PayPal Raises 2026 Profit and Cash Flow Guidance After Q3 Growth

PayPal Holdings Inc. (NASDAQ: PYPL) raised its full-year 2026 guidance for transaction margin dollars, non-GAAP earnings and adjusted free cash flow after third-quarter profit growth was supported by Venmo, Braintree and financial services, even as revenue increased at a slower pace and branded checkout remained under pressure in Europe.

The payments company now expects about $15.7 billion in 2026 transaction margin dollars, including approximately $14.6 billion excluding interest on customer balances. PayPal also projects non-GAAP earnings of about $5.60 per share, up from $5.31 in 2025, and adjusted free cash flow of at least $6.5 billion. Its plans for $6 billion of share repurchases and approximately $1 billion of capital expenditure remain unchanged.

For the fourth quarter, management expects transaction margin dollars to be slightly positive year over year, both overall and excluding interest on customer balances. PayPal forecast non-GAAP earnings of approximately $1.43 per share and GAAP earnings of about $1.37 per share.

Venmo and Braintree support transaction margins

Third-quarter total payment volume rose 6% to $487.14 billion, or 7% on a currency-neutral basis. The increase was driven primarily by double-digit Braintree growth and mid-teens growth at Venmo. U.S. payment volume increased 11% to $316.52 billion, while international volume was flat on a currency-neutral basis at $170.61 billion.

Revenue rose 2% to $8.58 billion, or 1% on a currency-neutral basis. Transaction revenue increased 3% as growth from Braintree and Venmo and favorable foreign-exchange effects offset other pressures. Other value-added services revenue declined 2%, reflecting lower interest on customer balances, partly offset by higher credit revenue.

Non-GAAP transaction margin dollars increased 2% to $3.95 billion and rose 3% to $3.66 billion when interest on customer balances was excluded. PayPal said Venmo, Braintree and currency effects drove the increase, while strategic spending on checkout and buy-now-pay-later adoption provided an offset.

Non-GAAP operating income advanced 3% to $1.61 billion, while the corresponding operating margin increased 16 basis points to 18.8%. Non-GAAP diluted earnings rose 8% to $1.45 per share. On a GAAP basis, operating income was $1.40 billion and diluted earnings were $1.25 per share.

Non-transaction-related expenses increased 1% to $2.34 billion as progress on cost initiatives was balanced by continued investment in growth areas, technology and risk. The transaction take rate fell six basis points to 1.58%, reflecting product mix and increased investment in branded checkout and buy now pay later.

Branded checkout remains subdued

Currency-neutral branded checkout volume grew 1%, marking a fourth consecutive quarter in the 1% to 2% range. PayPal reported improving performance in the U.S. and continued strength in buy now pay later and Pay with Venmo, while tariff-related changes weighed on European activity.

The company said branded checkout trends were improving at selected merchants where it had deployed multiple elements of its operating playbook, including updated checkout experiences, stronger PayPal presentation, broader payment selection and consumer marketing. The 11 merchant examples cited in the presentation represent about 20% of PayPal’s U.S. branded volume, though the company did not provide a platform-wide forecast based on those results.

Venmo payment volume rose 14% to $96.81 billion, while Venmo debit monthly active accounts increased 55%. Across PayPal and Venmo, U.S. debit monthly active accounts rose 23% and debit payment volume increased 25%. Buy-now-pay-later monthly active accounts grew 44%, with payment volume up more than 60%.

PayPal expects financial services to account for more than 20% of transaction margin dollars and grow at a double-digit rate in 2026. The company is expanding buy-now-pay-later distribution and scaling credit and debit products for consumers and small and midsize businesses. Management said these products can be distributed across both PayPal and Venmo using the company’s existing customer base.

Active accounts increased 1% to 440 million, while monthly active accounts were broadly unchanged at 228 million. Payment transactions rose 7% to 6.80 billion, and trailing 12-month transactions per active account increased 6% to 60.8.

Cost savings and capital returns

PayPal said it remains on track to generate more than $700 million in gross run-rate savings by the end of 2026 and at least $1.5 billion over the next two to three years. The program includes a simplified organizational structure, operating and portfolio optimization, and wider adoption of artificial intelligence and automation.

The company has reduced headcount by more than 2,000 and cut managerial roles by over 25%. It also said AI chat agents now support customer service in 190 countries and six languages and have resolved more than 24 million contacts year to date.

Adjusted free cash flow totaled $2.05 billion in the quarter, down 10% from a year earlier, while reported free cash flow declined 17% to $1.43 billion. PayPal repurchased $1.5 billion of shares and paid approximately $120 million in dividends. Cash, cash equivalents and investments stood at $15.1 billion at September 30, compared with $13.5 billion of debt.

The outlook remains subject to risks including intense competition and rapid technological change, cybersecurity threats, regulatory and legal developments, changing card and banking network rules, credit and fraud exposure, foreign-exchange volatility, and broader political, economic and trade conditions. PayPal also identified execution risks related to technology upgrades, cost reductions, artificial-intelligence deployment and reliance on third parties.