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    PayPal Holdings Inc (PYPL)

    Q3 2024 Earnings Summary

    Reported on Jan 31, 2025 (Before Market Open)
    Pre-Earnings Price$83.59Last close (Oct 28, 2024)
    Post-Earnings Price$78.04Open (Oct 29, 2024)
    Price Change
    $-5.55(-6.64%)
    MetricPeriodGuidanceActualPerformance
    Revenue Growth (YoY)
    Q3 2024
    Mid-single digits
    5.8% YoY ((7,847– 7,418) ÷ 7,418)
    Met
    Non-GAAP EPS (YoY)
    Q3 2024
    High single digits
    6.45% YoY ((0.99– 0.93) ÷ 0.93)
    Missed
    TopicPrevious MentionsCurrent PeriodTrend

    Transaction margin dollar growth

    Mentioned in all prior quarters (Q2, Q1, Q4) with growth of 4–8% and ~3-point contribution from interest income. Some normalization expected in the second half of each year.

    Grew by 8% year-over-year, 6% ex-interest income. Interest benefit set to drop in Q4; focus remains on core levers like branded checkout, Venmo, Braintree, and loss performance.

    Consistently positive results, though interest income tailwind will fade into a headwind.

    Braintree’s contribution and merchant deals

    Discussed every quarter (Q2, Q1, Q4). Braintree shifted to focus on better margins and value-added services; merchant negotiations emphasize profitability.

    Second consecutive quarter of meaningful TMD contribution. Renewed merchant contracts aim for profitable revenue vs. high-volume, low-margin deals.

    Continued momentum around profitable growth, reinforcing strategic partnerships with merchants.

    Venmo monetization efforts

    Consistent mentions since Q4 2023. Debit card usage, Pay with Venmo, and Teen Accounts have steadily grown. Monetization hinges on increasing use of Venmo balances and card adoption.

    Positioned Venmo as a broader financial tool, highlighting debit card growth (+30% in monthly active debit card users) and Pay with Venmo. Emphasis on bundling with PayPal Checkout.

    Strengthening monetization via new features and focus on high-engagement products.

    Pricing changes for merchants

    Recurring topic in past calls (Q2, Q1, Q4). PayPal has consistently shifted toward profitable pricing rather than race-to-the-bottom deals. Fastlane pricing still in early stages.

    Emphasis on a “price-to-value” strategy. Merchants receptive to profitable revenue growth over volume. Braintree margins improved under this model.

    Continues to evolve; merchants increasingly accept value-based pricing as PayPal adds services.

    Improved mobile & consumer experiences (Fastlane)

    Previously discussed each quarter (Q2, Q1, Q4) focusing on guest checkout improvements, mobile redesigns, and expansions to merchant platforms.

    Over 1,000 merchants using Fastlane, improved conversion (+400 bps in reworked mobile flow), and app switch success rates of 97% on iOS. Expansion anticipated through large enterprise adoption in 2025.

    Continued rollout with promising conversion gains; adoption expected to accelerate post-holiday.

    PayPal Everywhere launch

    No mention in Q2, Q1, or Q4 2023.

    Newly introduced initiative enabling daily in-person purchases, cashback choices, and NFC capabilities. Early data suggests a 5x omni-channel spend increase within two weeks of sign-up.

    New topic in Q3 2024, offers omni-channel engagement and planned expansion to Europe.

    Ads platform for merchants

    Mentioned in Q2, Q1, Q4 as an emerging solution to support end-to-end merchant needs (e.g., marketing, remarketing).

    Cited as a key value-added service helping merchants target and acquire customers; part of broader strategy to offer more than just payment processing.

    Continues to evolve; reinforces “price-to-value” approach by bundling more services for merchants.

    Interest income on balances & rate impacts

    Main contributor to TMD growth since Q4 2023 but anticipated to decline as comps get tougher and rate environment changes.

    ~3 points boost to TMD in Q3. Expected to drop under 1 point in Q4. Potential headwinds in 2025 if rates are cut; a 25 bps cut reduces TMD by ~$40M.

    Tailwind turning headwind; PayPal shifting focus to operational metrics ex-interest.

    Marketing investments affecting EPS

    Similar theme in Q2 and Q1, where deferral of marketing spend impacts later quarters. No direct mention in Q4 2023.

    Marketing push intentionally moved to Q4, reducing Q4 non-GAAP EPS by a low-to-mid single digit %; aims to boost product adoption (e.g., Venmo) for holiday season.

    Short-term EPS pressure from heavier second-half marketing but aiming for long-term gains.

    Competition from Apple Pay & alt. methods

    PayPal addressed Apple Pay and alternatives in Q2, Q1, Q4, emphasizing large market share remains stable despite new entrants.

    No direct mention in Q3 2024.

    No current mention; focus shifted to own product improvements.

    Take rate pressures from merchant mix

    Persistent topic in all prior quarters with similar downward pressure from enterprise volume gains, FX fees, and product mix shifts.

    Take rate fell by 4 bps to 1.67% due to large enterprise growth and FX/payouts; Braintree margin gains partly offset these pressures.

    Ongoing challenge as large enterprise growth outpaces SMB segment.

    Regulatory changes in Europe (iOS/NFC)

    Previously discussed in Q2, Q1, Q4 regarding European Commission’s push for more open NFC on iOS devices and PayPal’s readiness to deploy offline capabilities.

    Not mentioned in Q3 2024, aside from referencing possible NFC expansion for PayPal Everywhere in 2025.

    No direct Q3 mention beyond broad expansion plans.

    Large untapped market & new user opportunities

    Recurring topic in Q2, Q1, Q4, focusing on SMB solutions, teen accounts, and broadening acceptance to capture nonconsumption segments.

    Discussed growth via new partnerships (Fiserv, Adyen), expansion of SMB offerings, and G2C (guest-to-customer) conversions with Fastlane. Emphasis on omni-channel and Venmo to drive new users.

    Continued bullish focus on broad market potential, fueling product expansions.

    1. Transaction Margin Growth Outlook
      Q: What's driving transaction margin growth into Q4 and 2025?
      A: Management is excited about the momentum in transaction margin dollar growth, driven by strong underlying growth drivers like branded checkout TPV up 6% , profitable growth in Braintree , and Venmo monetization. They expect consistent trends in Q4, anticipating low to mid-single-digit transaction margin dollar growth. For 2025, they expect transaction margin dollars to grow at least as fast as in 2024, excluding interest income.

    2. Merchant Pricing Strategy
      Q: How are pricing changes affecting merchant relationships and margins?
      A: Management is shifting conversations with merchants to focus on strategic partnerships that include value-added services like Fastlane and an ads platform. They're moving away from commodity pricing to a holistic approach that brings more value to merchants. This includes negotiating better-margin contracts, which will impact TPV and revenue over the next several quarters. They expect margin accretion to emerge over the next few years as they build deeper relationships and monetize across all value-added services.

    3. Branded Checkout Growth
      Q: Will new checkout experiences accelerate branded growth in 2025?
      A: Management expects consistent trends in branded checkout and is focused on improving the experience, especially on mobile. Innovations have led to a 400 basis point improvement in conversion for one-time checkout and reduced latency by 45%. Initiatives like Fastlane and PayPal Everywhere are expected to drive habituation and growth in branded checkout, presenting opportunities to continue taking share in 2025.

    4. Fastlane Monetization Strategy
      Q: How is Fastlane contributing to monetization and take rates?
      A: Fastlane adoption is strong, with over 1,000 merchants onboarded. The current focus is on adoption rather than immediate monetization. Pricing is included in merchant contracts, and as Fastlane adoption grows, it is expected to contribute positively to margins over time. Large enterprises are excited to implement Fastlane after the holiday season, which will further enhance its impact.

    5. 2025 Guidance and OpEx Expectations
      Q: What's the outlook for 2025, including OpEx expectations?
      A: Management anticipates revenue trends to continue as they renegotiate merchant contracts for better margins. Operational expenses are projected to increase by low single digits in 2024 and similarly in 2025, but more balanced throughout the year. They're focused on factors within their control, building durable growth levers, and maintaining a solid foundation for future growth.

    6. Interest Income Impact
      Q: How will interest rate changes affect transaction margins?
      A: Interest income contributed about 3 points to transaction margin dollar growth in 2024. In Q4, this benefit is expected to be less than 1 point, making it relatively immaterial. For 2025, a 25 basis point rate cut would reduce transaction margin by approximately $40 million. Anticipated rate cuts could present a 1- to 2-point drag on transaction margin dollar growth next year.

    7. SMB Growth and Take Rates
      Q: What's driving take rates, and how are SMBs performing?
      A: Take rate decline is influenced by product mix and improvements in Braintree margins with lower incentives. Growth among large enterprises is outpacing SMBs, impacting take rates since large enterprises have lower take rates. Management is investing in innovation for SMBs, such as PayPal Complete Payments, and expects SMB penetration to grow in 2025 and beyond.

    8. Consumer Growth and Innovation Pipeline
      Q: What's the outlook for consumer growth and new products?
      A: Management highlights innovation as a key advantage, with new features in the PayPal app and Venmo, including PayPal Everywhere and enhanced rewards. Initiatives like PayPal Everywhere have attracted over 1 million new users since launch. They're seeing steady progress in monthly active users and are confident that continued innovation will drive consumer engagement and growth.