Darren Peller

Darren Peller asked about the timeline for investments to yield results, specifically if transaction margin dollars and branded checkout are expected to improve in the second half of 2026 or if it's a 2027 story, and PayPal's strategy for balancing growth with capital return.

Answer

Steve Winoker (Chief Investor Relations Officer, PayPal) explained that transaction margin (TM) dollars are expected to decline slightly for the full year, with investments hitting consistently throughout 2026, not back-end loaded. Jamie Miller (Executive VP and CFO, PayPal) stated that PayPal is focused on organic growth and investing in its unique assets, maintaining a strong capital return profile with $6 billion in buybacks and a dividend, with the board regularly discussing capital allocation.

Darren Peller asked for clarification on the trajectory of Mastercard's 2026 guidance, specifically the acceleration from the first half to the second half, and the underlying assumptions regarding consumer and spend volumes (cross-border, domestic), including any potential for stimulus.

Answer

Sachin Mehra (CFO) stated that the 2026 base case assumes healthy consumer and business spending, informed by hard data and a projected healthy tax refund season. He explained that the lower growth expected in the first half of the year is primarily due to tougher comparisons from elevated FX volatility experienced in 2025.

Darren Peller from Wolfe Research asked for clarification on Mastercard's 2026 guidance trajectory, specifically the expected acceleration from the first half to the second half, and the underlying assumptions for consumer and business spending volumes, including cross-border and domestic, and the potential for stimulus.

Answer

Sachin Mehra, CFO of Mastercard, stated that the 2026 base case assumes healthy consumer and business spending, triangulated from hard data, and considers factors like a strong job market and tax refund season. He explained that the lower growth expected in the first half compared to the second half is primarily due to tougher year-over-year comparisons from elevated FX volatility in the first half of 2025.

Darren Peller inquired about the building blocks supporting the mid to high-4% organic banking trends seen this quarter and embedded in the next quarter's guide. He requested more color on the specific growth drivers within issuing, digital, payments, and core, and asked about the sustainability of this trajectory. He also followed up on the adjusted free cash flow outlook for next year, asking how restructuring charges would be segmented and if the company could still achieve 80%+ conversion, focusing on the quality of free cash.

Answer

CEO Stephanie Ferris detailed that net new sales contribute about 100 basis points of annual growth, driven by investments in bank modernization, digital, and payments. She noted that organic growth from transactions and accounts typically adds 2-3 points per year, with net pricing contributing 0-50 basis points, supporting a 3.5%-4.5% range. CFO James Kehoe explained that the core business is expected to exit the year with 85% conversion, driven by lower capital intensity and normalized cash taxes, aiming for 90% in 2026. He added that the acquired business also has a similar conversion rate, leading to a substantial step-up in cash flow, despite needing to absorb one-time integration expenses.