PayPal’s card-processing growth slows amid focus on profit

PayPal Holdings Inc. reported slowing growth in its card-processing business even as fourth-quarter earnings topped analysts’ estimates.
Growth in the total payment volume for PayPal’s unbranded payment-processing business – the volume of payments it processes for other firms, not itself – slipped to 2% in the fourth quarter from 29% a year earlier, a deceleration the firm attributed to an intentional effort to price its technology more competitively.
“With respect to forward trends on this, we do expect similar dynamics the next few quarters – some volatility,” Chief Financial Officer Jamie Miller said Tuesday on a call with analysts. “This is not something that just happens in a perfect line, and we still do have some large agreements over the next couple of years that we will work our way through.”
Branded checkout growth also fell short of some estimates, according to Dan Dolev, an analyst at Mizuho Securities USA LLC.
“Expectations likely ran ahead of themselves, especially after Visa’s comment last week regarding strong fourth-quarter e-commerce trends,” he said in a note to clients.
Shares of the firm slid 9.1% to $81.37 at 9:33 a.m. in New York. That have gained 31% in the past 12 months.
Adjusted net income slipped 1.9% to $1.21 billion, or $1.19 per share, in the fourth quarter, beating the $1.13-a-share average estimate of analysts. PayPal also lifted its forecast for first-quarter earnings to $1.15 to $1.17 a share, also greater than analysts are expecting.
PayPal focused on slimming down and refocusing its businesses last year, and aims to do the same this year, after becoming bloated with acquisitions and prioritizing growth at the expense of profitability. Soon after Alex Chriss joined as chief executive officer in 2023, he said the firm was “doing too many things” and sought to set it back on track with investments in its branded checkout technology, among others. Those efforts are now flowing through to the San Jose, California-based company’s earnings after a period of investor uncertainty.
“We set out at the beginning of 2024 to narrow our focus, improve execution and reposition the business,” Chriss said in a statement Tuesday. “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.”
Total payment volume, or the volume of all payments processed by PayPal and Venmo, was $437.8 billion for the three months through December, up 6.8% and also exceeding analysts’ estimates.
PayPal also announced that its board authorized $15 billion in new share repurchases, and plans to buy back approximately $6 billion in shares this year, according to a company presentation.
In the year ahead, PayPal aims to glean more profit from Venmo, one of its best-known offerings. Full-year earnings are expected to total $4.95 and $5.10 per share on an adjusted basis.