Key Takeaways
- PayPal reports third-quarter results before the open on Tuesday, Oct. 27, its first report since a reported takeover approach worth more than $53 billion fell apart in late August.
- With no deal price under the stock, the report has to show gross profit still growing and free cash flow on track for management’s 2026 goal.
- Gross profit grew 1% in the second quarter, and consensus sees net income no higher in 2028 than in 2026, so buybacks drive the per-share growth.
- At 10x forward earnings, well below its five-year average of 16x, the stock is priced as if the business is shrinking, so a quarter of modest growth would hold up the case for owning it.
PayPal (PYPL) stock peaked at about $310 in mid-2021, and today it trades more than 80% below that. The takeover approach that briefly put a floor under the shares is gone too.
So when PayPal reports third-quarter results before the open on Tuesday, Oct. 27, its own numbers have to hold the stock up for the first time since the deal fell apart. Two of them matter most.
The deal floor is gone
In July, PayPal reportedly drew a takeover approach at $60.50 a share, worth more than $53 billion. It collapsed in late August, and the stock fell 12% in morning trading that day. PayPal has since placed an AI shopping bet with Glance.
That leaves the business to make its own case.
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Gross profit has to keep growing
The first test is gross profit, which PayPal calls transaction margin dollars: what’s left of revenue after it pays to process payments and covers its losses. It grew to $15.5 billion in 2025 from $14.7 billion in 2024.
But growth has slowed to a crawl. In the second quarter of 2026, gross profit rose 1% to $3.9 billion while total payment volume grew 10%. PayPal kept 0.80% of every dollar it moved, down from 0.87% a year earlier.
For the third quarter, management guided to slightly positive growth in transaction margin dollars. It also expects volume through the PayPal checkout button, which earns over half of the company’s profit, to grow about 2%. If gross profit comes in below last year’s, the bears get the shrinking business they’ve been arguing for.
Free cash flow has to hold
Free cash flow is the second test, and PayPal’s record here is strong. It has generated between $4.2 billion and $6.8 billion in each of the last five fiscal years, including $5.6 billion in 2025:
This year is on pace too: $3.5 billion of adjusted free cash flow in the first half, against management’s goal of at least $6 billion for 2026. (The adjusted figure strips out the timing of PayPal’s buy now, pay later loans.) But PayPal also spent $3.3 billion on buybacks and dividends in the first half, more than the $2.7 billion of free cash flow it reported, and its debt rose $1.8 billion.
That spending matters, because buybacks are carrying the per-share growth.
Priced for a shrinking business
Consensus puts PayPal’s normalized net income at $4.7 billion in both 2026 and 2028, below 2025’s $5.1 billion. EPS still climbs from $5.39 to $6.32 over those years, all of it from a falling share count. Diluted shares fell to 882 million in the second quarter, from 977 million a year earlier.
And the market isn’t paying much for those earnings. PayPal trades at 10x forward earnings, against a five-year average of 16x and a low of 7.3x in February.
The guide may matter more than the quarter
One quarter won’t settle much on its own. With no deal price under the shares, the stock may trade as much on what CEO Enrique Lores says about the rest of 2026 as on the quarter itself.
Management’s 2026 guidance calls for about $5.38 of non-GAAP EPS and roughly $6 billion of buybacks. It also raised its forecast for growth in non-transaction operating expense to 7% to 8%, up from about 3% in February, even as it works toward at least $1.5 billion of savings. If Lores holds the guidance and the savings start showing up as slower expense growth, the plan earns some credit it doesn’t have yet.
My take: at 10x earnings, PayPal is a cheap stock with a slow-growing business, and Tuesday only has to show it’s still growing. Gross profit up even 1%, with the free cash flow goal intact, would do it.
Of course, that’s a low bar. The bigger tests come later: PayPal’s 2027 guidance and the segment figures management has promised for next year.
So what is PayPal stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
