PayPal’s fourth-quarter revenue rose 3% to $8.7bn before currency movements, lagging payment volume growth of 6%.
Underlying operating profit was up 3% to $1.6bn. Underlying earnings per share (EPS) also grew by 3% to $1.23, bringing the full-year total to $5.31, with growth of 14% landing below the 15-16% guidance range.
Underlying free cash flow was flat at $2.1bn. PayPal ended the year with net debt of $1.2bn.
PayPal expects a mid-single-digit decline in underlying EPS for the first quarter. For 2026, the range has been set between a low-dingle-digit decline and a small increase, compared to consensus growth forecasts of nearly 8%.
CEO Alex Chriss is to be replaced by existing Board Member Enrique Lores, who was formerly CEO of IT hardware firm HP.
The shares fell 16.6% early trading.
Our view
PayPal’s fourth-quarter miss seemed to be the last straw for PayPal’s Board, who have asked CEO Alex Chriss to pack his things. A 30% increase in sales and marketing expenditure during his reign has not been enough to lift revenue or profit growth consistently back into double digits.
The group’s making some tough decisions, electing to up investments that focus on long-term growth initiatives rather than chasing short-term volume growth. The innovation focus is set to remain, but with a heightened emphasis on execution, something where incoming boss Enrique Lores can claim a strong track record. But a sharp drop in the share price on the day suggests he’ll have his work cut out to win investors over.
In the increasingly competitive space of digital payments, PayPal has been struggling to defend its market position and its profit margins. It still has a massive footprint across both consumers and vendors. But if it wants to kick-start growth again, it needs to keep upping the bar on the functionality it offers.
Efforts are underway to reinvigorate the all-important branded checkout business, and further investments are planned this year. Other areas attracting PayPal’s funds are consumer engagement, and the group’s buy now, pay later offering. Agentic commerce, where AI agents help personalise consumers’ shopping experiences, is another growth lever to pull on.
But, as with eCommerce, competition in the AI payment world is likely to be fierce. In the near-term these investments are set to dent margins and it may take some time before the benefits arrive. The new CEO will need to define some clear success metrics and targets. He’ll then be under intense pressure to deliver them.
A robust balance sheet and strong free cash flows support the investment drive as well as substantial distributions to shareholders. There’s a modest dividend yield on offer, with a further $6bn of buybacks slated for 2026. However, there can be no guarantee of future payouts, particularly if PayPal’s competitiveness slips further.
Alex Chriss’s underwhelming performance at the helm, and PayPal’s latest profit downgrade looks to have been somewhat over-punished by the market. If the company can meet revised expectations, then we think there could be some upside on offer. However, the key driver of sentiment will be the new CEO’s ability to convince investors that PayPal’s strategy is in good hands. Until such time further volatility can be expected.
Environmental, social and governance (ESG) risk
The technology sector is generally low-risk in terms of ESG, but some segments like Electronic Components can be more exposed to environmental risks. Regulatory interest in the sector has picked up recently, leading to more acute business ethics risks. Other key risks include labour relations, data privacy and product governance.
According to Sustainalytics, PayPal's overall management of material ESG issues is strong.
Concerns about anti-money laundering processes appear to have been addressed. The company fosters a culture of privacy by design and mandates annual employee training on data privacy. Its diversity programmes are well thought but staff turnover has been relatively high, a trend seen across much of the sector. PayPal is keen to highlight its place as a facilitator of donations to good causes. However there have been concerns raised about the transparency of its giving platform.
PayPal key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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