10-Q · July 28, 2026
PayPal delivered 5% Q2 revenue growth to $8.682 billion and 10% TPV growth to $486.448 billion, but GAAP diluted EPS declined 3% to $1.25 and operating margin contracted 200 basis points year over year to 16%. Expense…
Earnings analysis · 10-Q
PYPL earnings analysis
Filed October 27, 2026 · Our reading of the company's report
The latest report
PayPal delivered 2% revenue growth to $8.584 billion and stronger payment activity, but profitability weakened: operating margin fell to 16% from 18%, diluted EPS declined 4% to $1.25, and restructuring expense…
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PayPal delivered 2% revenue growth to $8.584 billion and stronger payment activity, but profitability weakened: operating margin fell to 16% from 18%, diluted EPS declined 4% to $1.25, and restructuring expense increased to $255 million. Braintree and Venmo growth was partly offset by a $240 million decline in PayPal-branded product revenue, while merchant credit metrics deteriorated. Management is pursuing substantial cost savings, including at least $1.5 billion of gross annualized run-rate savings over two to three years, but expanding regulatory, cybersecurity, stablecoin, and investment risks weigh on the outlook.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $1.25
- Operating margin
- 16.3%
What stood out
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TPV growth supported modest revenue growth
Third-quarter revenue increased 2% year over year to $8.584 billion, driven primarily by 6% TPV growth to $487.138 billion. Transaction revenue rose 3% to $7.711 billion, while other value-added services declined 2% to $873 million.
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EPS and net income declined year over year
Diluted GAAP EPS was $1.25 versus $1.30 in the prior-year quarter, a 4% decline. Net income fell 14% to $1.073 billion and operating income fell 8% to $1.402 billion.
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Operating leverage remained under pressure
Operating margin contracted to 16% from 18% in the prior-year quarter, with operating expenses rising 4% to $7.182 billion versus 2% revenue growth. Transaction expense increased 5% to $4.248 billion and restructuring expense rose to $255 million from $69 million.
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Braintree and Venmo drove transaction growth
Payment activity improved: payment transactions increased 7% to 6.796 billion, transactions per active account rose 6% to 60.8, and active accounts increased 1% to 440 million. Braintree revenue increased approximately $270 million and Venmo revenue increased approximately $100 million year over year.
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Operating cash flow improved despite investment outflows
Nine-month operating cash flow increased 17% to $4.709 billion from $4.032 billion. Capital expenditures were $600 million, equal to approximately 2.3% of nine-month revenue of $25.619 billion.
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Reorganization targets sizable cost savings
Management expects at least $1.5 billion of gross annualized run-rate savings over the next two to three years and approximately $340 million of annualized employee-related savings from the 3Q 2026 Plan. Substantially all of the plan's $152 million restructuring charge was recognized by September 30, 2026.
What to watch
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Regulatory investigations are expanding
The September 2026 FTC Civil Investigative Demand expands regulatory scrutiny to advertising, marketing, sale, issuance, or management of fees and purchase protection for financial products and services. PayPal also disclosed ongoing CFPB CIDs and an FCA investigation initiated in March 2026.
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Merchant credit metrics deteriorated
Merchant credit quality weakened: the percentage of merchant receivables more than 90 days past due rose to 4.0% from 3.5%, while the net charge-off rate increased to 8.3% from 7.3%. The merchant receivables balance was $1.896 billion at September 30, 2026.
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Investment losses pressured earnings
Strategic investment volatility remains material: strategic investments totaled $1.728 billion, while nine-month net losses and impairments on strategic investments contributed to a $250 million year-over-year decline in other income. Non-marketable investment gross losses and impairments reached $188 million in the first nine months.
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AI-enabled cybersecurity risk added
The amended risk factors highlight AI-enabled cyberattacks, including threats from new frontier AI models and autonomous agents. PayPal states it has experienced cybersecurity incidents and expects to continue experiencing such incidents, creating potential exposure to remediation costs, litigation, and regulatory penalties.
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Stablecoin and custody risks expanded
Cryptocurrency risk disclosures were expanded following the 2025 GENIUS Act. PayPal states its PYUSD-related activities may face additional licensing, compliance, custody, and enforcement risks, including potential loss of customer assets if a custodian or issuer fails.
Management's outlook
The 10-Q does not provide numeric revenue or EPS guidance. MD&A forecasts at least $1.5 billion of gross annualized run-rate savings over the next two to three years, including approximately $340 million of annualized employee-related savings from the 3Q 2026 Plan and approximately $310 million of annualized savings from the 2Q 2025 Plan.
Earlier filings 2
10-Q · May 5, 2026
PayPal reported Q1 2026 results with revenues of $8.35 billion, up 7% year-over-year, and EPS of $1.21, reflecting a slight decrease from the previous year. The company highlighted operational challenges including…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.