Key Takeaways
- PayPal raised its 2026 adjusted EPS outlook to about $5.60 after third-quarter EPS of $1.45 beat estimates, even though $8.58 billion of revenue missed.
- Branded checkout growth stayed between 1% and 2% for a fourth straight quarter, while Pay with Venmo jumped 43%.
- PayPal closed Thursday at $59, just above its $57.10 average target, and trades at 9.8x forward earnings versus Block at 16.1x.
- The February 3 report will show whether checkout can grow faster than 2% and what the first 2027 outlook says.
PayPal Holdings (PYPL) found a way to grow earnings without growing much else.
Third-quarter adjusted EPS rose 8% to $1.45, well ahead of the $1.31 consensus. Revenue rose just 2% to $8.58 billion, short of the $8.71 billion analysts expected. Management still raised its 2026 EPS outlook to about $5.60, above the $5.38 Street estimate.
CEO Enrique Lores sees a turn. “We are beginning to see our strategy translate into our financial results,” he said in the release.
The stock has swung since. It rose 3.4% on Wednesday, the day Block jumped 15% on its own results. Then it slipped 2.1% on Thursday to $59 as the Nasdaq fell 5.5% and Freedom Broker cut its rating to Hold. That leaves PayPal just above the $57.10 average analyst target and 13% below its 52-week high of $68.
Block (XYZ) is the obvious comparison. Block joined Stripe and Advent in a group that pursued PayPal this summer before walking away in late August, and on Tuesday it posted 22% gross profit growth.
A beat built on expenses
Most of the beat came from cost control. Non-transaction operating expenses grew just 1%, so non-GAAP operating income rose 3% to $1.6 billion while transaction margin dollars grew 2% to $3.95 billion.
The new targets:
- 2026 transaction margin dollars of about $15.7 billion
- Fourth-quarter adjusted EPS of about $1.43
- At least $1.5 billion of gross run-rate savings over two to three years, with more than $700 million in place by the end of the fourth quarter
Headcount is already down by more than 2,000, and three management layers are gone. However, CFO Jamie Miller told analysts not to annualize this quarter’s expense line, since PayPal plans to keep funding growth.
The top line tells the slower story…
Revenue growth has slid from 7% in the first quarter to 5% in the second and 2% now.
Venmo is doing the lifting
Branded checkout volume grew 1% on a currency-neutral basis. That’s the fourth straight quarter stuck between 1% and 2%, and the EU’s removal of its de minimis exemption shaved roughly 70 basis points off global growth.
Elsewhere, growth is real. Venmo posted double-digit payment volume growth for an eighth straight quarter, Pay with Venmo jumped 43%, and Venmo debit card monthly actives rose more than 55% to 6.7 million.
Braintree added about $270 million of transaction revenue year over year, and Pay Later volume grew 25%. Financial services now make up more than 20% of transaction margin dollars and are growing at a double-digit rate.
So does the Street buy the earnings story?
Only modestly. Analysts expect EPS to compound about 5% a year over the next two years, which leaves little credit for the mix shift Lores is describing.
TIKR tracks 44 analysts on PayPal. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on PayPal, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See PayPal’s Analyst Ratings
The discount has a reason
PayPal trades at 9.8x forward earnings. Block fetches 16.1x because its gross profit grew 22% last quarter while PayPal’s revenue grew 2%.
The gap is hard to miss:
Investors are paying for growth, and PayPal hasn’t shown enough of it to close the spread.
The cash still counts. PayPal produced $2 billion of adjusted free cash flow in the quarter and returned more than $1.6 billion through buybacks and dividends. The dividend yields about 1%.
There are loose ends, too. The U.K. Financial Conduct Authority opened investigations in March, and the buyout interest that lifted the stock in July is gone.
My take: The earnings machine works, and at under 10x forward earnings the buybacks shrink the share count quickly. But a turnaround needs a growing core, and branded checkout still isn’t growing. With the stock sitting right around the average target, I’d hold what I own and wait for proof before adding.
The next checkpoint is the February 3 report. It should show whether checkout gets back above 2% and what the first 2027 outlook says about growth beyond cost cuts.
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 stocks mentioned. Thank you for reading, and happy investing!
