Key Points
PayPal is partnering with OpenAI to become the first payments wallet integrated into ChatGPT.
Agentic e-commerce is still in its early stages, and this is a big move.
PayPal's business has been performing well and its stock is cheap.
There has been no shortage of deals among artificial intelligence (AI) companies recently, with chipmakers, AI software developers, and other types of tech companies announcing big partnerships.
Well, PayPal (NASDAQ: PYPL) just joined the party. The online payments leader announced a deal with ChatGPT developer OpenAI to facilitate payments directly through the AI tool. But what could this mean to investors? Here's a rundown of the key points of the deal and what it could mean for the stock long-term.
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PayPal's deal with OpenAI
First, here are the key points of PayPal's deal with OpenAI. The main idea is that PayPal will become the first digital wallet to be embedded into ChatGPT, which will enable users to pay for items they find through the platform.
We've seen several e-commerce companies announce deals to integrate their platforms with ChatGPT, including Etsy, Shopify, and Walmart. So, this deal will essentially let ChatGPT users who want to buy items use PayPal to complete the transaction without ever leaving ChatGPT.
Not only will this deal allow customers to pay for purchases with PayPal, but it will enable PayPal's millions of merchants to sell their products through the leading AI tool.
It's worth mentioning that fintech payment processor Stripe is also involved with OpenAI's Instant Checkout feature, specifically when it comes to allowing users to pay for Etsy purchases. But there are some big differences. Stripe is not a consumer-facing company -- it has no mobile app for consumers, and it cannot store funds on behalf of users. It's a payment tool, not a digital wallet. PayPal will be the first way to use stored funds to shop through ChatGPT.
What will this mean for PayPal investors?
It remains to be seen exactly what AI-powered shopping will ultimately look like or how quickly it will catch on, and it will almost certainly be an industry that evolves rapidly. But the general idea is that ChatGPT (and potentially other AI tools) can effectively serve as personal shoppers, helping users find the right products to meet their needs.
It's tough to overstate what a big win this deal is for PayPal. ChatGPT has more than 700 million weekly active users, several hundred million more than PayPal. This could potentially expose many new users to the PayPal ecosystem, drive increased engagement from existing users, and be a serious needle-mover for payment volume through the platform.
There's no way to quantify exactly what this could mean for PayPal investors, but it's fair to say that this is a big step in the right direction for the business. CEO Alex Chriss and his team have been hard at work over the past two years when it comes to focusing on efficiency and returning the company to profitable growth. This is the latest (and perhaps the most impressive) of several initiatives over the past year that could help earnings growth accelerate to management's 20%+ target over the next few years.
Strong results and profitability already
As a final thought, it's worth mentioning that PayPal announced the OpenAI partnership along with its third-quarter earnings, which were far stronger than investors had expected. Earnings per share grew by 12% year over year on an adjusted basis, payment volume grew 8% to more than $1.8 trillion annually, and the business generated $2.3 billion in free cash flow.
Despite the positive momentum and promising new initiatives like the OpenAI deal, PayPal trades for less than 14 times management's 2025 earnings guidance, and for an even lower multiple of free cash flow.
PayPal has been aggressively buying back its stock for the past couple of years, and it's easy to see why. This isn't just a legacy payments company -- it's at the forefront of agentic AI shopping. In addition to the OpenAI deal, PayPal recently announced a partnership with Alphabet's Google to develop commerce tools for use across its platforms. Buying shares before any of these recent developments start to impact the company's results could end up being a smart move.
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Matt Frankel has positions in PayPal and Shopify and has the following options: short January 2027 $170 calls on Shopify. The Motley Fool has positions in and recommends Alphabet, Etsy, PayPal, Shopify, and Walmart. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short December 2025 $75 calls on PayPal. The Motley Fool has a disclosure policy.
