PayPal Holdings PYPL reported first-quarter 2025 non-GAAP earnings of $1.33 per share, which surpassed the Zacks Consensus Estimate by 15.65% and jumped 23.1% year over year.

Net revenues of $7.79 billion increased 1.2% year over year on a reported basis and 2% on a forex-neutral basis. The figure lagged the consensus mark by 0.43%.

Following the results, PayPal shares were up roughly 1% at the time of posting this article. Year to date, PYPL shares have declined 23%.

PYPL’s Revenue Details

The total payment volume was $417.2 billion for the reported quarter, up 3% year over year on a reported basis and 4% on a forex-neutral basis. 

Transaction margin in dollar terms were $3.7 billion grew more than 7% on a reported basis. Excluding interest on customer balances transaction margin increased 7% to $3.4 billion.
 

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Transaction revenues were $7 billion (90.1% of net revenues), down 0.3% year over year. Value Added Services revenues were $775 million (9.9% of net revenues), up 16.5% year over year.

Revenues from the United States totaled $4.46 billion (57% of net revenues), up 8% on a year-over-year basis. International revenues were $3.33 billion (43% of net revenues), up 12% year over year on a reported basis and 14% on a forex-neutral basis.

PayPal witnessed year-over-year growth of 2% in total active accounts to 436 million in the reported quarter. The total number of payment transactions was 6.045 billion, down 7% on a year-over-year basis. PYPL’s payment transactions per active account were 59.4 million, down 1% year over year.

PYPL’s Operating Details

PayPal’s operating expenses were $6.26 billion in the first quarter, down 4.1% year over year. As a percentage of net revenues, the figure decreased 450 basis points (bps) on a year-over-year basis to 80.4%.

The transaction expense rate was 0.89% in the reported quarter compared with 0.97% reported in the year-ago quarter. 

Transaction margin improved 270 bps to 47.7%.

PYPL’s Balance Sheet Remains Strong

As of March 31, 2025, cash, cash equivalents and investments (including long-term) were $15.8 billion. The long-term debt balance was $12.6 billion.

PYPL generated $1.2 billion in cash from operations, while adjusted free cash flow was $1.4 billion in the first quarter of 2025.

The company returned $1.5 billion to shareholders through share repurchases.

PayPal Reiterated 2025 Guidance

For 2025, PayPal still anticipates non-GAAP earnings between $4.95 per share and $5.10 per share.

Transaction margin is expected between $15.2 billion and $15.4 billion, suggesting growth in the 4-5% range.

Non-GAAP non-transaction operating expenses are expected to grow in the low single-digit range. 

Free cash flow is expected between $6 billion and $7 billion. Share repurchase is expected to be roughly $6 billion.

For the second quarter of 2025, PayPal expects non-GAAP earnings between $1.29 per share and $1.31 per share.

Transaction margin is expected between $3.75 billion and $3.80 billion, suggesting growth in the 4-5% range for the current quarter.

Zacks Rank & Stocks to Consider

Currently, PayPal carries a Zacks Rank #3 (Hold). 

Barrett Business Services BBSI, Bowman Consulting Group BWMN and Climb Global Solutions CLMB are some better-ranked stocks in the broader Zacks Business Services sector. While Bowman Consulting Group and Climb Global Solutions sport a Zacks Rank #1 (Strong Buy), while Barrett Business Services carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrett Business Services is scheduled to report its first-quarter 2025 results on May 7. Bowman Consulting Group is set to report first-quarter 2025 results on May 6, while Climb Global Solutions is scheduled to report its first-quarter 2025 results on April 30.

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This article originally published on Zacks Investment Research (zacks.com).

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