by A PayPal sign is seen at its headquarters in San Jose, California on January 30, 2024.
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Paypal reported better-than-expected third-quarter results on Tuesday, but revenue fell a little short of expectations. Shares were trading lower premarket.
Here’s how the company performed compared to Wall Street estimates, based on a survey of analysts by LSEG:
- Earnings per share: $1.20, adjusted from $1.07 expected
- Income: $7.85 billion versus $7.89 billion expected
Revenue rose about 6% in the quarter, compared to $7.42 billion in the same period a year ago. PayPal reported net income of $1.01 billion, or 99 cents per share, compared with $1.02 billion, or 93 cents per share, a year earlier.
This is CEO Alex Chriss’ first earnings report since he took office in September. The stock is up 36% this year and 42% since Chriss joined the payments company, which at the time was mired in a deep recession due to increased competition and a decline in payment rates. participation, or the percentage of revenue that PayPal keeps on each transaction.
Chriss focused on prioritizing profitable growth and better monetization of key acquisitions such as Braintree, which is used by Meta for credit card processing, and payment app Venmo.
Total payments volume, an indication of the evolution of digital payments in the broader economy, increased 9% from a year earlier to $422.6 billion for the quarter ended September 30 , and came in just above the average analyst estimate of $422.5 billion, according to Street Count.
“PayPal delivered strong financial and operational results during a very productive third quarter,” Chriss said in the earnings release.
The company’s operating margin came in at 18.8%, beating StreetAccount’s estimate of 17.4%. PayPal reported total active accounts of 432 million, up 1% from the previous year and beating the average estimate of 430.5 million.
While PayPal’s acceptance rate fell to 1.86% from 1.91% a year earlier, transaction margin, which is how the company measures the profitability of its core business, increased by 45.4% to 46.6%.
For the fourth quarter, PayPal expects “low single-digit growth”. Analysts expected growth of 5.4% to $8.46 billion. The investor filing says the guidance reflects a “price-value strategy and focus on profitable growth.”
The company expects adjusted earnings per share of between $1.07 and $1.11, compared with analysts’ average estimate of $1.10, according to LSEG.
One of Chriss’ strategies to address margin deterioration was to offer merchants increased value-added services, such as connecting a few data points at checkout to reduce the cart abandonment rate. This product, called Fastlane, was launched in August and is a one-click payment option for online sales that can rival Apple Pay and buy Pay through Shopify.
In August, fintech platform Adyen made Fastlane available to businesses in the United States and announced plans to expand its offering globally in the future. The company has also partnered with other global commerce leaders, including Fiserv, Amazon, Global Payments and Shopify, to increase its share of online payment.
The other big product launch during the quarter was PayPal Everywhere, which launched in early September. The initiative offers 5% cash back for using a PayPal debit card in the mobile app. So far, PayPal has seen 1 million new PayPal debit card signups.
Venmo’s total payment volume increased 8% in the quarter compared to the prior year. DoorDash, Starbucks and Ticketmaster are among the companies that now accept Venmo as a payment method for consumers.
“We are making strong progress in our transformation by bringing new innovations to market, forging significant partnerships with leading business players, and driving awareness and engagement through new marketing campaigns,” said Chriss in the press release.
PayPal will host an earnings conference call for analysts at 8 a.m. Eastern.
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