PayPal raises 2026 profit forecast as turnaround gains traction

Oct 27 — PayPal lifted its annual adjusted profit forecast on Tuesday, as a years-long turnaround starts to bear fruit, with improving ​margins and resilient consumer spending providing fresh momentum.

The company has stepped up efforts to revive growth, most recently under CEO Enrique Lores, as it struggles to sustain its pandemic-era popularity amid intense competition ‌from Apple and Google and newer fintechs.

"We are making good progress in our multi-year transformation," Lores, who took the helm earlier this year after the ⁠board ousted Alex Chriss over dissatisfaction with the pace ​of change and execution, said in a statement.

"While there ⁠is more work to do, we are increasingly confident in our path to durable, profitable growth and remain ‌focused on execution," he added.

The ‌payments company now expects full-year adjusted profit of about $5.60 per share, compared with its previous forecast ⁠and Wall Street analysts' expectations of $5.38, according to estimates compiled by ⁠LSEG.

Adjusted profit came in at $1.45 per share in the three months ended September 30, sailing past estimates of $1.31.

Revenue of $8.6 billion in the third quarter was a tad below estimates of $8.7 billion. Shares of the company fell 1.2% in premarket trading.

REVIVAL ON TRACK

The company said it was on track to achieve $700 million in gross run-rate cost savings by the end of 2026, driven by cuts to more than 2,000 jobs and a ‌reduction of over 25% in managerial roles.

Efforts to streamline operations, optimize its ​portfolio and accelerate AI adoption, including using AI chat agents to support customer service, are also supporting the cost-management efforts, PayPal said.

The company has set a goal of securing at least $1.5 billion in gross run-rate savings over the next two to three years.

Adjusted operating margin, a key metric for investors, expanded 16 basis points to 18.8% in the third quarter.

Earlier this year, Reuters reported, citing sources, that PayPal had received a buyout offer of $60.50 per share from Stripe and private equity firm Advent International, a bid that many analysts described ​as "low-ball."

The offer, which valued PayPal at about $53 billion, was reportedly deemed inadequate by the board and represented a fraction of the roughly $360 ‌billion valuation the ‌company commanded at its ⁠peak in 2021.

SPENDING ENGINE KEEPS HUMMING

More broadly, US consumers have continued to open their wallets despite economic uncertainty and sticky inflation, helping sustain spending growth across the payments industry.

PayPal's total payment volume grew 7% on a foreign exchange-neutral basis to $487.1 billion in the third quarter.

The year-end holiday season brings a crucial sales period for the payments sector, as ‌retailers roll out eye-catching discounts and ​doorbuster deals online and in stores for Black Friday, Cyber Monday ‌and Christmas.

PayPal expects adjusted profit ⁠in the fourth quarter ​to come in at $1.43 per share, well above Street expectations of $1.35 and $1.23 a year earlier.

(Reporting by Manya Saini in Bengaluru; Editing ​by Sriraj Kalluvila)

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