mid-single-digit decline from FY2025 GAAP EPS of $5.41.
- Third quarter: PayPal expects both GAAP and non-GAAP EPS to decline by a low-single-digit percentage from Q3 2025 levels of $1.30 and $1.34, respectively.
- Near-term charges: The company expects approximately $120 million-$140 million of transformation-related charges in the second half of 2026, while the full-year non-GAAP guidance assumes approximately $350 million of adjustments excluding potential second-half transformation charges.
Cash returns and liquidity
Cash generation and capital returns were substantial, supported partly by working-capital and credit-receivable timing. PayPal continued to reduce its share count while initiating a regular dividend.
- Cash flow: Operating cash flow was $1.98 billion versus $898 million a year ago, while free cash flow was $1.78 billion versus $692 million. Adjusted free cash flow, excluding BNPL receivable timing, was $1.83 billion.
- Repurchases: PayPal repurchased approximately 33 million shares for $1.5 billion in Q2. Over the trailing 12 months, it repurchased approximately 111 million shares for $6.0 billion.
- Dividend: The board declared a quarterly cash dividend of $0.14 per share, payable September 25, 2026.
- Liquidity and debt: Cash, cash equivalents and investments totaled $15.3 billion at quarter-end against $13.4 billion of debt. PayPal also issued $2.0 billion of fixed-rate notes in May 2026.
Credit and oversight
Credit performance improved in the quarter, while the filing continued to identify regulatory and litigation matters as areas of uncertainty. The company’s lending activity remains meaningful but is increasingly supported by receivable sales.
- Losses: Transaction and credit losses declined to $397 million from $476 million a year ago, and the loss rate fell to 0.08% of TPV from 0.11%.
- Consumer credit: Consumer receivables were $5.5 billion net of participation interests, with 96.6% current at June 30, 2026; the allowance was $348 million.
- Merchant credit: Merchant loans and advances totaled $1.9 billion, with 89.6% current and an allowance of $185 million.
- Receivable sales: During the first six months, PayPal derecognized $15.9 billion of loans held for sale and received $15.8 billion of net proceeds.
- Regulatory matters: The filing disclosed ongoing investigations or information requests from the FTC, CFPB, German Federal Cartel Office and U.K. FCA, including a new FCA investigation related to Visa and Mastercard wallet provisions. Accrued legal and regulatory liabilities were not material as of June 30, 2026.
