PayPal Beats Q4 Earnings Expectations, Shares Fall on Future Guidance

PayPal Exceeds Q4 Earnings Expectations but Projects Lower-than-Anticipated Future Earnings, Shares Fall

By Jack Wilson

2/7, 17:02 EST
PayPal Holdings, Inc.

Key Takeaway

  • PayPal's Q4 earnings surpassed expectations with $1.48 per share and $8.03 billion in revenue, but shares fell due to disappointing future guidance.
  • The company forecasts full-year earnings of $5.10 per share, below analysts' expectations of $5.48, signaling cautious outlook.
  • Amidst a 9% workforce reduction and new AI initiatives under CEO Alex Chriss, PayPal aims for transformation despite being 80% below its July 2021 peak.

PayPal Reports Q4 Earnings Above Expectations, Shares Dip on Future Guidance

PayPal, the global digital payments giant, announced its fourth-quarter earnings on Wednesday, surpassing analysts' expectations but provided future guidance that slightly missed market forecasts, leading to a decline in its shares in extended trading.

Earnings and Revenue Beat

For the fourth quarter, PayPal reported adjusted earnings of $1.48 per share, exceeding the $1.36 per share anticipated by analysts according to LSEG (formerly known as Refinitiv). The company's revenue for the quarter was $8.03 billion, also ahead of the expected $7.87 billion. This represents a 9% increase in revenue from the same quarter a year earlier, which stood at $7.38 billion.

Active Accounts and Net Income

Despite the positive earnings and revenue figures, PayPal saw a 2% decrease in the number of active accounts, reporting 426 million compared to analysts' expectations of 427.17 million, as per StreetAccount data. However, the company experienced a significant rise in net income, which surged 52% to $1.4 billion, or $1.29 per share, up from $921 million, or 81 cents per share, in the previous year.

Total Payment Volume Growth

The total payment volume processed by PayPal during the quarter was $409.8 billion, marking a 15% increase from the prior year. This figure surpassed the $405.51 billion analysts had anticipated, showcasing the company's continued growth in processing payments.

Guidance Below Expectations

Looking ahead, PayPal provided guidance for the full year and the first quarter that did not meet analysts' expectations. The company forecasts full-year earnings of $5.10 per share, which is below the $5.48 per share analysts had projected, according to LSEG. For the first quarter, PayPal expects year-over-year earnings per share growth in the mid-single digits, compared to a consensus estimate of 8.7%.

Workforce Reduction and AI Initiatives

In a move to streamline operations, PayPal announced last week a reduction of 9% of its global workforce, equating to approximately 2,500 jobs. Additionally, the company recently introduced new artificial intelligence features, marking the first major announcement under the leadership of CEO Alex Chriss. Chriss, who took the helm in August and is a former executive at Intuit, emphasized the company's commitment to transformation and profitable growth in the coming years.

Stock Performance

Prior to the earnings announcement, PayPal's shares had seen a 3% increase this year, following a three-year decline. However, the shares are still approximately 80% below their record high from July 2021, reflecting the challenges and market conditions the company has faced.

In summary, PayPal's fourth-quarter results highlighted its ability to exceed earnings and revenue expectations, despite facing a slight decline in active accounts and issuing future guidance that fell short of market predictions. The company's focus on transformation, including workforce adjustments and the introduction of AI features, underscores its strategy to navigate through current challenges and drive future growth.

Management Quotes

  • Alex Chriss, CEO of PayPal:

    “We’re driving significant transformation across our company and are committed to making the necessary changes to our business to drive profitable growth in the years ahead.”