PayPal Holdings on Tuesday reported December quarter earnings and revenue that topped Wall Street estimates while fiscal 2025 profit guidance came in above expectations. But PayPal stock tumbled as investors focused on big changes at subsidiary Braintree.
The digital payments firm reported fourth-quarter earnings before the market open.
Big Changes At Braintree
Repricing initiatives last year at subsidiary Braintree have pressured revenue growth as well as payment volumes but improved transaction margins. Braintree processes transactions for Uber Technologies, Airbnb, DoorDash, Spotify, Paymentus and others.
Meanwhile, Braintree's payment volume and revenue will be lower if some customers migrate business to other payment firms when contracts come up for renewal.
"Braintree again contributed to transaction margin dollar growth," said Susquehanna analyst James Friedman in a report. "Consistent with the plan, Braintree TPV (total payment volume) growth has fallen from 30% in 2023 to just 2% in Q4 2024 and now looks like it's headed negative as clients transition wallet share. Investors are anxious about perceived market share loss and are worried Braintree will not pivot."
PayPal earnings for the fourth quarter rose 5% to $1.19 per share on an adjusted basis. Revenue climbed 4% to $8.37 billion.
Analysts expected PayPal earnings of $1.13 a share on revenue of $8.27 billion.
On the PayPal earnings call with Wall Street analysts, Chief Financial Officer Jamie Miller said PayPal is focused on profitability.
"For the first quarter, we expect flat to low single-digit revenue growth on a currency-neutral basis, which is heavily impacted by the Braintree renegotiation efforts," she said.
Miller added: "We plan to continue guiding revenue one quarter at a time. We believe this approach has served the company well during our transformation — enabling healthy long-term decision making that prioritizes driving faster transaction margin dollar growth. Over time, we are focused on accelerating both revenue and profitability."
PayPal Stock: Key Financial Metrics
In Q4, total payment volume (TPV) processed from merchant customers in the quarter climbed 7% to $437.8 billion, in line with views. Analysts had projected total payment volume of $438 billion.
At Jefferies, analyst Trevor Williams said in a report: "Main nitpick will be branded TPV holding at 6% year over year as investor expectations had been for 7% to 8%."
TD Cowen analyst Bryan Bergin holds a similar view. "Branded growth remaining at 6% (flat versus Q3) apt to be sticking point on share loss concerns," he said in a report.
Also, worries over lost checkout market share to Apple and others continue to be a concern for PayPal stock.
Branded TPV is tied to the online PayPal checkout button that many consumers use when shopping.
Another key financial metric, transaction margin dollars, rose 7% to $3.9 billion. That topped estimates of $3.77 billion.
For PayPal, transaction margin dollars represent the profit it makes from each individual payment transaction it processes, after accounting for the direct costs associated with that transaction, such as fee payments to credit card networks.
For full-year 2025, PayPal predicted adjusted earnings in a range of $4.95 per share to $5.10 per share versus estimates of $4.91 per share.
The company forecast 2025 transaction margin dollars in a range of $15.2 billion to $15.4 billion, above estimates of $15.05 billion.
In October, PayPal's fourth quarter revenue guidance missed estimates.
PayPal Stock Technical Ratings
On the stock market today, PayPal stock fell 6% to 84.13 in early trading, signaling a move below the 50-day line and near the bottom of a flat base. PYPL stock has a 93.66 traditional buy point.
Heading into the PayPal earnings report, shares were up 4% in 2024. PayPal stock had advanced 42% over the past year.
In addition, PayPal hosts an investor day on Feb. 25. When reporting Q4 earnings, the company also announced a new $15 billion share buyback program. It had over $5 billion remaining from a buyback program announced in 2022.
San Jose, Calif.-based PayPal has evolved from an online checkout option to a mobile shopping and person-to-person payments app.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
