PayPal's strategic pivot drives an earnings beat

PayPal

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PayPal CEO Alex Chriss has said it would take time for the company's technology-focused strategy shift to show up in its financial performance, and on Tuesday said the moves the payment firm has made in the past year are starting to reap benefits. 

For the quarter ending December 31, PayPal reported non-GAAP earnings per share of $1.19, beating FactSet's analyst prediction of $1.12. Net revenue of $8.37 billion was above the Wall Street estimate of $8.26 billion. Net income was $1.2 billion, down 2% from the prior year.

PayPal's stock was about $89 in premarket trading, up about 1%. PayPal projects earnings per share between $1.15 and $1.17 in the first quarter of 2025; and $4.95 to $5.10 for the full year 2025. Analysts projections for the full year are $4.90.

"We set out at the beginning of 2024 to narrow our focus, improve execution, and reposition the business," Chriss said in a release. "The improvements we made to branded checkout, peer-to-peer, and Venmo, plus the progress we made on our price-to-value strategy, are beginning to show up in our results…The strong momentum we've created sets us up well for 2025, which is about scaling adoption."

PayPal's stock has gone up 45% in the past 12 months, better than Zacks Computer & Technology sector's average return of 28% and Zacks Internet and Software Industry's index 40.4%. This followed a slump in PayPal's stock during 2022 as the technology industry corrected after a runup during the pandemic. 

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PayPal's strategy under Chriss, who assumed the top job in late 2023, has been to invest in artificial intelligence to improve its core payments business. As the payment company battles card networks and rival payment firms like Stripe and Block. Chriss has called for "patience" from investors to allow PayPal's changes to take hold. 

PayPal's moves include its new flagship product Fastlane, which consumers use to make payments with a one-time password in a few taps. Fastlane performs like a payments facilitator, drawing on consumers' past payment choices to recommend checkout options through AI-powered analysis. PayPal has added more than 1,000 merchants to Fastlane since August and has inked several distribution deals designed to add to that scale in the coming months. 

A collaboration with checkout technology company BoldCommerce brings Fastlane to retailers that use Adobe Commerce's Magento e-commerce platform. Another partnership with Shopify Payments adds PayPal's branded checkout options into Shopify's checkout flow. Another piece of the strategy is to boost merchant acceptance for Venmo, PayPal's popular transfer app.

That would encourage consumers to spend more accumulated funds from P2P transfers instead of transferring the funds to other accounts. PayPal says $18 billion flows through Venmo each month, and 80% of that money leaves Venmo within 10 days. 

In the digital asset market, PayPal in late 2024 additionally added scale for its PYUSD stablecoin, using a distributed ledger to link cross-border payment services to PayPal's Xoom remittance app. Xoom's recently signed partners include Cebuana Lhuillier,  the largest micro-financial services provider in the Philippines, where it has a network of 3,500 branches and 25,000 agent locations.

Another new partner is Yellow Card, a major stablecoin on/off ramp in Africa and  the first African fintech to list PYUSD.PYUSD, which launched in late 2023, has lagged behind larger stablecoins such as Tether's USDT and Circle's USDC. PYUSD and USDT recently suffered a setback in Europe as Crypto.com delisted the stablecoins, along with some other cryptocurrencies, in an effort to follow new European Union cryptocurrency regulations.

PayPal has signed cryptocurrency firm Bitpay to build acceptance for stablecoin payments across Bitpay's network of more than 200 merchants. PayPal has also attracted gaming and Web 3.0 content firms to use PYUSD for payments, while a partnership with payment technology BVNK  has extended PYUSD into business-to-business payments.