PayPal beats profit targets, flags spending pull forward amid economic uncertainty
PayPal beat Wall Street estimates for first-quarter earnings and stuck to its annual profit forecast on Tuesday, even at a time when U.S. President Donald Trump's tariffs have fueled economic uncertainty.
Executives said PayPal was off to a good start in April, as consumer spending and the labor market proved to be resilient.
Chief Financial Officer Jamie Miller told analysts that U.S. consumer activity accelerated as tariff-related concerns pulled forward some spending, echoing comments from big banks.
Despite a strong start, PayPal maintained its previous annual profit forecast because of "uncertainty in the global macro environment". It sees annual adjusted profit between $4.95 and $5.10 per share.
The forecast embeds some incremental flexibility into the second half of 2025 from economic uncertainty, CFO Miller said.
"Keeping full-year guidance unchanged is encouraging given the uncertain economic backdrop. However, PayPal's challenges remain significant and investors are likely to want to see the pace of growth pick up to stay interested," said Dan Coatsworth, investment analyst at AJ Bell.
Since CEO Alex Chriss took the helm in late 2023, PayPal has narrowed its focus and concentrated on high-margin businesses instead of aggressive growth.
"Our strategy is working. This is our fifth consecutive quarter of profitable growth," Chriss said in a statement.
Excluding one-time costs, PayPal earned $1.33 per share in the first quarter, topping analysts' expectations of $1.16, according to estimates compiled by LSEG.
PayPal shares were up 0.4 per cent in early trading.
BRANDED CHECKOUT IN FOCUS
Investor worries around growth in the firm's branded checkout offerings, which include PayPal and Venmo, have heavily pressured the stock.
Additionally, concerns about market share loss due to increasing competition from Big Tech rivals Apple and Alphabet's Google have created a potential overhang.
In February, PayPal unveiled plans to accelerate branded checkout growth to between 8 per cent and 10 per cent by 2027.
PayPal is rolling out a new checkout experience and focusing on monetizing its Venmo app to accelerate branded growth.
In the first quarter, PayPal's branded checkout TPV grew 6 per cent excluding leap day, compared with a 5 per cent rise a year ago.
Evercore analyst Adam Frisch said branded checkout growth was yet to show signs of year-over-year acceleration.
PayPal has also forged lucrative partnerships and introduced new products, including its Fastlane guest checkout feature, to shield its dominant position among payments firms.
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