PayPal grows five percent and operating profit still falls eight percent

PayPal generated adjusted earnings of 1.38 dollars per share in the second quarter of 2026 and therefore beat expectations by 7.8 percent. Against the year before that is still a fall of one percent.

Revenue rose five percent, and three percent adjusted for currency. Operating profit by contrast fell eight percent, and the margin lost 248 basis points.

The reason lies in costs. Expenses outside the transaction business are growing seven to eight percent according to the company own guidance, while revenue gained five percent.

The group nevertheless raised its full year guidance. It now expects transaction margin revenue of around 15.6 billion dollars and adjusted earnings of about 5.38 dollars per share, after 5.31 dollars in 2025.

The short version

• Adjusted earnings in the second quarter of 2026 were 1.38 dollars per share and beat expectations by 7.8 percent.
• Revenue rose five percent while operating profit fell eight percent and the margin lost 248 basis points.
• Branded checkout volume grew two percent on a currency adjusted basis.

Only 1.3 percent growth despite six billion in buybacks

That guidance deserves some placing. An increase from 5.31 to 5.38 dollars corresponds to 1.3 percent. At the same time PayPal has bought back its own shares for six billion dollars over twelve months.

With buybacks of that size, profit is spread across considerably fewer shares. That earnings per share still rise only a good one percent means that profit itself is falling.

In the quarter the group generated adjusted free cash flow of 1.8 billion dollars and returned 1.5 billion dollars to shareholders through buybacks.

The core business grows two percent

The decisive figure is the volume in branded checkout, meaning where customers deliberately choose the PayPal button. It grew two percent on a currency adjusted basis, for the second quarter in a row.

For the full year the company expects growth in the low single digits. Figures from July still match the two percent of the first half according to management.

Other areas run considerably faster. Venmo and the payment service Braintree grew in the mid teens, and the instalment business accelerated to 26 percent.

The number of payment transactions rose eight percent to 6.8 billion. Transactions per active account gained three percent to 60.0 over twelve months. The number of users itself stayed largely unchanged.

A reorganisation into three business areas

Chief executive Enrique Lores has organised the group into three areas. Payment solutions, consumer financial services, and payment services and cryptocurrencies.

As the largest future driver of margin revenue he explicitly names not the checkout but the financial services. Those include credit, instalments and further offerings for managing money through PayPal and Venmo.

A structural finding sits behind that. The checkout is, in the view of observers, being attacked from several directions at once. Anyone who earns little from it has to build other sources of revenue.

1.5 billion dollars of savings planned

Over two to three years at least 1.5 billion dollars of running costs are to be saved. Measures worth around 400 million dollars are to be implemented by the end of 2026.

Part of those savings is to flow back into growth areas, among them risk management with artificial intelligence and payments triggered by programs.

For the third quarter management is unusually open. It expects slightly positive growth in transaction margin revenue and a fall in adjusted earnings per share in the low single digits. The savings are only to become noticeable in the fourth quarter.

Finance chief Jamie Miller pointed out that the updated guidance for the rest of the year no longer assumes any rate cuts. In Europe growth is normalising after several strong years, with competition increasing.

Frequently asked questions

Why does operating profit fall despite growth

The reason lies in costs. Expenses outside the transaction business are growing seven to eight percent according to the company own guidance, while revenue gained five percent.

What does the guidance say about profit

Around 5.38 dollars per share are expected after 5.31 dollars in 2025, which is 1.3 percent more. At the same time PayPal has bought back its own shares for six billion dollars over twelve months. That earnings per share still rise only a good one percent means that profit itself is falling.

Which areas grow fastest

Venmo and the payment service Braintree grew in the mid teens, and the instalment business accelerated to 26 percent. Branded checkout volume by contrast gained only two percent.

This analysis is for information only and is not investment advice.