PayPal's Q3 2025 Earnings Call: Contradictions Emerge in BNPL Strategy, Venmo Expansion, and Transaction Margin Forecasts

Date of Call: None provided

Financials Results

• Revenue: Transaction revenue $7.5B in Q3, up 6% (spot); TPV $458B, up 8% (spot) and 7% currency-neutral
• EPS: Non-GAAP EPS up 12% in Q3; full-year guidance $5.35–$5.39, up 15%–16%

Guidance:

• Q4 currency-neutral revenue expected mid-single digits.
• Q4 transaction margin (TM) expected $4.02B–$4.12B (~3.5% growth at midpoint) and ~5% ex-interest at midpoint.
• Q4 non-GAAP EPS $1.27–$1.31, up 7%–10%.
• Full-year TM guidance raised to $15.45B–$15.55B (5%–6% growth); excl. interest 6%–7%.
• Full-year non-GAAP EPS raised to $5.35–$5.39 (15%–16%).
• Capital return: ~ $6B buybacks, initiating dividend (10% payout ratio), adj. FCF ~$6B–$7B.

Business Commentary:

* Revenue and Profit Growth: - PayPal reported an accelerated currency-neutral revenue growth by 2 points from Q2, with transaction margin dollars excluding interest growing 7%. - The growth was driven by strong credit performance, branded checkout flow-through, improved PSP profitability, and Venmo monetization.

• Branded Experiences and Engagement:
• Branded experiences TPV grew 8% on a currency-neutral basis, with U.S. branded experiences TPV growth accelerating to 10%.

• This growth was attributed to expanding omnichannel adoption, improved U.S. online branded checkout trends, and successful initiatives like Buy Now, Pay Later and Pay with Venmo.

• Venmo Revenue Acceleration:

• Venmo TPV grew 14% in Q3, marking the fourth consecutive quarter of double-digit growth, and revenue is on pace to generate $1.7 billion this year.

• The acceleration was driven by increasing scale in the attractive demographic of young, affluent users and expanding monetization efforts.

• PSP and Enterprise Payments:

• PayPal's PSP volume growth accelerated to 6%, with improvements in revenue growth and transaction margin dollars.
• This growth was attributable to holistic relationships with merchants, increased adoption of value-added services, and expansion of the enterprise payments platform globally.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly described stronger momentum and durable profitable growth: "we are on pace to deliver at least 15% non-GAAP EPS growth this year," "this is the new PayPal, built for faster, more profitable growth," and reported broad-based TM dollar growth and raised full-year guidance.

Q&A:

• Question from Tingjin Huang (J.P. Morgan Payments): Has agentic commerce changed PayPal’s strategic priorities in any way? What’s your right to win? Can you fully fund investments here without sacrificing your incremental margins? Do you have the coverage you need to drive ubiquity with partners like OpenAI, Perplexity, Google?
  Response: Agentic aligns with existing strategy to be everywhere consumers pay; PayPal offers a single merchant integration to reach multiple LLMs, has wallet scale and announced major partnerships—will invest (product/marketing) which may be a near-term headwind but is manageable.

• Question from Harshita Rawat (Bernstein): On branded checkout deceleration and the path forward—should investors emphasize the diversified drivers of growth (slide four) given headwinds and holiday dynamics?
  Response: Q4 anticipates slower branded growth due to softer AOV and macro; management remains focused on scaling redesigned checkout, prioritization, biometrics, BNPL and Venmo, and expects U.S. proof points to scale internationally.

• Question from Dan Dolev (Mizuho): On BNPL: industry view, who are you gaining share from and in which territories? Any quantification of investments next year?
  Response: BNPL is a generational shift; PayPal is gaining traction broadly (not just vs. one player), expanding geographically (recent Canada launch), processing >20% growth and on track for ~$40B TPV in 2025; investment details for 2026 will be provided at February call.

• Question from Sanjay Sakrani (KBW): Can you map Venmo’s trajectory given recent ~20% revenue growth and the multiple levers in play—how should we think about next year and beyond?
  Response: Venmo is inflecting: MA up, debit and Pay-with-Venmo adoption driving ARPA (multi-product users 4x–6x ARPA); still early in monetization with large upside as card and Pay-with-Venmo attach rates rise.

• Question from Darren Peller (Wolfe Research): How should we think about exit growth rate into 2026 and the impact of increased investments on operating leverage and EPS next year?
  Response: Management declined to give 2026 guidance but warned investments to win in digital wallets, BNPL and agentic may pressure near-term TM and EPS growth while positioning for durable long-term upside.

• Question from Jason Kupferberg (Wells Fargo): Can you unpack Q3 transaction margin upside (credit vs other drivers) and comment on cadence of pay-sheet penetration beyond ~25% of transactions?
  Response: TM upside was broad-based across branded checkout, Venmo, PSP/VAS and credit; pay-sheet redesign + biometrics are delivering 2%–5% conversion lifts in optimized cohorts, ~25% global coverage today with rollout continuing.

• Question from Will Nance (Goldman Sachs): Quantify run-rate impacts from the Blue Owl externalization and BNPL geographic skew/penetration differences?
  Response: Blue Owl externalization had small, net-neutral Q3 operating-income impact and a modest OpEx run-rate increase into 2026; BNPL originations are global (U.S. <30% of originations today) and management is expanding omnichannel and in-store offerings.

• Question from Timothy Chiodo (UBS): Breakdown of BNPL mix (pay-now vs pay-monthly), loss rates, funding mix and unit economics—what is TM net take per unit relative to peers?
  Response: Most BNPL volumes are pay-monthly with average duration ~40 days; management says unit economics are on par or better than peers, drives higher engagement/TPV lift (~35%) but did not provide a per-unit TM net-take figure.

Contradiction Point 1

Buy Now, Pay Later (BNPL) Growth Strategy

It involves differing statements about the growth strategy and market share of PayPal's Buy Now, Pay Later (BNPL) service, which is a key revenue driver for the company.

Can you outline the current market landscape for Buy Now, Pay Later, including key competitors you're gaining market share from and the regions driving growth? Also, can you quantify your investments for next year? - Dan Dolev (Mizuho)

2025Q3: PayPal sees strong momentum in BNPL, with growth in both the U.S. and globally. - Alex Chriss(CEO)

How significant was the tariff impact on branded online checkout TPV in Q2? Is the tariff impact stable or evolving in July? - Ramsey Clark El-Assal (Barclays Bank PLC)

2025Q2: We've got 13 partners already, including the largest U.S. retailer. We're doing about 50% of the U.S. volume. - Alex Chriss(CEO)

Contradiction Point 2

Venmo Growth and Expansion

It involves conflicting statements about the growth and expansion of Venmo, a critical product for PayPal's consumer engagement and revenue growth.

What is the projected growth rate for Venmo and initiatives to drive upside beyond 2025? - Sanjay Sakrani (KBW)

2025Q3: Venmo is expanding its functionality beyond P2P to enable in-store and online purchases, increasing product engagement and ARPA. - Alex Chriss(CEO)

How do you assess the revenue and profit impact of Pay with Crypto and PayPal World? - Tien-Tsin Huang (JPMorgan Chase & Co)

2025Q2: Venmo, which is up year-over-year in active users, we are seeing some nice traction there. We expect that to continue as we continue to launch new features and expand that product. - Alex Chriss(CEO)

Contradiction Point 3

Transaction Margin Performance

It involves varying explanations of the performance and drivers of PayPal's transaction margins, which are crucial for understanding the company's financial health and growth prospects.

What are the sources of transaction margin growth in the quarter, and what is the pace of new checkout experience adoption? - Jason Kupferberg (Wells Fargo)

2025Q3: The transaction margin performance was boosted by contributions from branded checkout, Venmo, PSPVAS, and credit. - Jamie Miller(CFO)

What are the growth drivers for transaction margin dollars in the second half? - Sanjay Harkishin Sakhrani (Keefe, Bruyette, & Woods, Inc.)

2025Q2: Consistent drivers include branded checkout, PSP, VaaS, and credit. We expect interest rate headwinds and slightly less credit contribution in the second half. - Jamie S. Miller(CFO)

Contradiction Point 4

Agentic Commerce and Strategic Priorities

It involves changes in strategic focus and priorities, impacting the company's direction and potential investor perceptions.

Has agentic commerce altered PayPal's strategic priorities? What is PayPal's right to win? Can you fund investments without sacrificing incremental margins? - Tingjin Huang (J.P. Morgan Payments)

2025Q3: Agentic commerce is part of the strategy to meet customers where they are, expanding beyond online to offline and agentic. It’s a natural extension of the existing strategy. - Alex Chriss(CEO)

Are there specific initiatives currently being rolled out aimed at accelerating domestic growth, especially in the offline sector? - Mark Mahaney (RBC Capital Markets)

2024Q4: We have effectively expanded our reach exponentially off-line through these agentic means, which is a big step in our strategy to meet customers where they are. - Dan Schulman(CEO)

Contradiction Point 5

Branded Checkout Growth and Macroeconomic Impact

It involves the expected growth trajectory of a key revenue driver, painted with differing macroeconomic contexts.

Regarding branded experiences, what deceleration is expected in Q4, and how should we view the path to branded acceleration? - Harshita Rawat (Bernstein)

2025Q3: We've seen consistent mid-single-digit growth in branded checkout through the year, despite the macroeconomic pressures we've had, both here in the U.S. and in Europe. - Jamie Miller(CFO)

What are the macroeconomic headwinds? What factors are currently affecting consumer behavior? What happens to consumer spending post-holiday season? - Ygal Arounian (Wells Fargo)

2024Q4: We have seen moderate macroeconomic pressure. And in a macroeconomic environment that we had not anticipated, we did very well. - Dan Schulman(CEO)