PYPL Q2 Earnings Top Estimates, Shares Decline Despite Guidance Raise

PayPal Holdings PYPL reported second-quarter 2025 non-GAAP earnings of $1.40 per share, which surpassed the Zacks Consensus Estimate by 7.7% and jumped 17.6% year over year. Results reflected better-than-expected growth in revenues.

PayPal saw an uptick in both total payment volume (TPV) and revenues compared to the first quarter, along with another quarter of high single-digit growth in transaction margin dollars. Reflecting this momentum, the company raised its full-year guidance for transaction margin dollars and EPS while maintaining its outlook for free cash flow.

Net revenues of $8.3 billion increased 5.1% year over year on a reported basis and 5% on a forex-neutral basis. The figure topped the consensus mark by 2.3%.

However, following the results, PayPal shares were down roughly 7% at the time of posting this article. Despite the guidance raise and decent results, PayPal’s payment transactions declined 5% in the reported quarter.

PayPal Holdings, Inc. Price, Consensus and EPS Surprise

PayPal Holdings, Inc. price-consensus-eps-surprise-chart | PayPal Holdings, Inc. Quote

PYPL’s Revenue Details

TPV was $443.5 billion for the second quarter, up 6% year over year on a reported basis and 5% on a forex-neutral basis. 

The transaction margin in dollar terms was $3.8 billion, which grew 6.5% on a reported basis. Excluding interest on customer balances, transaction margin dollars increased 8% to $3.5 billion.

Transaction revenues were $7.4 billion (89.8% of net revenues), up 4% year over year. Value Added Services revenues were $847 million (10.2% of net revenues), which rose 15.7% year over year.

Net revenues from the United States totaled $4.71 billion (56.8% of net revenues), up 3.5% on a year-over-year basis. International net revenues were $3.6 billion (43.2% of net revenues), up 7.3% year over year on a reported basis and 7% on a forex-neutral basis.

PayPal witnessed year-over-year growth of 2% in total active accounts to 438 million in the reported quarter. The total number of payment transactions was 6.2 billion, down 5% on a year-over-year basis. PYPL’s payment transactions per active account were 58.3 million, which dropped 4% year over year.

PYPL’s Operating Details

PayPal’s operating expenses were $6.78 billion in the second quarter, up 3.4% year over year. However, the operating margin expanded 134 basis points year over year to 18.1%.

The transaction expense rate was 0.89% in the second quarter compared with 0.95% reported in the year-ago quarter. 

The transaction margin improved 60 bps to 46.4%.

PYPL’s Balance Sheet Remains Strong

As of June 30, 2025, cash, cash equivalents and investments (including long-term) were $13.7 billion. The long-term debt balance was $11.5 billion.

PYPL generated $0.9 billion in cash from operations, while adjusted free cash flow was $0.7 billion in the second quarter of 2025.

The company returned $1.5 billion to shareholders through share repurchases.

PayPal Raises 2025 Guidance

For 2025, PayPal anticipates non-GAAP earnings between $5.15 per share and $5.30 per share, calling for 11-14% growth year over year. This is up from the prior guided range of $4.95-$5.10.

The transaction margin dollar is expected between $15.35 billion and $15.5 billion, suggesting growth in the 5-6% range. This is ahead of the prior projection of $15.2 billion-$15.4 billion.

Non-GAAP non-transaction operating expenses are expected to grow in the low single-digit range. 

Free cash flow is expected between $6 billion and $7 billion. Share repurchase is expected to be roughly $6 billion.

For the third quarter of 2025, PayPal expects non-GAAP earnings between $1.18 and $1.22 per share.

Transaction margin dollars are expected between $3.76 billion and $3.82 billion, suggesting growth in the 3-5% range for the current quarter.

PYPL’s Zacks Rank & Upcoming Earnings Releases

Currently, PayPal carries a Zacks Rank #2 (Buy).  

We now look forward to the earnings release of other stocks in the Financial Transaction Services industry — Mastercard Incorporated MA and Fidelity National Information Services, Inc. FIS. While Mastercard is scheduled to report on July 31, Fidelity National Information Services is slated to report on Aug. 5.

The Zacks Consensus Estimate for Mastercard’s second-quarter 2025 EPS stands at $4.05, indicating a 12.81% increase year over year. The consensus mark for Fidelity National Information Services’ second-quarter EPS is pegged at $1.36, implying no change year over year.

While Fidelity National Information Services carries a Zacks Rank #2, Mastercard has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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