10-Q · May 5, 2026
PayPal reported Q1 2026 results with revenues of $8.35 billion, up 7% year-over-year, and EPS of $1.21, reflecting a slight decrease from the previous year. The company highlighted operational challenges including…
Earnings analysis · 10-Q
PYPL earnings analysis
Filed July 28, 2026 · Our reading of the company's report
The latest report
PayPal delivered 5% Q2 revenue growth to $8.682 billion and 10% TPV growth to $486.448 billion, but GAAP diluted EPS declined 3% to $1.25 and operating margin contracted 200 basis points year over year to 16%. Expense…
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PayPal delivered 5% Q2 revenue growth to $8.682 billion and 10% TPV growth to $486.448 billion, but GAAP diluted EPS declined 3% to $1.25 and operating margin contracted 200 basis points year over year to 16%. Expense growth—especially an 11% rise in transaction expense—outpaced revenue, while strategic-investment losses shifted other income to a $117 million expense. Liquidity and cash generation improved, and management outlined a reorganization targeting at least $1.5 billion in gross annualized savings, although the filing does not provide numeric revenue or EPS guidance.
Reported figures
- Earnings per share
- $1.25
- Operating margin
- 16.0%
- Segment
- PayPal operates as one reportable segment: net revenue was $8.682 billion, up from $8.288 billion.
- Segment
- U.S. revenue was $5.048 billion versus $4.709 billion; other-country revenue was $3.634 billion versus $3.579 billion.
- Segment
- Transaction revenue was $7.832 billion versus $7.441 billion; other value-added-services revenue was $850 million versus $847 million.
What stood out
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Revenue grew 5%, led by U.S. activity
Q2 net revenue increased 5% year over year to $8.682 billion from $8.288 billion, and rose from $8.350 billion in Q1 2026. U.S. revenue grew $339 million to $5.048 billion, while other-country revenue increased $55 million to $3.634 billion.
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Payment volume and Braintree drove growth
TPV increased 10% to $486.448 billion and payment transactions rose 8% to 6.750 billion. Braintree revenue increased approximately $400 million and Venmo revenue increased approximately $60 million, partly offset by an approximately $130 million decline in PayPal-product revenue.
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EPS improved sequentially despite lower profit
GAAP diluted EPS was $1.25, down $0.04 from $1.29 a year ago but up from $1.21 in Q1 2026. The diluted weighted-average share count fell to 882 million from 977 million, supported by $3.0 billion of six-month repurchases.
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Operating cash conversion strengthened
Operating cash flow was $1.983 billion in Q2, up from $898 million a year earlier. For the first six months, operating cash flow rose 51% to $3.117 billion, while property-and-equipment purchases were $439 million, or 14.1% of operating cash flow.
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Liquidity remained ample
Corporate liquidity increased: cash, cash equivalents and investments excluding customer funds and strategic investments were $13.530 billion at June 30, 2026, versus $12.848 billion at December 31, 2025. Cash and cash equivalents specifically increased $257 million to $8.306 billion.
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Reorganization targets sizable savings
Management expects at least $1.5 billion of gross annualized run-rate savings over two to three years from its April reorganization. Initial actions are expected to generate approximately $400 million of run-rate gross savings, with a portion realized in Q4 2026.
What to watch
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Transaction costs compressed operating margin
Profitability weakened despite revenue growth: operating income declined 5% to $1.427 billion and operating margin fell to 16% from 18%. Transaction expense increased 11% to $4.385 billion, outpacing the 5% revenue increase, driven by 10% TPV growth and a greater Braintree mix.
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Investment losses increased earnings volatility
Other income turned to a $117 million expense from $25 million of income, including a $74 million Q2 loss on strategic investments versus an $11 million gain. Strategic investments totaled $1.735 billion, and a hypothetical 10% adverse valuation change would reduce carrying value by approximately $174 million.
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Merchant-credit loss rate worsened
Credit-quality pressure remains most evident in merchant lending: the merchant net charge-off rate increased to 7.6% from 6.1%, and loans more than 90 days outstanding rose to 3.9% from 3.6%. Merchant loans, advances and fees receivable were $1.900 billion at June 30, 2026.
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New FCA inquiry and consolidated securities cases
The filing updates legal and regulatory exposure: in March 2026 the U.K. FCA opened Competition Act investigations regarding provisions in agreements with Visa and Mastercard, while the Branded Checkout securities cases were consolidated on May 21, 2026. These proceedings seek unspecified damages and could require changes to business practices.
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Updated crypto regulatory and custody exposure
The updated risk factors emphasize cryptocurrency regulation and custody risks. PayPal reports $1.914 billion of loans held for sale and has customer cryptocurrency offerings subject to the GENIUS Act of 2025; regulatory changes or custody failures could require product restrictions, additional controls, or expose the company to customer losses.
Management's outlook
The 10-Q does not provide numeric revenue or EPS guidance. Management said its April 2026 reorganization is expected to generate at least $1.5 billion of gross annualized run-rate savings over the next two to three years; the initial actions could generate approximately $400 million of run-rate gross savings and may result in $120 million to $140 million of transformation-related charges in the second half of 2026.
Earlier filings 1
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.