PayPal presses on with turnaround in pivotal quarter as sale questions linger

Investors have closely watched PayPal's margins in recent years as growth has shifted toward its lower-margin businesses, while competition has weighed on its higher-margin branded products. On an adjusted basis, operating margin was 17.4% in the second quarter, contracting 248 basis points from 19.8% a year ago. The company forecast a low single-digit decline in third-quarter adjusted profit. Analysts, on average, expect earnings to decline 0.4%, or 1 cent, from the year-ago quarter's $1.34 per share, according to estimates compiled by LSEG. The initiatives follow a pivotal, market-beating quarter. Beyond PayPal's turnaround, the results also offered another snapshot of the health of the U.S. consumer, whose spending has remained resilient despite elevated borrowing costs. Total payment volume increased 9% on a currency-neutral basis in the second quarter to $486.4 billion. PayPal expects full-year adjusted profit of about $5.38 per share, above Wall Street expectations of $5.31. It had forecast a low single-digit decline to a slight increase in 2026 profit. While investors remain alert for signs of weaker discretionary spending, payment companies have continued to benefit from solid transaction volumes and a resilient labor market. On an adjusted basis, PayPal earned $1.38 per share in the three months ended June 30, beating estimates of $1.28. Revenue rose 3% on a currency-neutral basis to $8.68 billion, while analysts had expected $8.47 billion. Over the years, PayPal has responded to these pressures with sweeping changes such as management reshuffles, workforce reductions and a renewed focus on higher-margin products. Still, the market has largely reserved judgment, with investors waiting for clearer signs that it can regain market share and accelerate growth. The company replaced CEO Alex Chriss in February with HP's Enrique Lores, saying the pace of change and execution had not met the board's expectations. Lores has since outlined plans to streamline PayPal's organizational structure and cut costs. "I'm encouraged by the progress we made this quarter. We moved with urgency to sharpen our transformation plan and advance our growth strategies," he said. PayPal said it was pursuing several initiatives simultaneously. It plans to simplify operating model and reduce organizational layers through 2027, improve marketing efficiency and productivity through 2028, while continuing technology modernization and AI integration through 2029. It expects to save $400 million in costs by year-end. PayPal doubled down on its turnaround plan on Tuesday, raising its 2026 profit forecast and outlining cost-saving steps, as it looks to convince investors that it is worth more than the $53 billion takeover offer that analysts described as "low-ball". The payments company, once the crown jewel of American financial technology, received a $60.50-per-share bid from Stripe and private equity firm Advent International, Reuters reported earlier this month, citing sources. The offer is a fraction of the roughly $360 billion valuation PayPal commanded as a pandemic-era darling in 2021. The company's board considers the offer inadequate. PayPal has struggled to regain its footing after a pandemic-driven surge in online shopping and digital payments faded, as consumers returned to brick-and-mortar stores. Competition has also intensified as Apple AAPL.O and Google GOOGL.O expanded their digital payment, integrating them into smartphone ecosystems and eroding PayPal's advantage as a standalone payments platform, analysts said.

PayPal presses on with turnaround in pivotal quarter as sale questions linger

Quarterly results and outlook

Cost savings and operational changes

PayPal doubles down on turnaround plan

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