Venmo Growth and Cost Cuts Signal Progress in PayPal Turnaround

PayPal Raises Outlook as Payments Growth Broadens

PayPal (PYPL) reported second-quarter adjusted earnings of $1.38 per share on revenue of $8.68 billion, exceeding expectations of $1.28 per share and $8.47 billion. Revenue increased 5% year over year, while total payment volume reached $486.4 billion, up 9% on a currency-neutral basis.

The payments company also raised its full-year outlook as CEO Enrique Lores advances a multiyear transformation. PayPal now expects adjusted earnings of approximately $5.38 per share and transaction margin dollars of roughly $15.6 billion, reversing earlier guidance that had called for weaker profitability.

Key Points

• PayPal reported adjusted EPS of $1.38 and revenue of $8.68 billion, while currency-neutral total payment volume grew 9% to $486.4 billion.
• Full-year adjusted EPS guidance increased to approximately $5.38, while expected transaction margin dollars rose to roughly $15.6 billion.
• Venmo, Braintree and financial services showed stronger growth, but branded checkout remained modest and higher expenses pressured operating margins.

PayPal's Raised Outlook Strengthens the Turnaround Narrative

PayPal's second-quarter results offered several signs of improvement as the company restructures under Lores, who became CEO in March.

Transaction margin dollars increased 1% to $3.9 billion and rose 3% to $3.6 billion when interest earned on customer balances was excluded. Transaction margin dollars measure the revenue PayPal retains from transactions after transaction-related costs, making the metric an important indicator of the economics behind payment growth.

The company raised its full-year transaction margin dollar outlook to approximately $15.6 billion, compared with $15.5 billion in 2025. That marks a shift from previous guidance calling for a slight decline.

The change was also visible in earnings guidance. PayPal now expects full-year non-GAAP EPS of approximately $5.38, compared with $5.31 in 2025. Previous guidance had called for results ranging from a low-single-digit decline to slightly positive growth.

PayPal also expects at least $6 billion in adjusted free cash flow and approximately $6 billion in share repurchases for the year. The company repurchased $1.5 billion of stock during the second quarter and ended the period with $15.3 billion in cash equivalents and investments and $13.4 billion in debt.

The stronger full-year outlook helped shares rise more than 4% following the report. The reaction came after a volatile year for PYPL stock, including a steep February decline and a sharp recovery in July amid takeover speculation.

Why Are Venmo and Braintree Important to PayPal's Growth?

The quarter showed that PayPal's growth is increasingly coming from businesses beyond its traditional online checkout operation.

Venmo total payment volume grew 14%, marking its seventh consecutive quarter of double-digit growth. Pay with Venmo increased 44%, while monthly active accounts for the Venmo Debit Card grew more than 50% year over year.

PayPal is working to expand Venmo from a peer-to-peer payments product into a broader money-management platform. Customers using both Venmo Debit and Pay with Venmo generated more than nine times the average revenue per active account of users relying only on peer-to-peer payments, and the number of customers using both products roughly doubled over the past year.

Braintree also remained a source of growth. Payment-services volume increased 13%, accelerating from 11% in the first quarter, while Braintree volume grew in the mid-teens. The business has delivered profitable growth for nine consecutive quarters.

PayPal is working to combine Braintree, PayPal Complete Payments and Hyperwallet on a common technology foundation while expanding services such as merchant payouts, payment optimization, lending and embedded finance.

Financial services added another source of momentum. PayPal said its portfolio of credit and buy-now-pay-later products is on pace to grow revenue at least twice as fast as the overall company this year. Buy-now-pay-later volume increased 26% during the second quarter.

Those gains helped offset slower growth in PayPal's core online branded checkout business, where currency-neutral payment volume increased 2% for the second consecutive quarter.

Broader branded experiences payment volume, which includes online checkout, PayPal and Venmo Debit, and tap to pay, increased 6%, compared with 5% in the first quarter. Debit card and tap-to-pay spending grew more than 60%, although those categories remain a relatively small part of branded experiences volume.

Cost Savings and Technology Investment Shape What Comes Next

PayPal's transformation extends beyond revenue growth. The company is restructuring operations, modernizing its technology and targeting substantial cost savings.

Management expects approximately $400 million in new gross run-rate savings by the end of 2026, part of a longer-term goal of at least $1.5 billion over the next two to three years.

PayPal plans to reinvest a significant portion of those savings into financial services, product development, marketing, risk management and technology modernization. The company is removing three organizational layers, increasing spans of control, moving from owned data centers to the cloud and building a more modular technology architecture.

Those investments are already affecting profitability.

Non-GAAP operating income declined 8% to $1.5 billion, while the non-GAAP operating margin contracted 248 basis points to 17.4%. GAAP operating income fell 5% to $1.4 billion, with GAAP operating margin declining 171 basis points to 16.4%.

Non-transaction-related expenses rose 9% as PayPal invested in modernization, risk capabilities and targeted growth programs.

GAAP net income declined to $1.1 billion from $1.26 billion a year earlier, while GAAP EPS fell to $1.25 from $1.29. Adjusted EPS of $1.38 was down 1% year over year despite exceeding expectations.

Near-term guidance also reflects continued investment. PayPal expects third-quarter adjusted earnings to decline at a low-single-digit rate from the $1.34 per share reported in the prior-year period.

Management nevertheless pointed to stabilization in branded checkout alongside stronger momentum in Venmo, Braintree and financial services as evidence that the broader transformation is beginning to take shape.

What It Means for Investors

The second-quarter earnings reaction reflects a shift in the metrics investors are watching as PayPal works through its restructuring.

Total payment volume remains substantial, reaching $486.4 billion during the quarter, while payment transactions increased 8% to 6.8 billion. But the report also highlights why transaction margin dollars, operating expenses and the composition of payment growth matter alongside overall volume.

PayPal's strongest growth came from Venmo, Braintree, buy now, pay later and other financial services, while online branded checkout grew just 2% on a currency-neutral basis. That makes the company's effort to diversify beyond its traditional checkout button central to the turnaround.

Cost execution is another important part of the picture. PayPal is targeting at least $1.5 billion in gross run-rate savings over two to three years, but it is also reinvesting part of those savings into technology and growth initiatives. That dynamic was visible in the quarter's lower operating income and narrower margins.

The raised full-year outlook provides evidence of progress. Expected transaction margin dollars have moved from a slight decline to approximately $15.6 billion, while adjusted EPS is now expected to reach roughly $5.38.

At the same time, management's third-quarter outlook shows that the transformation is still carrying near-term costs, with adjusted EPS expected to decline at a low-single-digit rate.

Takeover speculation adds another dimension. Lores said PayPal remains open to opportunities that could create superior shareholder value, but emphasized that management's current focus remains executing its own transformation plan.

Conclusion

PayPal's second-quarter report provided early evidence that its multiyear restructuring is beginning to affect both growth and expectations.

Revenue increased 5% to $8.68 billion, currency-neutral total payment volume rose 9% to $486.4 billion, and adjusted EPS of $1.38 exceeded Wall Street expectations. More importantly for the company's turnaround, PayPal raised its full-year earnings and transaction margin dollar outlooks.

Growth is also becoming broader. Venmo volume increased 14%, Pay with Venmo rose 44%, buy-now-pay-later volume grew 26%, and Braintree continued expanding at a mid-teens pace. Those businesses helped offset continued modest growth in branded checkout.

The trade-off remains visible in profitability. Higher spending on technology, risk capabilities and growth initiatives contributed to an 8% decline in non-GAAP operating income and a 248-basis-point contraction in adjusted operating margin.

PayPal's second-quarter stock move therefore reflects more than an earnings beat. The combination of improving transaction economics, faster growth across newer businesses, higher full-year guidance and planned cost savings provided measurable signs of progress, while checkout growth, margins and continued investment remain important parts of the transformation.

FAQs

What did PayPal report for second-quarter 2026 earnings?

PayPal reported adjusted earnings of $1.38 per share on revenue of $8.68 billion. Analysts had expected adjusted earnings of $1.28 per share and revenue of $8.47 billion.

Why did PayPal raise its full-year outlook?

PayPal raised its outlook after transaction margin dollars improved and businesses including Venmo, Braintree and financial services showed momentum. The company now expects adjusted EPS of approximately $5.38 and transaction margin dollars of roughly $15.6 billion for 2026.

How did Venmo perform during the quarter?

Venmo total payment volume grew 14%, Pay with Venmo increased 44%, and monthly active accounts for the Venmo Debit Card rose more than 50% year over year. PayPal is working to expand Venmo into a broader money-management platform.

What is PayPal's cost-savings target?

PayPal expects approximately $400 million in new gross run-rate savings by the end of 2026 and is targeting at least $1.5 billion over the next two to three years. Part of those savings will be reinvested in technology, financial services, marketing, risk management and product development.

What is PayPal expecting for the third quarter?

PayPal expects adjusted earnings to decline by a low-single-digit percentage compared with the $1.34 per share reported in the year-ago quarter as the company continues investing in its transformation.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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