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PayPal (PYPL) delivered a solid 2Q25 earnings report, surpassing EPS and revenue expectation, with revenue growth accelerating to 5.1% from 1.2% in 1Q25. The company also raised its FY25 EPS guidance to $5.15-$5.30, up from $4.95-$5.10, signaling confidence in stronger profitability in 2H25. Despite this beat-and-raise performance, the stock is down sharply today.

• The selloff appears largely driven by disappointment in the growth trajectory of PYPL’s branded business, encompassing its core online checkout button and digital wallet offerings, which is viewed as a critical growth engine. In Q2, the branded business recorded total payment volume (TPV) growth of 5%, a slight deceleration from 6% in the prior quarter, falling short of investor expectations for accelerating momentum. This modest slowdown has raised concerns about PYPL’s ability to sustain robust growth in its flagship segment amid intensifying competition from players like Apple (AAPL) Pay and others.
• A notable headwind in the quarter was a 5% yr/yr decline in payment transactions, continuing a downward trend following a 7% drop in 1Q25. This weakness primarily stems from unbranded payment service provider (PSP) transactions, particularly through Braintree, as PYPL deliberately shifts focus away from lower-margin volume to prioritize higher-margin opportunities. While this strategic pivot aligns with long-term profitability goals, the persistent decline in transaction volume has sparked investor concerns about overall platform engagement.
• On a brighter note, transaction margin dollars, a key profitability metric, rose 7% yr/yr to $3.84 bln, propelled by PYPL’s emphasis on higher-margin branded transactions, contributions from credit products, Venmo, and value-added services. Excluding interest on customer balances, transaction margin dollars grew an even stronger 8%, underscoring the company’s ability to enhance profitability despite softer transaction volumes. PYPL also raised its FY25 transaction margin dollar guidance to $15.35-$15.50 bln from $15.2-$15.4 bln, reflecting confidence in sustained margin expansion.
• Venmo continues to be a standout performer, posting revenue growth exceeding 20% for the second consecutive quarter, driven by expanded merchant adoption and new initiatives like co-branded debit cards. Venmo’s total payment volume growth accelerated to its highest rate in three years, with debit card monthly active users surging over 40%, bolstered by integrations with major merchants like DoorDash (DASH), Starbucks (SBUX), and Ticketmaster.

PYPL’s Q2 results were solid, with strong EPS and revenue beats, upwardly revised guidance, and robust growth in transaction margin dollars and Venmo. However, the modest deceleration in branded business TPV growth has overshadowed these positives, fueling investor concerns about the company’s ability to accelerate its core growth engine in a competitive landscape.