Investing.com - PayPal (NASDAQ:PYPL)’s earnings outlook for its 2025 financial year beat estimates, while fourth-quarter income also topped Wall Street expectations, in a potential sign of progress in the digital payments group’s ongoing drive to improve its services.
Since taking over at the helm of PayPal last year, Chief Executive Alex Chriss has been pushing the business to slash costs and increase spending on automation and artificial intelligence. It has also been shifting its focus from growing low-margin divisions like its Braintree payments technology service to more lucrative segments such as branded checkout.
For the 2025 fiscal year, per-share earnings are seen at between $4.95 to $5.10, with the company also being bolstered by indications of resilient U.S. consumer spending. Analysts had anticipated an outlook of $4.89, according to Bloomberg consensus estimates. Current-quarter per-share income of $1.15 to $1.17 was also ahead of expectations.
In a statement, Chriss said PayPal is seeing "strong momentum" that is setting the business up well for 2025, adding that a major goal for the year will center around "scaling adoption".
Overall payment volume increased by 6.8% versus the year-ago period to $437.84 billion, while the number of active customer accounts edged up by 1.9% to 434 million. PayPal generates much of its income through transaction fees that it charges both retailers and consumers for processing payments.
Transaction revenues rose by more than anticipated, helping drive net revenue in the quarter ended on December 31 up by 4% to $8.37 billion, compared with estimates of $8.27 billion. Transaction margin dollars, seen as a key measure of the strength of PayPal’s core operations, also ticked higher by 7.2% to $3.94 billion.
Chriss credited the returns to improvements in its branded checkout process and "progress we made on our price-to-value strategy".
Adjusted earnings per share came in at $1.19, an increase from $1.14 a year-ago and topping projections of $1.13.
But adjusted operating margins -- which investors have used as a gauge to help determine the progress of PayPal’s strategy overhaul -- slipped by 34 basis points to 18% in the fourth quarter.
Shares in PayPal slid by more than 9% in early U.S. trading on Tuesday.
"Expectations likely ran ahead of themselves, especially after [Visa]’s comment last week regarding strong [fourth-quarter e-commerce] trends," analysts at Mizuho (NYSE:MFG) said in a note to clients. "We are not concerned, though, and note that [PayPal]’s branded button has been consistently growing in line with its major merchant partners."