Sections e, f & g are for paid subscribers. They walk through guidance, the conference call, the investor presentation and my take on the quarter. Upgrade below to read that and 40+ more reviews this season. Meta, Google, Amazon, Starbucks, Mercado Libre and ServiceNow earnings reviews are coming this week.

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In case you Missed it:

PayPal provides branded omni-channel checkout and financial services to a massive base of consumers and merchants. It also provides non-branded payment processing through Braintree, payouts-as-a-service through Hyperwallet, identifiable guest checkout through Fastlane and it owns Venmo. For a full review of their recent investor day, click here.

The German outage during the quarter led to a 150 bps TM$ growth headwind. This was due to higher transaction loss provisions. They also got a little less than 100 bps of help from selling some receivables to Blue Owl. The overall impact was about 50 bps in unexpected net TM$ growth headwinds, and it beat its guidance regardless.

Transactions fell by 5% Y/Y, but that was related to Braintree contract negotiations as they slash cash-burning contracts and prioritize profitable growth. Excluding this ongoing initiative, transactions rose by 7% Y/Y. This is also why transactions per active (TPA) growth is negative in the chart below. Branded TPA excludes this.

Other value-added services (OVAS) revenue rose by 15% Y/Y. This continues to be driven by strong merchant and consumer credit originations, as they briskly grow the portfolio following last year’s pullback. They’re “pleased with the quality, diversification and performance” of their credit book. Furthermore, customer balance growth (and so interest income) was called “encouraging.” This is related to budding Venmo initiatives and products that we’ll work through later in the piece.

“We see this dividend as strengthening our overall capital return program, working in conjunction with our ongoing share buybacks.” – CEO Alex Chriss

For the full year, it raised TM$ guidance by 0.5%, which beat estimates by 1.1%. The annual TM$ guidance raise was $75M compared to an $80M Q3 beat. That implies a $5M reduction in Q4 PayPal TM$ guidance. Furthermore, the annual guide was aided by $65M in incremental customer balance help. Without this, Q4 guidance would have been lowered by $70M.

The somewhat softer Q4 TM$ guidance implies just 3.5% Y/Y growth. Why was it softer? They called out macro softening in the USA and Europe during September. Much more on that later. They also blamed rate cuts and lapping an acceleration in credit originations. Both are legitimate reasons. Furthermore, it plans to accelerate growth spend, including added customer promotions that count as contra revenue and weigh on TM$. That weakness was included in Q4 guidance, yet PYPL still enjoyed a 0.5% upward revision to Q4 analyst revenue estimates following the call. 2026 revenue estimates also rose by 0.5%.

Aside from the all-important TM$ metric, PayPal raised annual EPS guidance by $0.14, which beat by $0.13. The new guidance represents 15%-16% Y/Y growth. This was entirely thanks to the Q3 beat, as Q4 guidance missed by $0.02. Next, it reiterated annual $6.5B FCF guidance, which slightly beat expectations. 

One more note on 2026. The company is accelerating investing in areas like Venmo, BNPL, agentic commerce partnerships, ads and more. That will be a 2026 profit growth headwind. They did not quantify how large, but they wanted to prepare investors for that item. Thankfully, leadership did reiterate plans to get back to high single-digit TM$ growth in the quote below. It just doesn't sound like that will come in 2026, which isn’t a huge surprise. The investor day timeline to high-single digit TM$ growth was during 2027.

“All of this gives us confidence in the business's longer-term growth potential and ability to deliver high single-digit transaction margin dollar growth and non-GAAP EPS growth in the teens or better over the longer term.” -- CEO Alex Chriss

PYPL trades for 13x forward EPS. EPS is expected to compound at an 11% clip from 2025-2027.

Branded Experiences:

In PayPal’s push to morph from a transactional payment button to a holistic commerce platform, Branded Experiences is where investors need to focus. This includes online and in-store transactions for PayPal, BNPL, Venmo and its omni-channel debit programs (like PayPal Everywhere). It’s with these products that PayPal aims to “meet customers everywhere they shop,” with payment methods that service a wide array of preferences and needs. Branded experiences growth was again 8% Y/Y, which is the same as last quarter and a 2-point acceleration vs. the previous year. 

As it expedites progress across all of these product areas, there are clear signs that its efforts are working. Most of the changes have first been implemented in the USA. And? TPV growth in this important market has accelerated to 10% Y/Y. That’s a 5-point Y/Y acceleration. They’re confident that the initiatives working in the USA will work everywhere else too.

Branded Experiences – Venmo:

Venmo is the clearest example of its branded experience efforts paying real dividends. 14% TPV growth for the segment is a 5-point acceleration compared to 2024 and revenue growth again surpassed 20% Y/Y. This growth engine was falling below 10% just 2 years ago. What a turnaround. They now expect to post 20%+ Y/Y revenue growth for this segment for the full year. That’s coming from 7% Y/Y growth in monthly active accounts despite already having 66 million Americans in the base. It’s also coming from 15% Y/Y growth in average revenue per active account.

How is Venmo enjoying such strong momentum? Better product focus and delivery. I say it all the time… Venmo has had a large, loyal and affluent user base for years. Venmo just didn’t have any compelling products for them to use outside of peer-to-peer. Now it does. Pay with Venmo volume rose 40% Y/Y, as it eclipsed $1B in a single month for the very first time during September. Monthly active Pay with Venmo users also rose by 25% Y/Y. Next, debit card users rose by 43% Y/Y, as college partnerships helped it add more than 1 million new holders during the quarter. That adoption rate is up 300% vs. 2023, and has more to do with better go-to-market than anything.

While all of this is very exciting, it’s also still so early. $25 in average revenue is less than a third of what Cash App enjoys, and I see every reason to think Venmo’s user base is capable of at least eclipsing that level. Less than 10% of Venmo users have a debit card or use Pay with Venmo and under 5% are using direct deposit. There’s a 4x revenue opportunity for Pay with Venmo adoption and a 6x revenue opportunity for successful direct deposit adoption. The runway for its existing user base is massive and it’s finally showing a real ability to capitalize.

“Venmo is at a clear inflection.” – CEO Alex Chriss

More on Venmo – Bilt:

Venmo & Bilt (large payment rewards company) announced a new partnership. Starting next year, Venmo will be a new payment option for Bilt’s 5M rewards members to pay landlords or local merchants. Per the press release, these members can now use Venmo from the Bilt app or make Bilt payments from Venmo. If paying from Venmo, balances or connected payment options can be used. 

This feels like an ideal partner for Venmo. It’s fixated on giving customers more things to do with their money. It wants to form high frequency habits to turn loyal customers into effectively monetized customers. Pay with Venmo’s quickly growing adoption is a great way to do that, and this specific news means 45,000 new merchants accept it. Not only will this mean more volume funneling through the app, but also cash sitting in balances for longer and more interest income as a result.

I’m a fan of this. It feels like there’s an exciting new partnership to discuss with PayPal every other day. For this partnership specifically, it should lead to better Venmo monetization and support the impressive acceleration that the app is currently enjoying.

Branded Experiences – Online Branded PayPal & Venmo Checkout:

This segment grew by 5% Y/Y FXN. Again, U.S. branded checkout grew faster, which points to all of their initiatives working, but overall expansion remains below 8% global e-commerce growth estimates for 2025. Their goal is to change that.

The macro headwinds from Asia it called out 3 months ago abated, but that help was offset by “softer consumer discretionary spending in Europe and the USA later in the quarter. I did not love that, but it was great to hear this is led by basket size rather than account or transaction growth. This offers evidence that PayPal selection and usage are fine and consumers are maybe feeling a little more uneasy. Really glad they added this context.

The new PayPal checkout experience is up to 25% of its global traffic. The pace of the rollout is a bit slower than they want it to be, as they work to “untangle a decade of legacy integrations.” Also didn't love hearing that. As this process plays out, there’s clear evidence from existing cohorts that the conversion uplift will be around 100 bps. When adding biometrics to this updated flow, that conversion lift rises to 200-500 bps. PayPal thinks the combination will foster a best-in-class checkout experience paired with more generous rewards than other competitors can offer. That formula is what they’ll count on to drive a durable acceleration in the years to come.

“Given the competitive intensity online, we know more work is needed to close the gap between our performance and overall e-commerce growth.” – CEO Alex Chriss

Branded Experiences – Omni-Channel and Debit:

Offline adoption is so important for PayPal. It tends to include the kind of categories that turn casual customers into power users and drives a direct uplift in online usage as well. The PayPal Everywhere campaign, with its 5% cash-back on a top spend category and partner rewards stacking to extend generosity, has been instrumental in driving momentum to get this usage halo effect going. This program is a big part of 65% Y/Y debit + tap-to-pay volume growth and why PayPal and Venmo each added more than 1M first time debit card users in the USA. These users continue to deliver 6x transaction and 3x revenue per user uplifts, highlighting the appeal of debit’s proliferation.

Branded Experiences – BNPL:

BNPL is performing at a high level, with PayPal now expecting $40B in 2025 volume (21% Y/Y growth). TPV and user growth were again both over 20% Y/Y. While this is cannibalistic to other payment types, I view this as a large net positive for the following reasons: 

When I mentioned PayPal accelerating growth spend this was one of the main categories included. They’re running a 5% cash-back promotion for the Holidays and aggressively expanding across the globe. This past quarter, that expansion entailed a Canada debut and new payment terms in Italy and Spain. It also entailed an in-store USA BNPL launch.

Payment Service Provider (PSP; Braintree and PayPal Complete Payments Platform):

Braintree is fully in acceleration mode. Contract cuts and negotiations have largely concluded. That headwind is being lapped, and PSP growth rose to 6% Y/Y vs. 2% last quarter (Braintree grew in the mid-single-digit range). This improvement is profitable should continue. Easier comps, product momentum and omni-channel expansion thanks to its Verifone partnership are all helping. Furthermore, other value-added services (OVAS) is another big piece of this promising trend. Its slew of services can cut transaction costs by 15%, lower FX transaction fees by 20 bps and cut fraud rates. And as clients adopt one, they’re routinely coming back and asking for more. There was very little belief in this product becoming a healthy and profitable growth driver. It certainly has proved the doubters wrong.

Agentic Commerce News:

The first of many agentic commerce offerings between PayPal and Google was announced this week.The two companies will pool strengths to create an end-to-end agentic shopping experience right from a merchant’s website. PayPal’s Agent to Agent protocol will plug into a merchant’s shopping agent to provide vital context on a given shopper. That timely information should enhance recommendations, augment personalization and improve conversion rates. Merchants can use Google’s Agent Development Kit (ADK) to build their own agent or can use Google Cloud’s Conversational Commerce Agent. These merchants “remain in full control of agent tone and look” regardless of which option they choose.

Post product selection, PayPal’s Agent Payments Protocol (AP2) automates and streamlines the tedious checkout process via data-driven checkout option surfacing and BNPL eligibility automatically checked. Following that process, to ensure a secure agentic experience, the PayPal commerce agent handles payment authentication and authorization with the help of PYPL’s dense customer data profiles and battle-tested platform. That goes a long way in making merchants comfortable with embracing this exciting new technology without conceding fraud or security issues. It also allows merchants to directly own the customer relationship without agentic disintermediation.

Separately, PayPal & OpenAI have signed an agreement for PayPal to be the first digital wallet neatly integrated into ChatGPT. Consumers get an easier checkout. Merchants get an easy way to add their assortment to ChatGPT (matching $SHOP). PayPal makes sure consumers & merchants can use it where they want to.

PayPal feels well positioned to win in agentic commerce. Aside from what's written above, their new Agentic Commerce Services offering helps merchants eliminate a need to integrate separately with every single large language model (LLM). With this, they can plug into PayPal once and easily connect to all of them from there. That ensures simplicity and that their products are made available to a “full coverage of consumers.” And for LLM players, PayPal gives them immediate access to most large merchants, with scaled fraud and authorization systems and a ubiquitous brand.

Other Notes:

Venmo is turning into a shining star and enjoying a turnaround more impressive than I think anyone expected. That product is all the way back. Braintree pricing adjustments are now mainly in the rearview and that segment is set up very well for accelerating growth. Agentic partnerships are encouraging... they're mainly sizzle and little steak at this point... but still encouraging. They insulate PayPal from the risk of being displaced over the coming years. BNPL growth is fantastic, ads proliferation is all but inevitable and Fastlane’s ramp is still coming. That’s all quite good. I also really don't mind accelerating growth spending as long as they keep delivering strong signs of progress and marching towards their 2027 targets. The spend is in response to success, which is encouraging to me if anything. And regardless, the commentary did not stop 2026 profit estimates from rising after the report. More aggressive pursuit of growth paired with higher profit forecasts is a great combo.

Now for the small negatives. The notes on slower modern checkout rollout were hauntingly familiar to me. That sounded like the old team talking. I get that this is no easy task and I get how messy the disparate integrations are. Still, I'd like to see this move faster. The U.S. and European branded checkout growth weakness cited for Q4 was also a tad concerning... and macro felt like a lame excuse. That's why I'm thankful that they added the context of this being basket size-related. It is not tied to transactions or customer growth, which does make me think they're right about weakness being macro-related. That headwind also doesn't seem to be impacting them much, as analyst revenue estimates rose for the next 5 quarters.

When netting out these pros and cons, I think it was a solid quarter. Not perfect… not bad… solid. I think the believers are going to see this performance and feel PayPal is perfectly on track to meet the targets it set for 2027. I think the skeptics are going to run with the small branded checkout negatives and higher promotions as reasons for why the firm will fall short. Said another way, I don’t think this quarter really changes much of anything. I think it could easily and frustratingly chop around for another 3 months. They're still in prove-it mode for the masses. But? I think believing in their ability to execute is becoming a safer and safer opinion as progress mounts.

As long as they keep accelerating innovation, driving adoption and sticking to their multi-year targets, I am happy to wait for the stock to respond. I am happy to be patient. And this quarter makes me want to stay patient. While I am cognizant of the modest branded checkout and TM$ negatives, I remain confident in Chriss righting this ship. If 2027 expectations are well placed (and I still think they are), the firm’s 13x GAAP earnings multiple is going to look like a gift in hindsight.

I’ve already invested a lot of capital into this name; despite it trading at a PEG just under 1x, I am not looking to add to my stake at this time. If I owned zero shares today, I’d likely start a position and would be rather aggressive in doing so. While I could be wrong, I do not think there’s much downside remaining. The core business health keeps improving, the buyback is gigantic and the multiple is dirt cheap.

For now, I plan to do nothing.