PayPal Holdings Inc. reported mixed third-quarter earnings on Tuesday, delivering stronger-than-expected profit results while narrowly missing on revenue, CNBC reports.
PayPal’s revenue for the quarter reached $7.85 billion, slightly below the $7.89 billion forecasted by analysts. The modest revenue shortfall led to a dip in shares during premarket trading, despite PayPal’s year-to-date 36% gain.
For Q3, PayPal reported adjusted earnings per share (EPS) of $1.20, beating Wall Street’s $1.07 EPS forecast. Revenue grew 6% year-over-year to $7.85 billion from $7.42 billion in Q3 2022. Net income was reported at $1.01 billion, or 99 cents per share, compared to $1.02 billion, or 93 cents per share, a year ago.
The quarter also marked CEO Alex Chriss’s first year with PayPal, during which the company has focused on improving profitability through enhanced monetization of acquisitions such as Braintree and Venmo.
Total Payment Volume (TPV), a significant metric in digital payments, rose 9% to $422.6 billion, narrowly surpassing analyst estimates. Venmo, a key platform under PayPal’s umbrella, saw an 8% increase in TPV as new partnerships with businesses like DoorDash, Starbucks, and Ticketmaster bolstered its position in consumer payments.
Although PayPal’s take rate slipped to 1.86% from 1.91% last year, its transaction margin, which gauges core business profitability, improved to 46.6% from 45.4%.
As part of PayPal’s product evolution, two new offerings were introduced this quarter: Fastlane, a one-click checkout alternative, and PayPal Everywhere, which provides 5% cash back on debit card purchases within the mobile app. The company’s new checkout feature aims to compete with Apple Pay and Shop Pay by Shopify, further underscoring Chriss’s strategy to drive value through added merchant services.
In the recent earnings release, Chriss emphasized PayPal’s “strong financial and operating results,” highlighting the progress in bringing innovative products to market, creating new partnerships, and building customer engagement.
Looking ahead, PayPal has set a conservative guidance for the fourth quarter, forecasting “low single-digit growth,” slightly below analyst expectations of 5.4% growth to $8.46 billion. The company’s guidance, as detailed in its investor materials, reflects its focus on “price-to-value strategy and prioritization of profitable growth.” Adjusted EPS is expected to fall between $1.07 and $1.11, with the midpoint aligning closely with analysts’ projections.
While the premarket dip reflects some investor caution, PayPal’s expanded product portfolio and growth in TPV indicate progress in its long-term strategy. As the company looks to maintain its position in the digital payments landscape, PayPal’s leadership remains focused on innovation and strategic partnerships to drive future growth.
