PayPal Reports Better-Than-Expected Fourth Quarter Results but Falls Short on Guidance
3 min readPayPal, the digital payments technology company, reported better-than-expected fourth-quarter earnings and revenue on Wednesday, February 7, 2024. However, the company’s guidance for the full year and first quarter fell short of expectations, causing the shares to slip 8% in extended trading.
The company reported earnings per share of $1.48 adjusted, surpassing the $1.36 expected by LSEG. Revenue came in at $8.03 billion, exceeding the $7.87 billion anticipated by LSEG. Despite the strong quarterly performance, the number of active accounts decreased 2% to 426 million, falling short of the 427.17 million expected by StreetAccount.
Net income for the quarter rose 52% to $1.4 billion, or $1.29 per share, compared to $921 million, or 81 cents per share, in the same period a year earlier. Total payment volume reached $409.8 billion, up 15% from the previous year and surpassing the $405.51 billion expected by analysts.
PayPal provided guidance for the full year and first quarter that fell below expectations. The company anticipates full-year earnings of $5.10 per share, below the $5.48 analysts expected, according to LSEG. For the first quarter, PayPal estimated year-over-year earnings per share growth would fall in the mid-single digits, compared to a consensus estimate of 8.7%.
Finance Chief Jamie Miller explained on the earnings call that the company will no longer provide annual guidance and instead will only provide an outlook for the current quarter. “Given the considerable changes underway at the company, we believe it is prudent to guide revenue one quarter ahead and provide updates as the year progresses,” Miller said.
Last week, PayPal announced it would cut 9% of its global workforce, or about 2,500 jobs. The company also introduced new artificial intelligence features, marking the start of its “next chapter,” according to CEO Alex Chriss. Chriss, a former Intuit executive, was named CEO in August 2023.
Shares of PayPal have risen 3% this year as of Wednesday’s close, but are still about 80% off their record from July 2021.
PayPal’s strong fourth-quarter results were driven by robust growth in its digital payments business, which includes its Venmo and Xoom platforms. The company’s peer-to-peer payments volume grew 31% year-over-year, while merchant services volume increased 13%.
Despite the strong quarterly performance, PayPal’s guidance for the full year and first quarter fell short of expectations, causing the shares to slip in extended trading. The company attributed the shortfall to increased competition and macroeconomic headwinds, including rising interest rates and geopolitical tensions.
PayPal’s decision to stop providing annual guidance and instead focus on quarterly outlooks reflects the company’s efforts to adapt to a rapidly changing business environment. The company is facing increased competition from traditional financial institutions, as well as new entrants like Square and Stripe. PayPal is also investing heavily in new technologies, including artificial intelligence and cryptocurrencies, to stay competitive.
PayPal’s fourth-quarter earnings report also highlighted the company’s ongoing efforts to expand its reach and diversify its revenue streams. The company announced a partnership with Alibaba, the Chinese e-commerce giant, to offer its payment services to merchants on Alibaba’s platforms. PayPal also announced a partnership with Google to offer its payment services on Google’s platforms, including Google Pay and Google Shopping.
Despite the challenges facing the company, PayPal remains well-positioned to capitalize on the growing trend towards digital payments. The company’s strong brand, extensive network of partners, and innovative technologies give it a competitive edge in the market. PayPal’s ability to adapt to changing market conditions and stay ahead of the competition will be key to its long-term success.
In conclusion, PayPal reported better-than-expected fourth-quarter earnings and revenue, but fell short on guidance for the full year and first quarter. The company attributed the shortfall to increased competition and macroeconomic headwinds, and announced it would no longer provide annual guidance. Despite the challenges, PayPal remains well-positioned to capitalize on the growing trend towards digital payments and stay competitive in a rapidly changing market.
