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As digital payments systems have grown, so have the opportunities for bad actors to do—and pay for—bad things. PayPal, which hosts more than 20 billion transactions each year, uses AI to identify payments that enable criminal behavior. The goal is to “create a safer platform for our customers and a safer digital world for all,” company executive Aaron Karczmer told Fortune in an emailed statement. The technology detects purchases related to terrorist activities, drug sales, human trafficking, money laundering, and more. PayPal, which generated $27.5 billion in revenue last year, then works with law enforcement to investigate suspected crimes.

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WMAC-2022-49-Paypal

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Modern Boards 2022 PayPal

Fintech giant PayPal scored high on our rankings for age dispersion, board independence, and board expertise. John Donahoe, president and CEO of Nike, is PayPal's board chairman. The company counts current president and CEO Dan Schulman among its directors, as well as Ann Sarnof, CEO of WarnerMedia Studios &amp; Networks Group; Enrique Lores, CEO of HP; Gail McGovern, CEO of the American Red Cross; and the former CEOs of Freddie Mac and AT&amp;T. Belinda Johnson, former COO of Airbnb, and Rodney Atkins, a former IBM executive, are also board members. 
 
PayPal has in recent years increased its efforts to invest in underserved communities. The company has spent $510 million since 2020 to fund Black- and Latinx-owned financial institutions and to back early-stage VC funds led by Black and Latinx managers, with the goal of closing the racial wealth gap. 
 
Editor's note: This writeup has been corrected to include Nike CEO and president John Donahoe.

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CTW.1122. PayPal

Like so many other business leaders last winter, PayPal CEO Dan Schulman didn’t believe Vladimir Putin would actually send Russian forces into Ukraine. “I thought for sure there would be politics that would intervene,” Schulman recently told Fortune. So when infantry and tanks barreled across the border toward Kyiv on Feb. 24, Schulman and his team faced a distressing surprise, and a flood of tough tasks. 
 
Job one was making sure employees and customers’ balances were safe on both sides of the border. (Russia and Ukraine together accounted for about half of 1% of PayPal’s revenue in 2021.) The company quickly shut down its Russia operations. But far more urgent was the challenge of extending a lifeline to the swelling numbers of Ukrainians displaced by the war. Refugees would need humanitarian aid; and both those who left and those who stayed would need to access money even as their banks were shuttered, hacked, or destroyed. PayPal and its partners would have to quickly vet a swath of pop-up Ukraine-focused charities; verify the identities of those who said they were displaced; and put fraud protections in place for users who were now hundreds or thousands of miles from their homes. 
 
Experience and global reach made those tasks less daunting. PayPal has long-standing relationships with central banks and regulators worldwide, including in Ukraine. Its donation platform, PayPal Giving, had already been used by some 400 million customers and merchants before the war broke out. Under normal circumstances, building a person-to-person payment network that could reach hundreds of thousands of people would take nine months to a year; PayPal had one up and running in Ukraine in nine days. “I told the team, like, let’s move mountains,” Schulman recalls. 
 
PayPal has certainly moved an enormous amount of much needed money. Through late September, its customers used the platform to raise more than $600 million for relief efforts in Ukraine. PayPal has also helped Ukrainian citizens receive and send another $330 million in person-to-person payments and money transfers. And it has tallied almost 300,000 new Ukrainian account sign-ups since the war began. Someday those may become paying customers, but that’s a question for a more peaceful day: PayPal is waiving all money transfer and remittance fees for Ukrainian accounts through Dec. 31.

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F500-2021-134-PayPal

The momentum of customers embracing digital payments propelled PayPal up 48 spots on this year's list. In fact, 2020 was the strongest year in PayPal’s history so far, with 72.7 million net new accounts, total payment volume of $936 billion, revenue growth of 20.7%, and profit growth of 70.9%. For crypto converts, the company recently added a way for users to buy, sell, and hold crypto in their Venmo app.

Collectively, the ranked companies produced a three-year average shareholder return of 33%, vs. 19% for the S&P 500.

FGC-2021-PayPal_Honey_Macys_Coupons

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Future 50-2020-PayPal

The former subsidiary of eBay has definitely come into its own in its past five years of independence. Poised to reap the benefits of consumers’ growing reliance on digital payments, PayPal has excelled during the coronavirus pandemic, growing revenues nearly 20% in the first three quarters of the year—exceeding even its average three-year growth rate of 18%. Now one of the largest small-business lenders, PayPal is also expanding its offerings to include buying and selling cryptocurrency, both through its flagship product and its peer-to-peer payments app, Venmo.

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F500-2020-182-PayPal-Holdings

The online payments company is available in more than 200 markets around the world and owns mobile payment service Venmo.

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03.CTW20.Paypal

Last fall, the digital payment company spent tens of millions of dollars to raise its workers’ wages and lower the costs of their benefits. This spring, as the pandemic led to tens of millions of layoffs, CEO Dan Schulman (at left in photo, with PayPal employees in Omaha) pledged that all PayPal jobs would be safe from COVID-related cuts. The company also played a major role in bolstering other people’s security: It helped some customers get faster access to their coronavirus stimulus payments, by waiving the 1% fees it usually charges to rapidly cash payroll and government checks. 
 
In a crisis, “if you put your employees first and you put your customers first, then nobody forgets that, and you come out of this in a really strong position,” <a href="https://fortune.com/2020/04/20/paypal-ceo-dan-schulman-coronavirus-digital-payments-venmo-money/">Schulman told Fortune </a>in April. PayPal’s subsequent performance has borne out his argument. The company in July reported its strongest quarter ever as an independent company: Second-quarter revenue jumped 22% from a year earlier, to $5.3 billion, with profit nearly doubled, to $1.5 billion.

Collectively, the ranked companies produced a three-year average shareholder return of 19%, vs. 11% for the S&P 500.

Fastest Growing Companies-2020-78-PayPal

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PayPal is a leading global payments platform that enables individuals and businesses to send, receive, and manage money online and in person. The company offers a suite of digital payment solutions, including online checkout, mobile payments, peer-to-peer transfers, and merchant services, serving both small businesses and large enterprises. PayPal owns Venmo, a widely used peer-to-peer payment app, and provides risk management, analytics, and financing tools to help businesses grow. The company has embraced blockchain technology, launching its own stablecoin in 2023.

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PayPal Holdings (PYPL): Company Profile, Stock Price, News, Rankings

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PayPal Holdings

paypal holdings

Good morning, and welcome to PayPal's Second Quarter twenty twenty five Earnings Conference Call. My name is Regina, and I will be your conference operator today. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Steve Winoker, Chief Investor Relations Officer. Please go ahead.

Thanks, Regina. Welcome to PayPal's second quarter earnings call. I'm joined by CEO, Alex Kris and Chief Financial and Operating Officer, Jamie Miller. Our remarks today include forward looking statements that involve risks and uncertainties. Actual results may differ materially from these statements.

Our commentary is based on our best view of the world and our businesses as we see them today. As described in our earnings press release, SEC filings and on our website, those elements may change as the world changes. Over to you, Alex.

Thank you, Steve. We had a strong quarter delivering profitable growth and building momentum in transforming PayPal from a payments company into a dynamic commerce platform.

FinTech is in its infancy, and we believe the next five years are likely to see more change in how people shop than the last two decades combined. As the largest two sided open platform in the world, we have the unique advantage of connecting hundreds of millions of consumers and merchants of every size to unlock entirely new, deeply personalized shopping experiences. With PayPal's unmatched scale and trusted brands, our strategy is laser focused on anticipating and fulfilling what customers need today and what they'll expect tomorrow, whether they're buying online, in store or through AI agents. Our execution is fast and focused. We are strengthening PayPal's value proposition to bring in new customers, increase engagement and create strong partnerships with merchants.

We are also attracting top brands and developers as we innovate and shape the future of commerce. The traction we are seeing across our initiatives continues to give us confidence that PayPal's growth will accelerate in line with our three year outlook. Turning to our second quarter performance. We delivered our sixth consecutive quarter of profitable growth despite the macro uncertainty. Transaction margin dollars grew 8% excluding interest on customer balances.

Success across many of our strategic initiatives contributed to that growth, including online and offline branded experiences, payment services and Venmo. This highlights a healthy business with multiple avenues to sustain and accelerate growth. And non GAAP earnings per share increased 18% year over year. We continue to build upon our broad reach and strong engagement. Both total active accounts and monthly active accounts grew 2% in the quarter.

Transactions per active account ex PSP grew 4% as more people use PayPal and Venmo more often. If we look at our four strategic growth drivers: winning checkout, scaling omni and growing Venmo, driving PSP profitability and scaling our next gen growth vectors, we are making meaningful and tangible progress on all four. I'd like to walk through each one, highlighting examples of our progress. The first two growth drivers are entirely focused on improving and growing our Branded Experiences. I'm proud that we drove 8% currency neutral growth in Branded Experiences TPV this quarter.

This positive result reflects the benefit of meeting our customers wherever they choose to shop with PayPal and Venmo online and offline. As a reminder, Branded Experiences includes winning checkout, expanding Buy Now Pay Later, winning with Venmo and scaling omnichannel capabilities. Starting with online branded checkout, TPV including PayPal, BNPL and Pay with Venmo grew 5% currency neutral in the second quarter, consistent with what we've been seeing over the past year. Our upgraded experiences are driving the uplift we expected and most of our merchants and consumers are behaving consistently with recent quarters. At the same time, we offset headwinds from platforms and merchants in Asia, where we saw volumes decelerate following the implementation of tariffs.

Our focus is on the things that are within our control and that we know will have a positive impact on our overall growth trajectory over time. That starts with driving more traffic through our upgraded checkout experiences both in The U. S. And internationally. These upgrades offer a much better consumer experience, improved presentment of BNPL and drive meaningful conversion rate improvements.

This is currently rolling out in The U. S, Germany and The U. K, and we have a comprehensive playbook that we will apply to other countries. Around mid teens percent of our global transactions are now on our latest experience, including more than 60% of our U. S.

Checkout transactions. We are also investing in key use cases like subscriptions to drive repeat branded checkout use. Many of these efforts that are contributing to growth this year will continue to ramp into next year and add to our confidence that we are on track to achieve our growth outlook for branded checkout TPV. Turning to buy now pay later. BNPL continues to deliver strong growth quarter after quarter.

In the second quarter, BNPL volume grew more than 20% and monthly active accounts climbed 18%. When consumers choose BNPL, their average order value is more than 80% higher than a standard branded checkout transaction. Why are we winning customers in BNPL? Put simply, scale, ease of use and customer value. Our BNPL solutions are available nearly everywhere PayPal is accepted in our largest markets.

That makes us the most broadly distributed BNPL solution in the market. Merchants can offer flexible payment options that drive higher sales, all seamlessly integrated within the PayPal ecosystem, no extra tech work and often at a lower cost than with standalone BNPL providers. Merchants unlock the real power of our BNPL solutions when they add awareness messaging upstream on their product pages. Merchants choose to feature PayPal BNPL upstream because we offer a trusted name brand option that is already bundled with our comprehensive suite of branded payment options. Ace Hardware is a great example.

After adopting this upstream messaging and offering a 0% APR promotion, they saw a 35% year over year increase in total PayPal sales and a sevenfold increase in average order values. Today, we offer BNPL in nine global markets. We will continue to expand to more markets throughout the year and launch additional marketing to boost awareness and adoption. Next, Venmo. When I joined nearly two years ago, the big question was, can you grow Venmo?

Today, the answer is a resounding yes, and you're starting to see it in our results. Venmo delivered another outstanding quarter, showcasing some of our best growth in years. In Q2, we grew Venmo revenue by more than 20% marking our highest revenue growth rate since 2023. TPV grew 12% accelerating quarter over quarter to the highest growth rate in three years. This momentum stems from deliberate product innovations over the past year and dynamic marketing campaigns that are repositioning Venmo from a peer to peer payment tool to an everyday commerce platform.

The result is that our Venmo user base is not just growing, it's engaging in commerce with Venmo. Our recently announced Big 12 and Big ten college distribution deals will fuel this further. Not only will college athletes be able to receive institutional revenue share payments through PayPal or Venmo, but the Venmo brand will be embedded in some of the most iconic matchups in college sports. We've released new co branded Venmo debit cards and Venmo will also be working with the Big twelve and Big ten to enable acceptance for campus spending, including at bookstores, for ticketing, concessions and merchandise, giving students more flexibility to shop and pay with the app they already use every day. These deals leverage our strong reach with the college age demographic to put Venmo everywhere across college campuses.

Pay with Venmo TPV was up more than 45% in the quarter, and we achieved an approximately 25% increase in Pay with Venmo monthly active accounts as our merchant network continues to broaden. Leading brands that resonate with Venmo's valuable demographic like Sephora, KFC, Taco Bell and Pizza Hut are adding Pay with Venmo in their apps, making it easier than ever for users to spend their Venmo balance wherever they shop. On the omni front, Venmo debit card monthly active accounts were up more than 40% as a result of our newly redesigned and simplified onboarding. This is a great business, and Venmo's potential is significant. Our team is fully focused on unlocking even greater growth ahead.

Turning to our omnichannel strategy. We are seeing strong momentum. Debit card TPV across PayPal and Venmo grew more than 60%, while monthly active accounts grew more than 65%. Adoption is strong and accelerating, with another approximately two million first time PayPal and Venmo debit card users in the quarter in The U. S.

In Q2, we launched a new physical card for PayPal Credit, our digital credit line product. This new card is an extension of the existing PayPal Credit product, allowing users to access their credit line both online and for the first time in physical stores. The card also provides access to promotional financing offers, including six months of interest refinancing on travel purchases. This new card is in addition to our PayPal Cashback Mastercard, which offers 3% back on all purchases through online branded checkout. Our strategy focuses on getting our card products into the hands of even more of our customers, aiming to grow our share of wallet through options that can power every payment our customers make.

This on its own is a massive opportunity for PayPal and an area where we can drive penetration much, much higher. And that is before the flywheel benefit for branded checkout. Our data underscores the benefits of this approach. Customers who adopt one of our card products transact more frequently, choose PayPal more often when shopping online and deliver higher average revenue per account. Following the strong momentum from our U.

S. Launch last year, we took PayPal Everywhere to Germany in June with groundbreaking innovations. We launched the first ever PayPal contactless mobile NFC wallet on iOS and Android, introduced flexible Pay Later to Go for BNPL offline and delivered in app cash back offers at over 2,000 stores. To amplify the launch, Will Ferrell teamed up with us again for our largest marketing campaign yet in Germany. We already have more than 3,000,000 NFC enrollments and are seeing impressive engagement trends.

It's very exciting to see this kind of traction so early and we are on track to expand to The U. K. This year. The outcome of all this progress and momentum is that we drove 8% currency neutral growth in Branded Experiences TPV this quarter, and we have confidence that we can continue to grow this moving forward. Each pillar of our Branded Experiences is a thriving business on its own, and combined, they position us for sustainable long term growth and success.

Finally, I'd like to explain how last week's announcement of PayPal World will be a game changer for our branded experiences. Digital wallets have become ubiquitous and the standard for making a payment or sending money worldwide. Today, almost 3,500,000,000 people rely on digital wallets as their go to method for shopping and transferring funds. That's 83% of global digital payments happening through wallets, and the number is only going to continue growing. There will be over 5,000,000,000 wallets globally by 2026.

But among those billions of users, there are hundreds of regional wallets represented. This fragmented system of wallets poses tremendous challenges and immense friction in a global commerce ecosystem. For consumers, it means you are never quite sure if and where your wallet will be accepted. Even for wallets like PayPal, with tremendous global reach, there are large regions of the world and millions of merchants that are closed off. For many users with regional wallets, traveling out of the country poses new challenges with spotty or no acceptance and the need to create and keep track of multiple wallets just to interact with the world.

And while P2P payments should be easy, the need for a common wallet between users often makes it impossible to send money to friends or family around the world. For businesses, it means building the technology to accept dozens of wallets, which adds unnecessary costs and creates a fractured experience full of friction for customers, ultimately limiting reach and, of course, sales. When you want to sell to the world, how do you choose which wallets to accept and which customers to turn away? You shouldn't have to make that choice. This is where PayPal World comes in, to make it simple and easy to connect any consumer with any merchant.

Five of the largest digital wallets in the world, PayPal, Venmo, Mercado Pago, Tenpay Global and UPI, are coming together on a seamless global platform. So you can now use your preferred wallet anywhere in the world.

For our PayPal merchants, PayPal World will need access to billions of new customers through their existing branded checkout integration. Now a UPI user in India who wants to buy a pair of sneakers from an online store in Germany that accepts PayPal can simply click the PayPal button at checkout and their familiar UPI button will be presented for them to complete the transaction. It's that simple. This means our connections for branded checkout will extend beyond our 400,000,000 customers to more than 2,000,000,000 consumers worldwide, and that will continue to grow. Whether you're sending money to a friend or relative across borders or traveling to a country with a different currency, you will be able to transact seamlessly. And PayPal World is purpose built for the future of commerce, too.

The platform will be compatible with dynamic payment buttons, stablecoins and the latest technologies and commerce experiences, including agentic shopping. PayPal World is expected to go live beginning in the fall with partner wallets connecting to PayPal and Venmo. Over time, PayPal World aims to connect billions of users at scale, and we expect this to expand as we add more partners in the coming months and years. Even since our announcement last week, we've received multiple inbound requests from wallets across the globe looking to join the PayPal world platform. Moving to our PSP business.

I want to reflect on one of my first earnings calls where we shared our plan to reset our largest merchant relationships to price our services to the value we deliver. The consequence of that reset was pressure on growth in exchange for long term profitability. Now we are on the other side of that and can confidently say that our strategy worked. We maintained our customers and we are having more strategic conversations and relationships with them. And most importantly, we are now growing our Braintree TPV again and expect an acceleration in the back half of the year.

This is an important inflection point, and I am really proud of the team for their execution. Key to this strategy has been investing in and scaling our strong suite of value added services. These services are helping position PayPal as a trusted, innovative partner in this evolving commerce landscape and have transformed the margin profile of our PSP business. Let me share one example. Payouts is one of the value added services that is growing rapidly. Some of the world's top travel, mobility and social commerce platforms already use Hyperwallet to manage and distribute funds to hosts, drivers and creators globally. Most recently, our payout capabilities were a strategic enabler in our landmark partnerships with the Big 12 and Big 10 college athletic conferences that I mentioned earlier. Hyperwallet enables the conferences to provide student athletes with rapid access to revenue share payments that can be sent directly to their PayPal or Venmo accounts where they can then spend and send the money instantly. For small businesses, our priority remains empowering merchants with the tools they need to manage and accelerate their growth. We're steadily migrating more transactions onto PayPal Complete payments.

PBCP enables SMBs to easily access our latest online branded checkout and new products like Fastlane. As of today, over half of SMB volume flows through this platform, a notable improvement since last quarter. Our recent expansion of PBCP into Singapore further extends our global reach. We also continue to deepen our relationships with the most popular platforms where SMBs manage and grow their businesses. Just last week, we announced an expanded partnership with Wix that gives merchants access to our full suite of payment tools, seamlessly integrates into Wix Payments to fuel sales growth.

When our small business customers succeed, the relationship with PayPal deepens, and we remain committed to expanding access to the tools and capital that fuel that growth. Let's turn to how we're shaping the future of commerce by innovating in AgenTic, Ads and Stablecoins. In each of these areas, we are creating new ways to fuel growth in the years ahead. Agentic.ai is rapidly changing the commerce landscape and PayPal is at the forefront. We were an early mover, launching the first remote MCP servers for commerce earlier this year.

Now we're helping merchants and developers meet the moment as consumers begin to purchase goods and services through AI agents. As you've seen through our announcements over the last few months, the major players in AI, including Perplexity, Anthropic and Salesforce, are working with PayPal to create powerful new agentic commerce experiences. These new experiences will enable customers to find the right products, check out directly within the AI client, track purchases and much more. We have differentiated KYC and KYC expertise, access to the largest ecosystem of payment ready wallets with PayPal World and will continue to build our capabilities in this nascent space so that we strengthen our position as the go to partner for Agenta Commerce. We have the brand trust, data and expansive customer base to make this vision a reality.

Moving to ads. We continue to make strides with new products that create more personalized shopping experiences by allowing merchants to reach the right customers more effectively. We launched off-site ads in Q2, enabling brands to reach millions of consumers across the open web through display and video ads, all powered by PayPal's data insights. Building on this, we introduced Storefront Ads, a new ad format that allows consumers to browse, shop and pay directly within the ad unit. What makes Storefront Ads truly differentiated is our ability to combine seamless in ad checkout with direct merchant integration and PayPal's trusted payment capabilities.

Following our U. S. Launch, we've begun expanding internationally with PayPal ads now live in Germany and The U. K, and we continue to scale our advertising business globally. Turning to crypto.

I want to highlight our stablecoin, PyUSD, which is a pivotal part of our mission to advance global commerce by directly addressing pain points our customers face today, namely the burdens of high fees and the slow speed of cross border money transfers. Traditional payment methods can be prohibitively expensive and time consuming, creating friction that stifles growth and opportunity in global trade. PYUSD delivers a stable, reliable and cost effective alternative to conventional systems. We can enable businesses and individuals to transact with greater confidence and agility, fueling economic activity on a global scale. We are laser focused on solving real world problems for our customers and sequencing our efforts, starting with cross border transactions.

With the strength of PayPal's commerce network, PYUSD is well positioned for mainstream consumer and merchant use cases. This quarter, we added the ability to earn rewards for our stablecoin on PayPal and Venmo and announced the expanded availability of PYUSD on Stellar and Arbitrum blockchains. We are collaborating across the ecosystem to expand PYUSD's prominence as a commerce first stablecoin with a network of exchanges, custodians and other payments partners, including Coinbase, Fiserv and Mastercard. As I mentioned earlier, PyUSD will also be a major enabler of the PayPal world platform. Yesterday, we announced Pay with Crypto powered by PayPal, which will enable instant crypto to stablecoin or fiat conversion.

It will support transactions across more than 100 cryptocurrencies and wallets such as Coinbase and MetaMask and tap into a global base of more than six fifty million crypto users. We're only at the beginning of what's possible here. I'm excited to see us continue to solve critical customer issues related to cost, speed, stability and seamless payment integration. A big part of the future of commerce will be on chain, and PYUSD will help power that journey. As you can tell, our pace of innovation has accelerated significantly.

This is in large part due to our efforts to consolidate our platforms, strengthen our infrastructure and leverage AI across the company. To wrap up, there is tangible momentum across the business. We are growing transaction margin dollars at a high single digit rate, and we continue to see impressive growth across PayPal, Venmo and our PSP business. At the same time, we're making big and bold bets for our customers in AI, ads and crypto. I'm proud of our team for leading the industry forward. With that, let me turn it over to Jamie.

Thanks, Alex. Moving to Slide 10. PayPal delivered another quarter of profitable growth. Transaction margin dollars grew 8% excluding interest on customer balances. This was a continuation of last quarter's momentum and a meaningful improvement compared to the past three years.

I'll walk through the key drivers and a few puts and takes momentarily. While we are pleased with our progress, what's even more exciting is the foundation we are building to sustain and accelerate this growth in the years ahead. TM Dollar's growth had multiple sources in the quarter, including strong credit performance, branded checkout flow through, improvements in PSP profitability and Venmo. We drove operating leverage through a combination of top line growth and cost discipline as we remix less productive spend into product tech and marketing. Taken together, non GAAP operating income grew 13%.

Share buyback and a favorable tax rate more than offset headwinds from lower interest rates contributing to 18% growth in non GAAP earnings per share. Adjusted free cash flow, which excludes the net timing impact between originating and selling European buy now pay later receivables was $656,000,000 Adjusted free cash flow was negatively impacted by timing shifts in working capital, which we expect to reverse in the second half of the year. We continue to expect full year free cash flow of 6,000,000,000 to $7,000,000,000 Turning to Slide 11, account and engagement trends are healthy. Active accounts and transactions per account excluding PSP both continue to grow. Total active accounts increased by nearly 2,000,000 from the first quarter to four thirty eight million Monthly active accounts also continued to show steady progress, up 2% year over year to $226,000,000 Transactions per active account, excluding PSP processing, grew 4%.

Moving to Slide 12, total payment volume grew 6% at spot and 5% on a currency neutral basis to nearly $444,000,000,000 Looking across the product portfolio, there are a few key areas I'd like to highlight. As Alex noted, we are driving faster growth at Venmo. Venmo TPV increased 12%, its highest rate of growth in three years. In addition to driving more awareness and usage of commerce capabilities, we have been focused on improving core product and user experiences, which contributed to a P2P acceleration in the quarter. Branded Experiences TPV, which includes online checkout, PayPal and Venmo debit as well as tap to pay posted another quarter of 8% growth.

While debit and tap to pay spend represent a smaller amount of volume and branded experiences today, they are growing rapidly and are up more than 60% year over year. Winning checkout remains our most critical priority. Our teams are laser focused on advancing the many initiatives that reinforce our checkout business. In the second quarter, online branded checkout volumes grew 5% on a currency neutral basis. This was relatively consistent with the growth we delivered over the past few years.

At the same time, the macro and consumer spending environment has been uneven. As we move through the quarter, we observed a slight softening in retail spending in The U. S, most apparent in areas likely impacted by tariffs such as Asia based marketplaces with higher exposure to goods sourced from China. We continue to make progress modernizing and improving the performance of our checkout experiences and scaling more seamless authentication like pass keys and biometrics. We are also increasingly giving consumers more reasons to choose PayPal, for example, with enhanced rewards and incentive programs.

Pay with Venmo and Buy Now Pay Later continue to outpace the market, taking share from other payment methods. Our efforts to drive branded experience adoption with our debit cards online and in store, including tap to pay, helped to fuel our checkout business by increasing brand habituation leading to incremental branded checkout volume. We are confident in the steps we are taking to drive higher conversion, selection rate and engagement and are now beginning to take these enhancements outside of The U. S. While still early in our progress, we see clear signs that our initiatives are making a positive impact.

Bending the growth curve takes time for a company of our scale, but we remain confident that the actions we are taking

Bending today position us well to accelerate over time. Turning to PSP, which spans both large enterprise and SMB processing as well as parts of our vast portfolio like payouts, invoicing and point of sale solutions, volume grew 2% in line with the first quarter. Our focus on prioritizing healthy quality growth within our Braintree business continues to deliver meaningful TM dollars improvement. We've also hit a positive inflection point for Braintree volume. We are now past the peak pressure from renegotiating and shedding unprofitable volume.

Braintree volume was roughly flat in the quarter. We expect a return to volume growth in the third quarter as we drive profitable front book business, support our existing merchant base and continue to lean more into value added services. Moving to more financial detail on Slide 13, transaction revenue accelerated to 4% growth on a spot and currency neutral basis to $7,400,000,000 Excluding Braintree, transaction revenue grew 7% on a currency neutral basis, accelerating from 4% in the first quarter. Other value added services revenue grew 16% to eight forty seven million dollars driven primarily by strong performance in consumer and merchant credit. We ended the quarter with $6,900,000,000 in net loan receivables, up 7% sequentially and we continue to be pleased with the quality, diversification and performance of our credit portfolio.

Most of this growth came from our buy now pay later and international consumer revolve portfolios, where we have seen improvement in charge offs and low stable delinquency rates. We are focused on targeting a balance sheet light model for credit and are making progress towards externalizing another part of our portfolio later this year. Transaction take rate declined by four basis points to 1.68%, driven largely by the impact of foreign exchange hedges, product and merchant mix. This decline was an improvement relative to last quarter and included slightly less impact from Braintree and payouts. Online branded checkout take rates were more stable year over year, reflecting our mix of transactions, merchants and a continued focus on profitable growth.

This focus and the progress we are making across our strategic growth drivers continued to be most clearly demonstrated by the acceleration in the TM Dollar's growth we have delivered over the past year. As I mentioned earlier, TM Dollar's ex interest grew 8%. Growth came from multiple sources including credit, branded checkout, PSP and value added services and Venmo. TM Dollars also benefited from a roughly one point five point one time contribution from the renewal and expansion of our relationship with a key payment partner. This benefit was more than offset by an increase in transaction losses in the quarter.

Higher transaction losses were a combination of normalization and loss rates following last year's strong performance and new product introductions. Non transaction related OpEx increased two percent as we continue to actively manage our cost structure while reinvesting in key growth initiatives. Compared to our guidance, OpEx benefited from the timing of certain G and A items and the shift of some marketing spend into the third quarter. Non GAAP operating income grew 13% in the quarter to more than $1,600,000,000 Non GAAP operating margin increased about 130 basis points to nearly 20%. You'll also see in our materials that we reported restructuring costs of approximately $92,000,000 These costs are related to workforce actions and the key tech transformation initiatives that we discussed at our Investor Day.

On the tech side, this includes the start of a three year plan to reengineer infrastructure, streamline operations and exit certain data centers as we unify platforms and migrate more to cloud based solutions. We're excited about the increased speed, flexibility, data utilization and scalability that these efforts will deliver over time. Moving to capital allocation. In the quarter, we completed $1,500,000,000 in share repurchases, bringing share repurchases over the past four quarters to $6,000,000,000 Finally, we ended the quarter with $13,700,000,000 in cash, cash equivalents and investments and $11,500,000,000 in debt. Moving to guidance on Slide 14 for the third quarter and full year 2025.

Following a strong first half, we are on pace to outperform our original expectations for the year. We are raising our full year guidance for both TM dollars and non GAAP EPS. Similar to last quarter, we have embedded a range of potential outcomes into the second half of the year. The low end of our full year guide could absorb up to a couple of points of deceleration in e commerce spending should that occur. Overall, consumer spending and the labor market have proven resilient, but we continue to closely watch how tariffs and other trading friction might impact global economic activity, spending and supply chains over time.

For the third quarter, we expect currency neutral revenue growth at the lower end of mid single digits or approximately 4% or so. We expect continued momentum in transaction revenue with lower growth in other value added services revenue compared to the second quarter. This includes the impact of interest rate headwinds and a more difficult prior year comparison for credit growth. We expect third quarter TM dollars to be between $3.76 and $3,820,000,000 which represents 4% growth at the midpoint. Excluding interest on customer balances, we expect TM dollars to increase by approximately six percent at the midpoint.

We are planning for up to high single digit non transaction OpEx growth in the quarter. This higher growth reflects continued investment in tech and new product launches as well as the shift in timing of some marketing referenced earlier. We expect to deliver non GAAP earnings per share in the range of $1.18 to $1.22 or roughly in line with the prior year at the midpoint. For the full year, we now expect TM dollars to be between $15,350,000,000 and $15,500,000,000 which represents 5% to 6% growth. Excluding interest on customer balances, we now expect transaction margin dollars to grow between 6% to 7%.

We expect to deliver full year non GAAP earnings per share in the range of $5.15 to $5.3 up 11% to 14%. Our guidance continues to project approximately $6,000,000,000 in share buyback and full year free cash flow of approximately $6,000,000,000 to $7,000,000,000 I'd like to wrap up by thanking the PayPal team for their continued focus and dedication. The progress we're making gives us a strong foundation to build on as we execute on the second year of PayPal's transformation. With that, back to you, Alex.

Thanks, Jamie. We had a great second quarter and are confident that our strategy is working as our momentum builds. We are executing on everything we said we would do twelve to eighteen months ago. We are building out and improving our branded experiences and giving consumers many more reasons to choose PayPal and Venmo. We are capitalizing on untapped opportunities in PSP and SMB.

At the same time, we are actively shaping the future of commerce through our work in AI, ads and crypto, and our velocity of innovation is only accelerating. I am more excited than ever about the future we're building. Steve, let's go to Q and A. Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask just one question so we can get to as many people as possible. Regina, please open the line.

Our first question will come from the line of Ramsey El Assal with Barclays. Please go ahead.

Hi, thanks for taking my question and great to see your strategic plan really gaining momentum this quarter. I wanted to ask about branded online checkout TPV, which decelerated just a bit quarter over quarter to remain pretty stable for a few quarters. It sounds like tariffs are offsetting some of your own efforts like modern checkout and Will Ferrell to accelerate branded online TPV growth. How meaningful was the tariff headwind on branded online checkout TPV in Q2? And in July, are you seeing a stable tariff related headwind there?

Or is that a metric on that same metric? Or could we see the headwind change and potentially intensify?

Ramsey, thank you for the question and appreciate the comments on branded checkout. Look, we're excited as well. I think our execution on the global rollout, The U.

S. Rollout is exactly what we were looking for. And really the cohorts that we now have live in market are delivering exactly the way we expected. To the comment on these platforms from Asia, the way we think about it is without that pressure, our branded checkout really would have been at 6%. And it's a small amount, but we've started to see it stabilize a little bit as we get into this month. Jamie, anything you'd add?

Yes. No, I would just say that our trends underlying all this really have been broadly consistent. There's puts and takes in any given quarter. And like Alex said, we did see a slight deceleration really in those Chinese to U. S.

Corridors. In July, I would say it's still early, but seeing a bit less pressure in that space. We plan the full year with branded checkout at mid single digits. We are on track for that. And the watch out that I really am looking at is we still have a fair amount of policy and macro uncertainty.

PayPal Holdings (PYPL) Q2 2025 Earnings Call Transcript

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