PayPal’s Q3 Earnings Show Mixed Results as Q4 Guidance Disappoints Investors
2min read PayPal (PYPL) reported mixed third-quarter results that sparked a sell-the-news reaction, with shares down by around 5 percent. Despite posting earnings that exceeded analyst expectations and showing consistent growth in total payment volume (TPV) and active accounts, the company’s revenue slightly missed the mark, and its fourth-quarter guidance fell short of consensus. This outcome, combined with PayPal’s recent 52-week high, contributed to today’s mild profit-taking as investors recalibrate expectations for the rest of the year.
Q3 Results and Revenue Highlights
In the third quarter, PayPal achieved revenue growth of 6 percent year-over-year, reaching $7.85 billion. This growth, while solid, represented a slight deceleration compared to the previous quarter, as PayPal faced challenging comparisons from last year. TPV grew by 9 percent, while payment transactions increased by 6 percent, illustrating the company’s steady performance in its core payment processing business.
Adjusted earnings per share (EPS) rose by 22 percent year-over-year to $1.20, exceeding PayPal’s guidance. The growth in EPS was fueled by ongoing optimizations across transaction loss, improvements in Venmo’s operations, and a better credit environment. PayPal’s transaction margin dollars, a key measure of payment processing profitability, grew by 8 percent in the quarter, with its Braintree platform—focused on small and medium-sized businesses—contributing substantially to this margin growth.
Venmo and Transformation Initiatives Progress
PayPal continues to focus on expanding Venmo’s capabilities, as part of its broader transformation strategy to evolve from a payments-only company into a comprehensive commerce platform. Venmo, a key driver of future growth, saw some positive developments in the quarter, including a 30 percent increase in monthly active debit card accounts. However, only 5 percent of Venmo’s total active accounts are monthly, highlighting substantial growth potential yet to be tapped.
Other transformation initiatives are also moving forward. PayPal’s global branded checkout volumes increased by 6 percent in the quarter, consistent with the mid-single-digit growth rates of the past few years. Meanwhile, PayPal launched its PayPal Complete Payments Platform (PCP) in China and Hong Kong last month, with plans to expand into additional markets in 2025. PCP, designed for small and medium-sized businesses, has successfully converted volume from PayPal’s legacy products, with 40 percent of SMB volume now processed through PCP where it is available.
Guidance and Profit-Taking Concerns
While PayPal’s third-quarter performance underscored the stability of its core operations amid a significant transformation, the company’s fourth-quarter guidance raised concerns. PayPal expects only low to mid-single-digit growth in adjusted EPS and a low single-digit improvement in revenue for the fourth quarter, in line with its previous yearly outlook and reflective of a stable but slow macroeconomic environment. Investors were particularly disappointed with this guidance, as it suggested limited upside potential in the near term.
The conservative guidance partly reflects PayPal’s ongoing shift in priorities toward profitability, with a focus on margin expansion over volume growth, particularly in its Braintree platform. This approach, which favors sustained profitability over rapid expansion, is likely to weigh on revenue growth through 2025 as PayPal adjusts its strategy to align with long-term financial stability.
Conclusion
In summary, PayPal’s third-quarter earnings report presented a mixed picture. On one hand, the company posted encouraging EPS growth, steady increases in TPV, and demonstrated progress in its transformation initiatives, including Venmo and PCP. On the other hand, its revenue miss and cautious fourth-quarter guidance have tempered investor enthusiasm, especially after the stock’s recent run-up to a 52-week high.
As PayPal continues its journey toward becoming a full-service commerce platform, investors will be watching closely to see if the company can maintain stable revenue growth while expanding profitability. For now, the stock’s reaction suggests a cooling of investor expectations as PayPal navigates the latter part of its transition year, with the next few quarters likely to reveal the true impact of its strategic shift.
