PayPal (PYPL) Stock Rises After Earnings Beat Despite Weak Q2 Guidance

TLDR

• PayPal reported Q1 adjusted EPS of $1.34, beating the $1.27 analyst estimate
• Revenue came in at $8.35 billion, up 7% year-over-year, topping the $8.1 billion Wall Street forecast
• New CEO Enrique Lores announced a restructuring into three business segments
• PayPal expects a 9% decline in adjusted EPS for Q2, worse than the 4% drop analysts had predicted
• The company is targeting at least $1.5 billion in gross run-rate savings over the next two to three years

PayPal (PYPL) stock edged up 0.9% in premarket trading Tuesday after the company posted better-than-expected first-quarter results, though a soft Q2 outlook kept gains in check. The stock was already down 14% for the year heading into the print.

PayPal Holdings, Inc., PYPL

Adjusted EPS came in at $1.34, just ahead of the $1.27 consensus estimate from FactSet. Revenue totaled $8.35 billion, up 7% year-over-year and above the $8.1 billion Wall Street had penciled in.

Total payment volume rose 11% to $464 billion. Payment transactions grew 7% to 6.5 billion. Active accounts remained flat at around 439 million, meaning the growth is coming from existing users spending more, not new user additions.

On the profitability side, GAAP net income fell 14% to $1.11 billion. GAAP operating margin contracted to 17.8%, down about 182 basis points from a year ago.

Free cash flow came in at $903 million. PayPal returned $1.5 billion to stockholders through share repurchases and declared a quarterly dividend of $0.14 per share, payable June 25, 2026.

Restructuring Under New CEO

The earnings came alongside a restructuring announcement from new CEO Enrique Lores. PayPal is splitting into three business segments: checkout, consumer financial services, and payment processing.

The company also announced a cost-savings initiative tied to simplification and faster AI adoption, targeting at least $1.5 billion in gross run-rate savings over the next two to three years.

Lores took over earlier this year with a mandate to turn things around at the payments company.

Q2 Guidance Disappoints

Despite the Q1 beat, the forward outlook gave investors pause.

PayPal guided for a 9% decline in adjusted EPS for Q2. Analysts had been expecting a drop closer to 4%. That’s a meaningful gap.

Full-year 2026 guidance was reiterated. The company still expects GAAP EPS to decline mid-single digits and non-GAAP EPS to range from a low-single digit decline to slightly positive.

Management described Q1 as a “solid start” despite what it called a complex operating environment.

The board declared a $0.14 per-share cash dividend payable on June 25, 2026.

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