PayPal Climbs Back From a Revenue Miss on a Stronger Profit Outlook

PayPal opened lower on Tuesday and then spent the morning taking it back. By early afternoon the stock traded near $55.65, up 1.2% from Monday’s close of $54.99, after a third-quarter report that fell short on sales and came in strong on profit. Investors had to weigh the two against each other. The profit side won.

Earnings grew four times as fast as sales

For the quarter that ended September 30, PayPal reported revenue of $8.58 billion, up 2% from a year earlier. Wall Street had looked for $8.71 billion. It was the company’s slowest quarterly revenue growth of the year. Adjusted earnings told a happier story at $1.45 a share, ahead of the $1.31 analysts expected and up 8% from a year ago. On a GAAP basis the company earned $1.25 a share.

Volume did the heavy lifting. Total payment volume, the dollar value of transactions moving across PayPal’s networks, reached $487 billion, up 6%. The growth leaned on Braintree, the processor that runs checkout behind the scenes for other businesses, and on Venmo, where volume rose in the mid-teens. Branded checkout, the familiar PayPal button, grew 1% excluding currency swings, its fourth straight quarter in that 1% to 2% range. Transaction margin dollars, a profit gauge management watches closely, came in at $4 billion.

Guidance was the bigger lever. PayPal raised its full-year adjusted earnings forecast to $5.60 a share from an earlier $5.38, and pointed to fourth-quarter adjusted earnings of $1.43. Earnings grew four times as fast as revenue this quarter, a gap that reflects tighter spending and a shift toward higher-margin processing. That is the mix the raised outlook rewards, and it is why a soft sales line did not sink the shares.

A strong run met a sharp pre-earnings drop

PayPal walked into the report hot. The stock has gained nearly 30% over the past three months, climbing off a summer low of $41.70. It still sits below its three-month high of $62.30 and far under a 52-week high of $93.66. Monday went the other way. The shares fell 3.6% to $54.99 ahead of the print, on volume just above their 20-day average. A $48 billion company, PayPal is a mid-size name beside the trillion-dollar technology giants that set the market’s direction.

The broader tape helped. Stocks rose on Tuesday as chip and artificial-intelligence names extended a rally, and a consumer-confidence reading that jumped to 91.7 from a forecast of 81 brightened the mood. PayPal’s rebound rode some of that current.

The Fed, then the holidays

Two dates sit just ahead. The Federal Reserve delivers its next interest-rate decision on Wednesday afternoon, the event steering much of this week’s trading. For PayPal, the fourth-quarter guidance of $1.43 a share sets the bar for the holiday-shopping stretch, when checkout and Venmo volumes carry the most weight. Watchers will look for any sign that branded checkout can break above the 1% to 2% growth band it has held for a year, the number that has capped PayPal’s top line.

This is a general-market summary for information only — not investment advice, and not a recommendation regarding any security.