PayPal Holdings (PYPL) posted stronger-than-expected earnings and revenue for the December quarter, driven by lower forecasts and strategic shifts at its Braintree subsidiary. Despite an optimistic profit outlook for fiscal 2025, PayPal stock declined.
The digital payments giant released its fourth-quarter financial results before the market opened.
For Q4, PayPal reported an adjusted earnings increase of 5%, reaching $1.19 per share. Revenue also rose by 4% to $8.37 billion.
Analysts had predicted earnings of $1.13 per share on revenue of $8.27 billion.
Key Financial Highlights for PayPal Stock
The company’s total payment volume (TPV) from merchant transactions grew 7% year-over-year to $437.8 billion, aligning with analyst expectations of $438 billion.
Jefferies analyst Trevor Williams pointed out that a key concern for investors was branded total payment volume (TPV) remaining at 6% year-over-year, below expectations of 7% to 8%. TD Cowen analyst Bryan Bergin echoed this sentiment, noting that flat branded TPV growth compared to Q3 raises worries about potential market share loss.
Branded TPV is linked to PayPal's widely used online checkout button.
Meanwhile, transaction margin dollars—a crucial profitability metric—grew 7% to $3.9 billion, surpassing estimates of $3.77 billion. However, operating expenses reached $6.93 billion, exceeding some forecasts.
PayPal’s 2025 Outlook
For fiscal 2025, PayPal projected adjusted earnings between $4.95 and $5.10 per share, outpacing analysts' $4.91 per share estimate. The company also forecast transaction margin dollars between $15.2 billion and $15.4 billion, ahead of the predicted $15.05 billion.
Braintree's Impact on Revenue
PayPal was set to provide 2025 revenue guidance during its earnings call. Last October, the company’s Q4 revenue forecast fell short of estimates.
Braintree, a PayPal subsidiary that processes payments for major companies like Uber (UBER), Airbnb (ABNB), DoorDash (DASH), and Spotify (SPOT), underwent pricing adjustments last year. While these changes improved transaction margins, they slowed payment volume growth. Additionally, some businesses may shift to other payment providers when their contracts expire, potentially reducing Braintree’s volume.
Concerns persist over PayPal losing checkout market share to Apple (AAPL) and other competitors.
PayPal Stock Performance
Shares of PayPal fell 6% to $84.13 in early trading, dipping below the 50-day moving average and nearing the lower end of a flat base. The stock's traditional buy point stands at $93.66.
Before the earnings release, PayPal shares had risen 4% in 2024 and surged 42% over the past year.
Investor Day & Buyback Program
PayPal is set to host an investor day on Feb. 25. The company also announced a new $15 billion share repurchase plan, adding to the over $5 billion remaining from its 2022 buyback program.
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