PYPL PayPal Holdings 10-Q 2026-09-30 section summaries

PayPal — Q3 and nine months ended September 30, 2026

Performance and revenue mix

PayPal reported Q3 revenue of $8.584B, up from $8.417B, while operating income fell to $1.402B from $1.520B and net income to $1.073B from $1.248B. For 9M, revenue was $25.619B from $24.496B, but operating income declined to $4.317B from $4.554B and net income to $3.290B from $3.796B. Diluted EPS was $1.25 vs. $1.30 in Q3 and $3.71 vs. $3.88 in 9M, despite lower weighted-average diluted shares: 858M vs. 960M and 887M vs. 978M, respectively.

Transaction revenue was $7.711B vs. $7.522B in Q3 and $23.044B vs. $21.979B in 9M. Other value-added services revenue was $873M vs. $895M in Q3 and $2.575B vs. $2.517B in 9M. U.S. revenue was $5.002B vs. $4.753B in Q3 and $14.932B vs. $13.925B in 9M; revenue from other countries was $3.582B vs. $3.664B and $10.687B vs. $10.571B, respectively. No individual country outside the U.S. exceeded 10% of revenue. Revenue includes amounts outside ASC 606 of $613M vs. $542M in Q3 and $1.7B vs. $1.6B in 9M.

PayPal reports one operating and reportable segment. Transaction expense increased to $4.248B from $4.063B in Q3 and $12.798B from $11.735B in 9M. Transaction and credit losses together were $386M vs. $483M in Q3 and $1.161B vs. $1.330B in 9M. Restructuring and other expense rose to $255M from $69M in Q3 and $442M from $251M in 9M; this included losses on loans previously held for sale and fair-value adjustments of approximately $80M vs. $70M in Q3 and $206M vs. $122M in 9M. Other expense, net, was $28M vs. $13M of income in Q3 and $240M vs. $111M of income in 9M, reflecting in part $181M of 9M strategic-investment losses versus $69M of gains a year earlier.

Balance sheet, liquidity, and cash flow

At September 30, 2026, total assets were $81.622B, total equity $19.483B, goodwill $10.968B, and identifiable intangible assets, net, $154M. At December 31, 2025, the corresponding amounts were $80.173B, $20.256B, $10.864B, and $208M. Implied tangible equity was $8.361B at September 30. Cash and cash equivalents declined to $7.160B from $8.049B; total short- and long-term debt rose to $13.472B from $11.583B. Funds receivable and customer accounts of $38.424B were substantially offset by $40.924B payable to customers.

For 9M, operating cash flow increased to $4.709B from $4.032B, while capital expenditures were $600M vs. $658M. Investing cash flow was $(5.980)B vs. $1.095B, and financing cash flow was $(2.646)B vs. $(4.009)B. Cash, cash equivalents, and restricted cash ended the period at $20.089B vs. $23.853B. Common shares outstanding fell from 920M at year-end 2025 to 837M at September 30, 2026.

Lending, funding, and investments

Loans and interest receivable held for sale rose to $3.687B from $1.726B; net loans and interest receivable were $5.618B vs. $6.746B, with allowances of $491M vs. $539M. PayPal reclassified $1.5B of net loans to held for sale in 9M 2026 and sold loans with $24.0B UPB, receiving $23.8B net proceeds. Consumer receivables were $4.2B; 96.5% of consumer loan amortized cost was current, and the consumer allowance was $299M. Merchant finance receivables were $1.9B, with 10.8% delinquent; the merchant allowance rose to $192M. The allowance decrease on consumer loans partly reflected releases associated with reclassifying certain Japan installment loans as held for sale. These portfolios remain meaningful credit-loss exposures.

PayPal issued $2.0B of senior unsecured notes in May 2026: $650M at 4.55% due 2028, $850M at 4.95% due 2031, and $500M at 5.55% due 2036. Total notes, including current maturities, were $12.735B; $1.25B of principal payments fall due in the remainder of 2026, including 2.65% notes due October 1. The fully drawn Paidy facility was ¥90B (approximately $572M), due February 2027, with no remaining permitted capacity.

Strategic investments declined to $1.728B from $1.904B. Measurement Alternative investments recorded $188M of gross unrealized losses and impairments in 9M, partly offset by $102M of gross unrealized gains; cumulative gross losses and impairments reached $535M from $353M. Available-for-sale securities had $22.546B amortized cost and $22.519B estimated fair value. PayPal attributed fair-value declines primarily to interest rates rather than credit losses and said it did not intend, nor expect to be required, to sell affected securities before recovery.

Capital allocation, restructuring, and risk

PayPal repurchased approximately 94M shares for $4.5B in 9M, at an average $47.78 per share; $9.4B remained under its repurchase authorization. It paid $0.14 per share each quarter, totaling $376M in 9M. Stock-based compensation expense was $261M vs. $278M in Q3 and $846M vs. $851M in 9M; common shares outstanding declined over the period. A global reorganization announced in April 2026 was intended to simplify operations and reduce organizational layers. Separately, the technology-transformation plan is expected to be substantially complete in 2028, with approximately $85M remaining severance, $40M–$60M impairment and accelerated depreciation, and $110M–$140M other costs.

PayPal is cooperating with multiple regulatory inquiries, including FTC investigations into merchant practices and financial-product fees and purchase protection, as well as proceedings involving the CFPB, German Federal Cartel Office, and U.K. FCA. The company warns that outcomes could require costly compliance or changes to products and practices. A securities action alleges misrepresentations about branded-checkout growth and 2027 targets; damages are unspecified. Loan-sale indemnities have a maximum potential amount tied to $3.7B of current outstanding loan balances, which PayPal says is not its expected exposure. The IRS has proposed adjustments for 2015–2018 returns; PayPal disputes them, and gross unrecognized tax benefits were approximately $2.5B.

PayPal — 3Q and 9M 2026

Operating performance and revenue

In Q3 2026, net revenue increased 2% to $8.584B from $8.417B, while operating expenses rose 4% to $7.182B from $6.897B. Operating income fell 8% to $1.402B from $1.520B, and operating margin narrowed to 16% from 18%. Net income declined 14% to $1.073B from $1.248B; diluted EPS was $1.25 versus $1.30.

For 9M 2026, revenue grew 5% to $25.619B from $24.496B, but operating expenses increased 7% to $21.302B from $19.942B. Operating income decreased 5% to $4.317B from $4.554B, with margin falling to 17% from 19%. Net income declined 13% to $3.290B from $3.796B; diluted EPS was $3.71 versus $3.88.

Revenue mix shifted toward transaction revenue:

• Q3: transaction revenue was $7.711B from $7.522B; other value-added-services revenue was $873M from $895M.
• 9M: transaction revenue was $23.044B from $21.979B; other value-added-services revenue was $2.575B from $2.517B.

Payment activity grew faster than revenue. Q3 total payment volume (TPV) rose 6% to $487.138B from $458.088B, and transactions increased 7% to 6.796B from 6.331B. For 9M, TPV rose 9% to $1,437.541B from $1,318.843B, and transactions increased 8% to 20.021B from 18.602B. Active accounts were 440M versus 438M; trailing-12-month transactions per active account reached 60.8 from 57.6. Transaction revenue growth lagged TPV growth, reflecting product and geographic mix, higher large-merchant co-marketing incentives (recorded as revenue reductions), and lower foreign-exchange fees. International customers generated about 42% of revenue in both 2026 periods, versus 44% in Q3 2025 and 43% for 9M 2025; TPV outside the U.S. also declined as a share.

Braintree and Venmo supported growth, while PayPal-branded product revenue weakened. In Q3, Braintree revenue increased approximately $270M and Venmo $100M, with about $70M of favorable hedging, partly offset by an approximately $240M decline in PayPal product revenue. For 9M, Braintree revenue increased approximately $1.1B and Venmo $230M, partly offset by an approximately $230M decline in PayPal product revenue.

Costs, losses, and restructuring

Transaction expense—the principal transaction cost—was $4.248B in Q3 from $4.063B and $12.798B in 9M from $11.735B. The increase reflected TPV growth and a higher Braintree mix, which generally carries higher expense rates. Transaction expense rate improved to 0.87% from 0.89% in Q3 and remained 0.89% in both 9M periods.

Combined transaction and credit losses fell to $386M from $483M in Q3 and $1.161B from $1.330B for 9M. Transaction losses were $328M from $397M in Q3 and $927M from $1.058B in 9M; lower fraud, risk-mitigation benefits, and recoveries contributed to the decline. Credit losses were $58M from $86M in Q3 and $234M from $272M in 9M. Despite lower reported credit-loss expense, net charge-offs rose to $103M from $90M in Q3 and $278M from $243M in 9M; reserve releases, including on loans reclassified as held for sale, partly offset charge-offs.

Restructuring and other expense increased to $255M from $69M in Q3 and $442M from $251M in 9M. A Q3 workforce-reduction plan generated $152M of charges and is expected to produce approximately $340M of annualized employee-related savings. The broader April 2026 reorganization is intended to simplify operations and accelerate growth priorities, including AI and automation; PayPal expects at least $1.5B of gross annualized run-rate savings over 2–3 years, with a significant portion reinvested. Separately, the 2025 technology and workforce program is expected to deliver approximately $310M in annualized savings, with infrastructure work expected to be substantially complete in 2028.

Credit portfolios and funding

At September 30, consumer loans and interest receivable, net of participation interests sold, were $4.2B versus $5.2B a year earlier. The decline mainly reflected $1.5B of Japan installment loans reclassified as held for sale; held-for-sale loans and interest receivable totaled $3.7B versus $1.4B. Consumer credit indicators were broadly stable: current balances were 96.5% versus 96.3%, balances over 90 days past due were 1.5% in both periods, and the net charge-off rate was 4.6% versus 4.5%.

Merchant loans, advances, and fees receivable, net of participation interests sold, grew to $1.9B from $1.7B. Credit quality weakened: current balances fell to 89.2% from 90.2%, balances over 90 days past due rose to 4.0% from 3.5%, and the net charge-off rate increased to 8.3% from 7.3%. PayPal said it continues to monitor performance and adjust risk parameters.

Forward-flow loan portfolio sales generated $23.8B of net proceeds in 9M 2026, up from $18.2B. European customer balances designated for credit activities reached $2.5B, or about 34% of European balances available for corporate use, versus $2.0B and 26% at year-end 2025. PayPal noted that third-party funding is not assured and that, in exceptional circumstances, corporate liquidity could be needed for European customer-balance obligations.

Cash, debt, and capital returns

Net cash provided by operating activities was $1.592B in Q3 from $1.974B and $4.709B for 9M from $4.032B. For 9M, investing cash flow was -$5.980B versus +$1.095B, and financing cash flow was -$2.646B versus -$4.009B. The net change in cash, cash equivalents, and restricted cash was -$3.929B versus +$1.363B. Cash, cash equivalents, and investments totaled $13.337B at September 30, 2026, versus $12.848B at December 31, 2025; these figures exclude customer-related funds of $38.4B versus $38.2B and strategic investments of $1.7B versus $1.9B. Not all cash is available for general corporate use.

In May 2026, PayPal issued fixed-rate notes with $2.0B aggregate principal; notes outstanding were $12.7B principal at September 30. The company remained investment grade. It repurchased approximately $4.5B of common stock in 9M, with $9.4B remaining under its authorization, and paid three quarterly dividends of $0.14 per share.

Other items and risks

Other expense was $28M in Q3 versus $13M of other income and $240M for 9M versus $111M of other income, reflecting strategic-investment losses and impairments, higher interest expense after the May debt issuance, and lower interest income. Q3 effective tax rate was 22% versus 19%; the 9M rate was 19% in both periods.

PayPal identifies regulatory change and enforcement, cybersecurity and data-privacy threats, and macroeconomic uncertainty as risks to operations and results. Such conditions could weaken spending, increase merchant or consumer insolvencies and credit losses, and disrupt operations or foreign exchange; the company says the total potential macroeconomic impact cannot be reasonably estimated.

Market Risk

Interest-rate exposure

At September 30, 2026, 54% of PayPal’s cash, cash equivalents, and investments, excluding strategic investments, was held in cash and cash equivalents, down from 63% at December 31, 2025. PayPal holds eligible liquid assets equal to at least 100% of customer balances and does not pay interest on those balances.

A hypothetical 100-basis-point increase in rates would reduce the fair value of cash equivalents and available-for-sale debt securities by approximately $6 million at September 30, 2026, compared with $11 million at December 31, 2025, using the updated method. PayPal refined its floating-rate-security duration methodology in Q1 2026; under the prior methodology, the December 2025 sensitivity would have been approximately $171 million. The difference reflects the methodology change, not a change in portfolio composition. Fair-value changes on available-for-sale securities generally flow through accumulated other comprehensive income (AOCI); they are realized if securities are sold before maturity or if declines reflect expected credit losses.

Fixed-rate notes had aggregate principal of $12.3 billion at September 30, 2026, up from $10.4 billion at December 31, 2025. Rate changes affect their fair value, not interest expense. Floating-rate notes had $450 million of principal at both dates and mature March 6, 2028; a 100-basis-point increase was not expected to materially affect 3Q or 9M 2026 interest expense. Revolving credit facilities provided approximately $5.6 billion of borrowing capacity at both dates. ¥90.0 billion was outstanding—approximately $572 million at September 30, 2026, versus $575 million at December 31, 2025—and a 100-basis-point adverse rate change was not expected to materially affect 3Q or 9M 2026 interest expense.

Higher rates may also increase customers’ payment obligations on PayPal credit products and other consumer or merchant loans, potentially worsening delinquencies and charge-offs and increasing loan and interest-receivable allowances, with adverse effects on earnings.

Foreign-exchange exposure and hedging

PayPal’s international operations, revenues, expenses, and intercompany balances are exposed mainly to the British pound, euro, Australian dollar, Canadian dollar, and Indian rupee. The company is generally a net receiver of foreign currencies, so a weaker U.S. dollar tends to benefit it and a stronger dollar tends to be a headwind. Management considers a 10% exchange-rate move reasonably possible in the near term.

Cash-flow and net-investment hedges reduce, but do not eliminate, exposure. Derivative gains and losses initially enter AOCI; cash-flow hedge amounts are reclassified into earnings when the forecast transactions affect results. A hypothetical 10% weakening of the U.S. dollar would make AOCI related to foreign-exchange contracts approximately $404 million lower at September 30, 2026, versus $456 million lower at December 31, 2025, before considering offsets from underlying hedged items.

For balance-sheet exposures, a hypothetical adverse 10% currency move would reduce income before taxes by $413 million at September 30, 2026, before contracts; contracts would offset $352 million, leaving an approximately $61 million net adverse impact. At December 31, 2025, the corresponding gross exposure was $547 million, the hedge offset was $476 million, and the net impact was $71 million.

Strategic investments

Strategic investments totaled $1.7 billion at September 30, 2026, down from $1.9 billion at December 31, 2025, representing 11% and 13%, respectively, of cash, cash equivalents, and short- and long-term investments. A 10% adverse change in carrying value at September 30, 2026 would reduce the portfolio by approximately $173 million.

Changes in marketable and private-company investment values, as well as impairments, are recorded through income and can create material earnings volatility. Returns on private-company investments often depend on a liquidity event. PayPal assesses impairment of non-marketable investments based on investee results and outlook, transactions in securities, and industry, regulatory, economic, and technological conditions.

As of September 30, 2026, PayPal’s CEO and CFO concluded that disclosure controls and procedures were effective. During Q3 2026, no changes materially affected, or were reasonably likely to materially affect, the company’s internal control over financial reporting.

Risk Factors

PayPal identifies significant risks from cybersecurity threats, regulatory change and enforcement, litigation, transaction losses, reliance on third parties, digital assets, and adverse economic and geopolitical conditions. The filing provides no quantified exposures or financial impacts for these risks, so their potential magnitude cannot be assessed from this section.

Cybersecurity, data protection, and third-party providers

PayPal faces increasingly sophisticated cyberattacks, including AI-enabled threats, ransomware, and social engineering. Attacks may target PayPal directly or reach it through customers, vendors, partners, cloud providers, or other parts of its technology supply chain. The company reports prior cybersecurity incidents, including breaches involving customer information. Incidents could require remediation and notifications, and lead to litigation, regulatory fines, contractual penalties, payment-card reissuance costs, claims, reduced customer use, and reputational harm; cyber insurance may not cover all losses.

PayPal also depends on banks, payment networks and processors, gateways, unaffiliated lenders and card issuers, crypto custodians, cloud and data-center providers, and outsourced service providers. Their disruptions, weak controls, compliance failures, or unfavorable contract terms could impair service availability, liquidity, operations, and results, while limiting PayPal’s direct control over operations and compliance.

Regulation, enforcement, and litigation

PayPal operates under extensive, overlapping, and frequently changing requirements covering payments, money transmission, lending, privacy, cybersecurity, consumer protection, competition, sanctions, and anti-money-laundering, among other areas. New products, markets, merchant categories, and acquisitions may add licensing and compliance obligations. Enforcement or perceived failures could result in fines, lawsuits, operating restrictions, lost or delayed licenses, greater customer friction, loss of banking or commercial partners, and delayed product launches. A single event could prompt proceedings by multiple authorities in different jurisdictions.

The company regularly faces lawsuits, arbitrations, investigations, and inquiries involving issues such as consumer protection, competition, privacy, AML, sanctions, fraud, unclaimed property, and use of its services for illegal purposes. PayPal expects disputes and inquiries to grow in number and significance as its business expands and enforcement increases. Outcomes and legal reserves depend on uncertain estimates, and losses could exceed recorded amounts. Proceedings may lead to material judgments, fines, settlements, operational restrictions, required business-practice changes, or product and transaction delays.

Fraud, disputes, and transaction losses

Fraud—including synthetic identities, account takeovers, stolen payment instruments, and AI-facilitated scams—can scale quickly and evade detection. PayPal also bears losses from erroneous transactions and insufficient or unavailable funding sources. Its protection programs cover eligible unauthorized transactions and certain non-delivery or materially misdescribed-item disputes; recoveries from merchants and other parties may be incomplete, and allowances may not cover actual losses. Excessive payment-card losses could jeopardize PayPal’s ability to accept cards. Changes in regulations or card-network rules could increase exposure or broaden protection coverage.

Merchant bankruptcy or business interruption is especially relevant for advance-purchase goods and services, such as travel, tickets, custom goods, and subscriptions: PayPal may owe buyers through protection claims or card chargebacks. Rising losses or ineffective controls could increase costs, require remediation, undermine customer confidence, and reduce use of PayPal’s services.

Cryptocurrency and PYUSD

PayPal’s U.S. cryptocurrency activity is regulated by New York State as a virtual currency business; that status does not authorize securities brokerage or dealing. The GENIUS Act establishes obligations for PayPal as a digital asset service provider, but implementation remains ongoing, creating uncertainty about compliance costs and the competitive landscape for payment stablecoins.

PYUSD is issued by a third party and is available to PayPal and Venmo customers in certain markets, with eligible customers able to transfer it to external wallets. Evolving U.S. and international requirements could require costly operational changes or restrict availability. PayPal also faces issuer, reserve, custodian, cybersecurity, liquidity, and counterparty risks. If a custodian becomes bankrupt, customer assets could be delayed or unavailable despite contractual segregation requirements; their legal treatment is unsettled, and customer claims could be treated as unsecured, potentially exposing PayPal to claims.

Economic, geopolitical, and liquidity conditions

Tighter credit, market volatility, inflation or recession, weaker consumer confidence and discretionary spending, and supply-chain disruptions could reduce transaction volume and size and weaken demand. Enacted or threatened tariffs and reciprocal trade measures have added uncertainty and volatility. These conditions could constrain capital-market access; unexpected declines in customer balances or higher regulatory liquidity and capital requirements could strain liquidity. Foreign-exchange and interest-rate movements could also harm financial results.

On August 25, 2026, Aaron Webster, PayPal’s Executive Vice President and Global Chief Risk Officer, adopted a Rule 10b5-1 trading plan. The plan covers approximately 89,900 vested shares and net shares expected to vest during its term for potential sale, and is scheduled to expire no later than February 28, 2028. The section reports no company financial results, operating changes, or business risks.