2Q26 Earnings Recap: Modest beat and raise against conservative guidance, limited downside while M&A speculation persists

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2Q26 Earnings Recap: Modest beat and raise against conservative guidance, limited downside while M&A speculation persists

Barclays | PayPal, Inc.

Improving distribution and presentment in BNPL: In 2Q, Temu introduced BNPL in Canada,

expanding availability to eight markets globally. Further, Home Depot Canada launched

upstream presentment of PayPal's BNPL offering; upstream BNPL messaging and a second

button for BNPL are associated with strong lift to Branded Checkout volume.

What We Are Watching: 1) International TPV softness: International TPV growth decelerated

to ~0% FXN in 2Q26, down 2% sequentially, likely reflecting Iran war-related softness,

particularly in international travel and Middle East travel. Additionally, PayPal has previously

called out ongoing moderation in Germany, which we believe persisted into 2Q; 2) Higher non-

transaction operating expenses: PayPal increased the FY26 guidance for non-GAAP non-

transaction operating expenses growth from ~3% to ~7.5% at the midpoint, implying an

incremental ~$410mn annual operating expenses vs. previous guidance. Management

attributed this to additional investments in platform and cloud modernization, improved risk

capabilities, and targeted investments across the highers priority growth initiatives. The

company is investing ahead of the significant cost savings it expects to begin to materialize

exiting FY26 (see 1) in the previous paragraph); if those cost savings do not materialize as

anticipated, the spate of investments could weigh on margins into next year; 3) Branded

Checkout growth: PayPal printed 2% FXN Branded Checkout growth in 2Q26 (~flat,

sequentially, though a significant deceleration from 5% in 2Q25), and is guiding to ~2% FXN/LSD

growth in 3Q/2H, respectively.