PayPal Holdings, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Leadership Change: Enrique Lores appointed as CEO effective March 1, with Jamie Miller as interim CEO and Steve Winoker partnering on finance. David Dorman becomes Board Chair.
• Areas of Strength: Venmo revenue up 20%, Enterprise Payments profitable for 7 quarters, BNPL TPV over $40B. New growth drivers include omnichannel, agentic commerce, crypto, and wallet interoperability.
• Branded Checkout Challenges: Underperformed expectations. Focus areas: experience (frictionless consumer experience via biometrics), presentment (competitive placement), and selection (loyalty rewards). Prioritize strategic merchants, integrate experience and biometrics, improve presentment, and launch rewards programs.
• Other Growth Drivers: Omni initiative with debit card and Tap to Pay showing positive results; Venmo TPV up 13%, revenue up 20%; PSP business expanded margins, added value-added services, and went live with an omnichannel enterprise merchant.

Segment Performance

• Venmo: Revenue grew approximately 20% to $1.7 billion excluding interest income in 2025. Total active accounts surpassed 100 million, with 14% growth in ARPA for monthly actives.
• Enterprise Payments: Delivered 7 consecutive quarters of profitable growth and returned to double-digit volume growth in the fourth quarter. Drove nearly half of the 6% transaction margin dollar growth in 2025.
• Buy Now, Pay Later: Delivered over $40 billion in TPV in 2025, growing more than 20% year-over-year.
• Online Branded Checkout: TPV grew 1% in the fourth quarter on a currency-neutral basis, down from 5% in the third quarter. Affected by U.S. retail weakness, international headwinds (particularly in Germany), deceleration in high-growth verticals, and operational issues.

Guidance

• 2026 Outlook: Targeted growth investments expected to represent ~3 points headwind to TM dollar growth. 1Q 2026: low single-digit revenue growth, TM dollars slight decline/flat, mid-single-digit non-transaction OpEx growth, non-GAAP EPS mid-single-digit down. Full year 2026: TM dollars slight decline/flat, ~3% non-transaction OpEx growth, non-GAAP EPS range down low single digits to slightly positive. No multiyear growth outlook provided as prior assumptions didn't materialize.

Risks

• Execution: Not moving fast enough or with focus, affecting branded checkout performance.
• Macro: U.S. retail weakness, international macroeconomic softness, deceleration in high-growth verticals.
• Competitive: Intense competition in e-commerce and payments, competitors catching up on value proposition.

Question and Answer

• Q: Clarification on CEO change and strategy impact A: Board's appointment of Enrique Lores is for accelerated execution and discipline. He has experience in innovation and large-scale transformations, expected to help with branded checkout execution.
• Q: How to get merchants to adopt branded checkout A: Engage with merchants differently based on their needs. Focus on high-impact merchants, deploy latest integrations with biometrics, upstream presentment, and co-marketing.
• Q: Timeline for investment impact and balancing growth vs capital return A: Investments start in 1Q, with traction seen throughout the year. Focus on transforming the business while maintaining capital return with share repurchases and dividends.
• Q: Branded checkout turnaround and profitability without branded improvement A: Venmo, PSP, and other growth drivers are performing well and can contribute to earnings growth even if branded doesn't improve immediately.
• Q: Asset sales and branded outlook for 2026 A: Focus on organic growth; current plan is to execute integrated strategy. Branded outlook for 2026 is slightly positive to low single digits, with Q1-to-date running better than Q4.