PayPal Holdings (NASDAQ:PYPL) reported first-quarter financial results on Tuesday. The transcript from the company’s first-quarter earnings call has been provided below.
Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.
The full earnings call is available at https://events.q4inc.com/attendee/883299998
Summary
PayPal Holdings reported modest growth with total payment volume up 11% at spot and 8% currency neutral, reaching over $460 billion.
The company announced strategic initiatives focusing on three core business areas: checkout solutions, consumer financial services, and payment services, with an emphasis on modernizing their technology platform and accelerating AI adoption.
Future guidance remains cautiously optimistic with full-year 2026 expectations of slightly positive to low single-digit growth in branded checkout TPV, despite headwinds like high fuel prices and macroeconomic pressures.
Key operational highlights include reorganizing to simplify operations, reducing costs by $1.5 billion over the next two to three years, and prioritizing investments to drive durable growth.
New CEO Enrique Loris emphasized the need to balance investment between consumer and merchant networks, streamline decision-making, and enhance customer value propositions.
Full Transcript
Sarah (Operator)
Good morning and welcome to PayPal’s first quarter 2026 earnings conference call. My name is Sarah and I will be your conference operator today. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today’s conference, Steve Winoker, PayPal Holdings’ Chief Investor Relations Officer. Please go ahead.
Steve Winoker (Chief Investor Relations Officer)
Thanks Sarah. Welcome to PayPal’s first quarter 2026 earnings call. I’m joined by CEO Enrique Loris and Chief Financial and Operating Officer Jamie Miller. Our remarks today include forward looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Our commentary is based on our best view of the world and our businesses as we see them today as described in our earnings press release, SEC filings and on our website. Those elements may change as the world changes. Over to you Enrique.
Enrique Loris (Chief Executive Officer)
Thank you Steve and thank you to everybody for joining us this morning. I’m stepping into this role at an important moment for PayPal. I appreciate the opportunity to serve as CEO and I’m confident we will accelerate the growth of the company while improving profitability and cash flow. That is why I’m here. At the same time, I’m also realistic to that we need to make significant changes to improve the strategic and operational issues the company has faced. Today I will share what I have observed since joining the company, how we are shaping our strategic direction and the actions we are taking to move forward with focus and discipline. During my time on the board, I developed a good understanding of PayPal, strengths, opportunities and areas for improvement. Over the past two months I have listened to and learned from our customers, our teams and our investors. This has helped to deepen my view of where we are, where we need to go and how we get there. I will begin with a few initial observations. First, our foundation is strong. The company has valuable assets in our brands, our risk and underwriting capabilities, our technology and most importantly, our team. Our scale and global reach set us apart and are difficult to replicate and the hard earned trust our customers place in us every day is a critical advantage. Second, we operate in markets defined by growth and rapid change. It is during this period that leading companies find ways to differentiate themselves by innovating, delivering new and superior solutions and driving durable growth. This is where PayPal needs to focus. Third, one of our core strengths is our two sided network, serving both consumers and merchants. In recent years, PayPal has put more energy into the merchant side of the network, strengthening the value we offer to the hundreds of millions of consumers who choose PayPal and Venmo, is a key priority. Doing that, we increase the value of our platform for merchants and create a stronger foundation for sustainable growth. Fourth, due to years of underinvestment, we need to accelerate the modernization of our technology platform. Moving faster to become cloud native and aggressively adopting AI in our development processes will help us significantly increase developer productivity and short term time to market. Fifth, we need to simplify how we operate, streamline decision making and clearly define accountability to strengthen execution. Finally, there is potential to significantly reduce the company cost structure. Simplifying the organization and accelerating the adoption of AI across the company will generate significant savings that can be reinvested in growth and used to respond to business headwinds, improving our overall financial profile over time. With this as a context, we need to recommit to the fundamentals. That includes becoming a technology company again, sharpening our focus on consumers, aligning the company around three strong businesses and simplifying how we work with clear accountability and a stronger emphasis on execution. I expect that it will take a few months to completely define our new plan, but I think it is important to start sharing the direction we are taking and some of the actions we have underway. Let me start by sharing the framework we are using to define our strategy. We see three distinct, attractive and in many ways complementary market opportunities where focused investment and sharper execution can meaningfully improve our growth trajectory. Checkout, consumer financial services and payment services. Each has clear near term levers to improve the performance of our existing assets as well as compelling medium term growth opportunities. And in every case we have a strong right to win. I will take each in turn. Let me start with checkout. This is a large and growing market where we deliver meaningful value to consumers and merchants. Within checkout. We also see strong consumer demand for flexible payment options including buy now, pay later solutions. This is becoming an important driver of consumer acquisition while also delivering clear benefits to merchants through higher basket sizes. The second opportunity is in consumer financial services. Consumers are increasingly turning to digital platforms to handle everyday financial activities. This is also a large market opportunity worth more than $200 billion annually in just our top six markets and it is growing at low double digits. What is most attractive about this market is not only size and growth, but also the customer lifetime value opportunity we can tap into. The third opportunity is in payment processing and value added services. The PSP space represents significant untapped value for us driven by the continued shift to digital channels and the increasing complexity of global payments. We are aligning the organization to unlock these growth opportunities. Previously our teams were organized primarily around the customers we serve, consumers, small businesses and large enterprises. That structure resulted in organizational complexity with multiple dependencies and handoffs that slowed decision making and weakened execution. Check out, for example, touched all customer groups and markets, creating a multidimensional matrix for roadmap prioritization. The changes we announced last week will organize the company into three lines of business, each with a single Checkout Solutions and PayPal, Consumer Financial Services and Venmo and Payment Services and Crypto. And importantly, we are bringing together the two sides of the network to maximize our competitive advantage. Simplifying our operating model and clarifying accountability means that each leader will learn clear outcomes and our teams will be able to focus on our most important growth priority. We’re also using these changes to simplify and delayer our organization and we have formed a new AI Transformation and simplification team that will help us work more effectively and drive our enterprise wide AI agenda. Let me now outline how we are thinking about the path forward across each of our businesses. Checkout solutions and PayPal is primarily a checkout focused business and is the highest priority for the company and me. It brings together our consumer and merchant ecosystems under one unified strategy. This structure will enable us to fully leverage our two sided network and accelerate innovation across both sides of the platform. Our intent is not to chase transitory share in any given quarter, but rather to focus on segments and verticals of where we can deliver differentiated value to our customers. I have also emphasized that strengthening the consumer side of the network is key to increasing the value we deliver to merchants. Driving habituation through the adoption of our financial services offerings is an important step toward enhancing the consumer value proposition and reinforcing the power of of our two sided network and our PayPal loyalty program which we introduced in the UK and will expand to additional market is another important step. Over the medium to long term we have a number of compelling innovative initiatives underway. We will take a disciplined approach to prioritization, focusing resources and areas with the greatest potential to drive durable growth and shareholder value. Within this portfolio we will be highly selective as we evaluate our broad set of initiatives including Digital wallet, interoperability, biometric functionality and additional programs under consideration within consumer financial services and Venmo. We have been making good progress in the last few years and have built a strong portfolio of related products, but awareness and adoption remain well below their full potential. Our focus is on becoming more central to our customers financial lives and our goal is to enable consumers to send, spend, save, invest and borrow seamlessly. Venmo will be a key component of our growth plans moving forward. Supported by strong brand and younger demographic, we are in a strong position to expand in this space, deepen engagement and increase customer lifetime value. Payment services and Crypto unifies our processing and platform capabilities into a single scalable offering for merchants. We will bring together the company’s unbranded processing capabilities including Braintree and Value added services such as Fraud Management, Authorization Optimization and Global Payment Infrastructure. They are designed to support businesses of all sizes with flexible, high performance payment solutions. We are also well positioned to capture and monetize its growth. Stablecoin is also part of this enabling faster, lower cost transactions. We have made good progress with PyUSD, which became the largest federally regulated stablecoin in December and we recently expanded its availability to 70 markets globally. At the same time, we have much more opportunity to scale our offerings and accelerate growth in this space across the company. We need to modernize our technology platform to enable greater speed and interoperability across our offerings. As I said earlier, leveraging AI more extensively in our development processes will significantly help us with this effort. Supporting our growth plans is the opportunity to realize cost savings. First, we will remove duplication and layers from our organizational structure. Second, we will accelerate our AI adoption and automation across our operations. Combined, the savings will be significant. We expect to see at least $1.5 billion of gross fund rate savings over the next two to three years. Jamie will discuss more on this point later in the call. Let me touch briefly on some highlights from the quarter before Jamie takes you through our results in more detail. Our first quarter results show some improvement in branded checkout. Branded checkout TPV growth was 2% on a currency neutral basis up from 1% last quarter. We continue to see strength in key parts of the business with Venmo and PST delivering mid teens TPV growth. Transaction margin dollars excluding interest on customer balances grew 3% with contributions from Credit Vembo and PST. Non GAAP earnings per share grew 1%. We also continue to generate robust free cash flow giving us ample room to invest and return capital to shareholders through buybacks and our dividend. On the operational side, our team accomplished a lot in the first quarter from securing apps in presentment on key merchants to enabling interoperability for peer to peer payments between PayPal and Venmo to close. I am confident in our ability to put this company on a more durable path to long term growth and shareholder value creation. We have a strong foundation and we are now organized to move with greater urgency. We have a well defined framework and we will continue to define our strategy and prioritize our plan in line with it. I look forward to sharing more progress as we move ahead. And finally, I want to thank our teams for their continued focus and execution and our customers and shareholders for their trust. I will now turn it over to Jamie.
Jamie Miller (Chief Financial and Operating Officer)
Thanks Enrique. The team and I are energized by the focus, clarity and disciplined prioritization you are already bringing to PayPal. We have a strong market position and a solid foundation and I’m confident we are set up to move faster from here. Turning to the financials in More detail on slide 7 PayPal delivered a solid quarter with both transaction margin dollars and non GAAP earnings per share coming in moderately better than our guide. Total payment volume accelerated to 11% at the spot rate and 8% currency neutral in the first quarter, reaching over $460 billion. Online branded checkout volume growth improved slightly from the fourth quarter while enterprise Payments and Venmo both accelerated into the mid teens. First quarter revenue grew 7% on a spot and 5% on a currency neutral basis. TM dollars excluding interest on customer balance grew 3% in the first quarter. The drivers of our TM dollar growth were broad based, led by credit performance, Venmo monetization, PSP profitability and loss improvement across multiple products. Growth in these areas more than offset the headwind from investments we are making to strengthen our branded checkout position and drive higher engagement, habituation and incremental activity over time. First quarter non GAAP earnings per share increased 1% to $1.34 and compared to our guidance, non GAAP EPS benefited from stronger transaction margin dollar growth with some offset from higher non transaction operating expense. We expect the second quarter to reflect more pressure on a year over year basis driven by the non recurrence of certain prior year items and the timing of anticipated cost savings and investment, both of which I’ll walk through in more detail shortly. Importantly, these are factors we anticipated and we remain confident in our full year 2026 guidance. Adjusted free cash flow, which excludes the timing impact from the origination and sale of pay later receivables, was $1.7 billion or nearly $6.8 billion on a trailing 12 month basis. Turning to slide 8, we continue to drive deeper, more active relationships with our customers. Monthly active accounts increased 1% to 225 million. Transactions per active account excluding PSP improved sequentially to 6% growth. Moving to slide 9 total payment volume in the first quarter grew 11% at the spot rate and 8% on a currency neutral basis to 464 billion. Working our way down the page branded experiences TPV, which includes online checkout, PayPal and Venmo debit as well as Tap to pay grew 5% compared to 4% in the fourth quarter. While debit card and Tap to Pay spend represent a small portion of branded experience’s volume today, they continue to grow rapidly, up 60% year over year. Venmo TPV continues to reach new highs, accelerating sequentially to 14% growth year over year and marking the sixth consecutive quarter of double digit growth. Online branded checkout volume growth improved slightly compared to last quarter, up 2% on a currency neutral basis. Compared to the fourth quarter we saw a slight improvement in the US with softer performance continuing in Europe. Pay with Venmo and Buy Now, Pay later continue to outpace the market, taking share from other payment methods and growing 34% and 23% respectively. P2P and other consumer volume growth remains healthy, up 10% in the first quarter and reflecting the debit card and Venmo momentum …
This post was originally published here
