PayPal Earnings Show Turnaround Momentum
PayPal earnings beat estimates and lifted full-year profit guide, citing cost cuts and AI, reinforcing standalone valuation versus the $60.50 offer.
KEY TAKEAWAYS
- Adjusted EPS of $1.38 beat estimates and revenue rose, supporting a stronger standalone valuation.
- Company raised full-year adjusted profit to about $5.38 per share, lifting guidance versus prior view.
- Board rejected $60.50 per-share offer from Stripe and Advent, citing inadequate price versus internal value.
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PayPal Holdings Inc. (PYPL) reported stronger-than-expected second-quarter earnings and raised its 2026 profit forecast on July 28, 2026. The company cited cost cuts, operating-model simplification, and AI investments as signs of progress in its turnaround, even as a reported cash takeover proposal remains stalled.
Q2 Results, Guidance, and Cash Flow
For the quarter ended June 30, 2026, PayPal posted net revenues of $8.7 billion, up 5.0% year over year. On a currency-neutral basis, revenue rose 3.0%. Total payment volume reached $486.4 billion, increasing 10.0% year over year (9.0% currency-neutral), while payment transactions rose 8.0% to 6.8 billion.
Adjusted earnings per share (EPS), a non-GAAP measure excluding certain items, came to $1.38, beating analyst expectations of $1.28. On a GAAP basis, net income was $1.1 billion, down 12.0% year over year, with diluted GAAP EPS of $1.25, down 3.0%.
Operating cash flow totaled $2.0 billion, and free cash flow was $1.8 billion for the quarter. The company repurchased about 33 million shares for approximately $1.5 billion. The board declared a cash dividend of $0.14 per share, payable on Sept. 25, 2026.
PayPal raised its full-year adjusted profit forecast to about $5.38 per share, above Wall Street expectations of $5.31. This marks a meaningful upward revision from its prior cautious outlook. Management also raised full-year non-GAAP transaction-margin dollars and EPS guidance while reaffirming GAAP EPS guidance.
Takeover Offer and Turnaround Strategy
On July 15, 2026, Stripe and Advent International proposed an all-cash acquisition of PayPal at $60.50 per share, valuing the company at roughly $53 billion. The offer was reportedly backed by about $50 billion in financing.
PayPal’s board deemed the offer inadequate and formally rejected it at a special meeting around July 20–21. The board engaged advisers including Goldman Sachs and Evercore, who internally valued PayPal closer to $70 per share. The offer remains non-binding and unaccepted, with no certainty a deal will occur.
Management framed the quarter’s results and the revised outlook as evidence that its standalone plan can unlock greater value. The company outlined a multiyear program to simplify its operating model and reduce organizational layers through 2027, improve marketing efficiency and productivity through 2028, and continue technology modernization and AI integration through 2029.
Near-term, PayPal expects to save $400 million in costs by year-end 2026. It has described a broader structural program targeting at least $1.5 billion in gross savings over two to three years through automation and streamlined operations.
The company presented the earnings beat, raised guidance, and cost-savings timetable as support for a higher standalone valuation than the reported offer, leaving any renewed deal contingent on execution and future negotiations.
