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PayPal Holdings, Inc. (PYPL)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered profitable growth: non-GAAP EPS $1.33 beat consensus $1.16, while revenue of $7.79B was slightly below the $7.84B consensus; GAAP EPS was $1.29 and operating margins expanded materially (GAAP: 19.6%, non-GAAP: 20.7%). *
  • Transaction margin dollars rose 7% to $3.716B (ex-interest also +7% to $3.418B), aided by PSP profitability, Venmo, credit, and lower transaction expense and tax; cash from operations was $1.160B.
  • Guidance: FY 2025 non-GAAP EPS maintained at $4.95–$5.10; Q2 2025 non-GAAP EPS guided to $1.29–$1.31 with mid-single-digit non-transaction OpEx growth and TM$ of $3.75–$3.80B; management flagged macro/tariff uncertainty despite a strong start.
  • Strategic traction: branded experiences TPV grew 8% ex-leap day; Venmo revenue +20% with Pay with Venmo TPV +50%; U.S. checkout redesign reached >45% traffic with Europe rollout starting in Q2; ads and agentic-commerce initiatives ramping.

What Went Well and What Went Wrong

What Went Well

  • EPS and margins outperformed: non-GAAP EPS +23% YoY to $1.33; GAAP operating margin +447 bps YoY to 19.6% and non-GAAP +257 bps to 20.7%; “great start to the year…fifth consecutive quarter of profitable growth.” — Alex Chriss.
  • Venmo monetization inflected: Pay with Venmo TPV +50%; MAAs +30%; Venmo revenue +20% (“highest rate we’ve achieved in years”), with debit card MAAs +~40% and penetration to 6%.
  • OVAS strength and credit quality: OVAS revenue +17% to $775M, driven by consumer and merchant credit; loan receivables $6.5B with stable/improving charge-offs and delinquencies.

What Went Wrong

  • Topline slightly missed Street; transactions fell: revenue $7.791B vs $7.841B consensus; total payment transactions down 7% YoY, TPA -1% YoY (59.4), though ex-PSP TPA +4%. *
  • Take rate drifted lower: transaction take rate declined 6 bps to 1.68% on product/merchant mix (payouts momentum, Braintree mix), offset by large enterprise branded growth and debit adoption.
  • Free cash flow compressed: FCF fell 45% YoY to $964M and cash from operations declined 39% YoY given timing impacts in BNPL receivables; adjusted FCF was $1.381B.

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$7.847 $8.366 $7.791
GAAP Diluted EPS ($)$0.99 $1.11 $1.29
Non-GAAP Diluted EPS ($)$1.20 $1.19 $1.33
GAAP Operating Margin (%)17.7% 17.2% 19.6%
Non-GAAP Operating Margin (%)18.8% 18.0% 20.7%
Transaction Margin Dollars ($USD Billions)$3.654 $3.935 $3.716
Cash from Operations ($USD Billions)$1.614 $2.394 $1.160

Segment revenue breakdown

SegmentQ3 2024Q4 2024Q1 2025
Transaction Revenues ($USD Billions)$7.067 (90%) $7.588 (91%) $7.016 (90%)
Other Value-Added Services ($USD Billions)$0.780 (10%) $0.778 (9%) $0.775 (10%)
Total Net Revenues ($USD Billions)$7.847 $8.366 $7.791

KPIs

KPIQ3 2024Q4 2024Q1 2025
Active Accounts (millions)432 434 436
Payment Transactions (billions)6.631 6.619 6.045
Transactions per Active Account (TTM)61.4 60.6 59.4
TPV ($USD Billions)$422.641 $437.836 $417.208
Transaction Margin (%)46.6% 47.0% 47.7%
Transaction Expense Rate (%)0.91% 0.91% 0.89%
Transaction & Credit Loss Rate (%)0.08% 0.10% 0.09%

Q1 2025 vs Consensus

MetricConsensusActualBeat/Miss
Revenue ($USD Billions)$7.841*$7.791 Miss
Primary EPS ($)$1.16*$1.33 Beat
EBITDA ($USD Billions)$1.709*$1.814*Beat

Values retrieved from S&P Global. *

Drivers and notes

  • EPS benefited from lower effective tax rate (GAAP 19.7% vs 26.6% YoY) and ~$0.04 positive impact from strategic investments; transaction margin rate rose >270 bps YoY.
  • Revenue pressure reflected deliberate shift away from unprofitable Braintree volume despite branded checkout and Venmo growth.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Non-GAAP EPSQ2 2025N/A$1.29–$1.31 Newly provided
GAAP EPSQ2 2025N/A$1.24–$1.26 Newly provided
Transaction Margin Dollars (ex interest)FY 2025At least 5% growth At least 5% growth Maintained
Non-GAAP EPSFY 2025$4.95–$5.10 $4.95–$5.10 Maintained
GAAP EPSFY 2025$4.80–$4.95 $4.80–$4.95 Maintained
Non-transaction OpEx growthQ2 2025N/AMid-single-digit growth Newly provided
Free Cash FlowFY 2025N/AApproximately $6–$7B Newly provided
Share BuybacksFY 2025N/A~$6B assumed Newly provided/assumption

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Branded checkout modernizationNew mobile checkout; 100–400 bps conversion uplift in tests; latency -45%; early rollout (5% US traffic) Transformation foundation, improving branded/P2P/Venmo, price-to-value strategy >45% US traffic on new paysheet; Europe rollout starting Q2; branded experiences TPV +8% ex-leap day Accelerating rollout and impact
PSP/Braintree margin focusPrice-to-value resets; shift from low-margin volume; TM$ contribution even as revenue growth slows Ongoing negotiations to prioritize profitable growth Continued renegotiation; PSP volume +2%; accretive to TM$; Q2 revenue growth low-to-mid single digit FXN Margin accretion, slower near-term revenue
Venmo monetizationDebit MAAs +30%; Pay with Venmo MAAs +20%; ARPU uplift Building foundation; marketing in back half Venmo revenue +20%; Pay with Venmo TPV +50%; debit MAAs +~40%; penetration to 6% Strong momentum
Tariffs/macroNeutral macro; interest income tailwind to normalize in Q4 and headwind in 2025 Entering 2025 with caution and reinvestment Cautious stance; potential tariff impacts; Q2 outlook embeds uncertainty Elevated uncertainty; prudent guide
AI/agentic commerce & AdsNot highlightedNot highlightedLaunch of remote MCP server; agent frameworks integrated to PayPal APIs; Ads expanding internationally and off-site New initiatives, early-stage ramp
Credit portfolioTightened underwriting in 2024; starting to modestly grow merchant originations Balanced approach to credit Stable/improving charge-offs and delinquencies; net loan receivables $6.5B Improving performance

Management Commentary

  • “PayPal had a great start to the year and our strategy is working…fifth consecutive quarter of profitable growth…progress across branded checkout, PSP, omnichannel, and Venmo.” — Alex Chriss (CEO).
  • “We outperformed the TM dollars and EPS guidance…upside driven by PSP profitability, Venmo, credit and transaction expense improvement and a more favorable tax rate.” — Jamie Miller (CFO/COO).
  • “Branded experiences TPV grew 8% ex leap day…Venmo had another standout quarter…20% revenue growth.” — Alex Chriss.
  • “Despite a strong start…we are maintaining our full year guidance…given uncertainty in the environment and the potential for a wide range of outcomes.” — Jamie Miller.

Q&A Highlights

  • Macro and tariffs: Leadership emphasized diversification and cautious outlook; Chinese merchants selling into U.S. are <2% of branded checkout TPV, limiting exposure to de minimis changes.
  • Branded trajectory: April showed U.S. branded activity acceleration likely due to pull-forward; full-year assumes mid-single-digit branded checkout TPV growth.
  • OVAS composition: Q1 OVAS growth primarily credit-driven (consumer and merchant); portfolio quality strong; mid-single-digit OVAS growth expected for the year with ~$150M rate headwinds embedded.
  • International expansion: Germany NFC launch later Q2; U.K. PayPal app upgrade and biometrics for 2FA; competitive landscape favors PayPal’s brand and BNPL opportunity.
  • Merchant lending underwriting: Standards slightly tightened in March; portfolio well-managed with cash sweeps and personal guarantees in business loans.

Estimates Context

  • Q1 2025: EPS beat (Actual $1.33 vs $1.16 consensus*), revenue slight miss (Actual $7.791B vs $7.841B consensus*), EBITDA beat (Actual $1.814B* vs $1.709B* consensus). *
  • Prior quarters: PYPL exceeded EPS consensus in Q3 and Q4 2024, and topped revenue consensus in Q4 2024. *
  • Implications: Street models likely raise EPS for 2025 on margin trajectory and Venmo monetization; top-line revisions modest given PSP revenue mix shift; management’s maintained FY guide and H2 macro caution temper upward revisions.

Values retrieved from S&P Global. *

Key Takeaways for Investors

  • Margin story intact: Non-GAAP operating margin expanded to 20.7% and transaction margin rate rose >270 bps YoY, driven by price-to-value actions in PSP, branded and credit; this underpins EPS outperformance.
  • Venmo momentum is meaningful: Revenue +20%, Pay with Venmo TPV +50%, and debit penetration at 6% suggest durable monetization levers beyond P2P; watch U.S. and U.K. merchant adoption.
  • Branded checkout upgrade is scaling: >45% of U.S. traffic on the new paysheet with Europe rollout starting Q2; expect gradual conversion uplifts and branded TPV acceleration through 2025.
  • PSP revenue growth will be restrained near-term by deliberate mix shifts, but accretive to transaction margin dollars; Q2 revenue growth guided low-to-mid single digits FXN.
  • Cash generation remains robust despite timing effects: OCF $1.16B and adjusted FCF $1.381B in Q1; FY FCF still guided to $6–$7B with ~$6B buybacks.
  • Macro/tariff watch: De minimis exposure is small (<2% of branded checkout TPV), but guidance prudently embeds potential second-half softness; position sizing should account for headline risk.
  • Near-term trade: EPS and margin beats vs a cautious full-year stance; catalysts include EU checkout launch, Germany NFC, ads/off-site expansion, and agentic commerce integrations—monitor Q2 TM$ ($3.75–$3.80B) and branded TPV trend. 
Notes:
- Asterisk (*) denotes consensus or actual values sourced from S&P Global where company documents do not provide them. Values retrieved from S&P Global.