Key insights
- PayPal raised its 2026 adjusted profit forecast, signaling progress in its multi-year turnaround strategy. The company expects approximately $5.60 per share in full-year adjusted profit, exceeding previous guidance and analyst expectations. This upward revision is supported by improving margins, resilient consumer spending, and significant cost-saving initiatives, including job cuts and managerial role reductions, aiming for $700 million in gross run-rate cost savings by 2026. Efforts to streamline operations and adopt AI are also contributing to the positive outlook.
By Manya Saini
Oct 27 (Reuters) - PayPal lifted its annual adjusted profit forecast on Tuesday, as a years-long turnaround starts to bear fruit, with improving margins and resilient consumer spending providing fresh momentum.
The company has stepped up efforts to revive growth, most recently under CEO Enrique Lores, as it struggles to sustain its pandemic-era popularity amid intense competition from Apple and Google and newer fintechs.
"We are making good progress in our multi-year transformation," Lores, who took the helm earlier this year after the board ousted Alex Chriss over dissatisfaction with the pace of change and execution, said in a statement.
"While there is more work to do, we are increasingly confident in our path to durable, profitable growth and remain focused on execution," he added.
The payments company now expects full-year adjusted profit of about $5.60 per share, compared with its previous forecast and Wall Street analysts’ expectations of $5.38, according to estimates compiled by LSEG.
REVIVAL ON TRACK
The company said it was on track to achieve $700 million in gross run-rate cost savings by the end of 2026, driven by cuts to more than 2,000 jobs and a reduction of over 25% in managerial roles.
Efforts to streamline operations, optimize its portfolio and accelerate AI adoption, including using AI chat agents to support customer service, are also supporting the cost-management efforts, PayPal said.
The company has set a goal of securing at least $1.5 billion in gross run-rate savings over the next two to three years.
Adjusted operating margin, a key metric for investors, expanded 16 basis points to 18.8% in the third quarter.
Earlier this year, Reuters reported, citing sources, that PayPal had received a buyout offer of $60.50 per share from Stripe and private equity firm Advent International, a bid that many analysts described as "low-ball."
The offer, which valued PayPal at about $53 billion, was reportedly deemed inadequate by the board and represented a fraction of the roughly $360 billion valuation the company commanded at its peak in 2021.
SPENDING ENGINE KEEPS HUMMING
More broadly, US consumers have continued to open their wallets despite economic uncertainty and sticky inflation, helping sustain spending growth across the payments industry.
PayPal’s total payment volume grew 7% on a foreign exchange-neutral basis to $487.1 billion in the third quarter.
Adjusted profit came in at $1.45 per share in the three months ended September 30, sailing past estimates of $1.31.
The year-end holiday season brings a crucial sales period for the payments sector, as retailers roll out eye-catching discounts and doorbuster deals online and in stores for Black Friday, Cyber Monday and Christmas.
PayPal expects adjusted profit in the fourth quarter to come in at $1.43 per share, well above Street expectations of $1.35 and $1.23 a year earlier.
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