The news: PayPal’s revenues rose 5% YoY to $8.6 billion, driven by strong Venmo and Braintree performances and favorable foreign-exchange trends, per its earnings report. These results beat both Wall Street and  PayPal management expectations, per Barron’s.

PayPal lifted its full-year earnings guidance to $5.38 a share from $5.31. The stronger outlook  comes as PayPal weighs a $53 billion takeover proposal backed by Stripe and Advent, which it initially has rejected as inadequate, per a Reuters exclusive. 

Diving into the results: PayPal’s efforts to recover after a failed transition year continue, but recent metrics show signs of stabilization.

• Total payment volume (TPV) notched 10% YoY growth, down 1 percentage point from the previous quarter.
• Branded checkout TPV rose 2% YoY.
• Transaction margin dollar growth was 1%.

What’s working: Venmo, buy now, pay later (BNPL), and debit card TPV fueled growth.

• Venmo TPV grew 14% YoY.
• BNPL TPV hit 26% YoY growth, a 3 percentage point rise from last year.
• Payment service provider (PSP) TPV, including Braintree, rose 13% YoY, up from 11% the prior quarter.
• And debit card and tap-to-pay TPV surged over 60% YoY.

CEO Enrique Lopes said PayPal plans deeper investment in BNPL, credit, and other consumer financial services, citing strong engagement with those products. Those businesses could  help drive transaction margin dollars up over time.

Implications for payment providers: PayPal remains under significant competitive pressure, but it is far from out of the game. Its position as the second-largest BNPL provider in the US and successful marketing campaigns for Venmo give the company an opportunity to snag share among younger consumers, who are most likely to be installment users, per our forecast. If PayPal can successfully bring these users into its ecosystem early, it could  build lasting customer relationships and better compete against established rivals.

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