PayPal Holdings (PYPL) reported its first-quarter earnings for 2025 on April 29, revealing a mixed performance that exceeded Wall Street's expectations for earnings yet fell short on revenue. The digital payments giant's adjusted earnings per share (EPS) rose 23% year-over-year to $1.33, surpassing analysts' predictions of $1.16. However, revenue climbed just 1% to $7.79 billion, missing the forecast of $7.85 billion, reflecting a cautious approach amidst ongoing economic uncertainties.
Despite the revenue miss, PayPal's transaction margin dollars, a key profitability metric, increased 7% to $3.7 billion, marking the company's fifth consecutive quarter of profitable growth under CEO Alex Chriss. "Our strategy is working. This is our fifth consecutive quarter of profitable growth," Chriss stated during the earnings call.
In terms of transaction volume, PayPal processed a total payment volume (TPV) of $417.2 billion, which was slightly below the analysts' expectations of nearly $418 billion. This 3% increase from the previous year reflects a strategic shift towards profitability over sheer volume. The number of active accounts grew by 2% to 436 million, indicating steady user engagement with the platform.
Notably, the company's Venmo platform demonstrated robust growth, with revenue soaring 20% year-over-year, although specific figures were not disclosed. Total payment volume for Venmo increased by 10% to $75.9 billion, and the number of monthly active users for the Venmo debit card surged by about 40%. "We've leaned into Venmo and the investment is starting to pay off," Chriss added, highlighting the ongoing monetization efforts surrounding key acquisitions like Braintree and Venmo.
Looking ahead, PayPal provided better-than-expected guidance for the second quarter, forecasting adjusted EPS of $1.29 to $1.31, exceeding the average analyst estimate of $1.21. The company also projected transaction margin dollars would increase by 4% to 5% to between $3.75 billion and $3.8 billion. However, for the full year, PayPal reaffirmed its guidance of earnings per share between $4.95 and $5.10, citing "global macroeconomic uncertainty" as a reason to maintain this outlook.
Investors reacted cautiously to the earnings report, with PayPal shares falling 2.14% immediately following the announcement. Year-to-date, the stock has dropped nearly 24%, outpacing the Nasdaq's decline of about 10%. Analysts have noted that investor sentiment remains bearish, driven by concerns over potential tariffs, competitive pressures from tech giants like Apple and Shopify, and the risk of a prolonged slowdown in branded checkout growth.
Despite these challenges, PayPal's CFO Jamie Miller downplayed the risks associated with its exposure to the Chinese market, stating that less than 2% of the company's branded checkout total payment volume comes from Chinese merchants selling into the U.S. "We are globally diversified. Our merchant base, our region base, it's just very, very global and diverse, and we're well positioned to capture shifts in spending as they happen," Miller explained.
In response to the evolving market landscape, PayPal has introduced several initiatives aimed at enhancing user experience and expanding its market share. The company is rolling out a new checkout experience and has set ambitious goals to accelerate branded checkout growth to between 8% and 10% by 2027. This includes leveraging partnerships with major retailers such as DoorDash, Starbucks, and Ticketmaster, which now accept Venmo as a payment option.
Analysts have expressed mixed views on PayPal's growth trajectory. Evercore ISI analyst Adam Frisch noted that while branded volume growth was flat year-over-year, unbranded volume growth exceeded expectations. "Results were a mixed bag and generally in-line with our estimates – with branded volume growth the major headliner at 6% growth, which is flattish year-over-year and not showing signs of acceleration yet," Frisch commented.
As PayPal navigates through these challenges, its focus on profitability and strategic investments in high-margin businesses appears to be yielding positive results. The company generated $1.0 billion in free cash flow and repurchased approximately 19 million shares for $1.5 billion during the quarter, reflecting a commitment to returning value to shareholders.
In summary, PayPal's first-quarter results illustrate a company in transition, balancing the need for growth with the realities of an uncertain economic environment. While the company has demonstrated strong profitability metrics, the modest revenue growth and external pressures may require careful navigation in the coming quarters. As PayPal continues to adapt its strategy, investors will be watching closely to see if the company's efforts can translate into sustained growth and market leadership in the digital payments space.
