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

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. 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. 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. CFO Jamie Miller said the first phase of the turnaround plan could result in transformation-related charges of about $120 million to $140 million in the second half of 2026. 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. Adjusted operating margin was 17.4% in the 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 had expected 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 quarter to $486.4 billion. PayPal expects full-year adjusted profit of about $5.38 per share, above expectations of $5.31. It had forecast a low single-digit decline to a slight increase in 2026 profit. 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. 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, sources have said. "We don't comment on market speculation," CEO Enrique Lores told analysts on a post-earnings call, adding that management remained focused on maximising long-term shareholder value. "While there is still significant work ahead, I have strong conviction in our direction and in our ability to execute. At the same time, we remain open and objective in evaluating opportunities." Lores said PayPal would carefully consider any opportunity or strategic option that it believes could create superior value for shareholders. The stock was last up 3.4% in morning trading. "We expect the stock to primarily trade on deal-related comments considering the recent newsflow," J.P. Morgan analyst Tien-tsin Huang wrote in a note.

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

Turnaround efforts and margin pressure

Strong quarterly results and higher full-year outlook

PayPal raises 2026 profit forecast and outlines cost-saving plan

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