PayPal Holdings Inc Q2 2026 Earnings Recap

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PayPal Holdings Inc Q2 2026 Earnings Recap

eCommerce Checkout) and still to be proven returns on presentment and habituation

investments pressure our outer year gross profit growth forecasts. We balance these

concerns with the fact that PayPal has a unique two-sided network and FCF yields

supportive of shares (~$6b+ adj. FCF expected for 2026, less SBC of ~$1b), which also

supports the asset's attractiveness to potential acquirers. The risk to owning PayPal

includes a combination of both continued TPV share loss and having TM$ investments

impact Branded Checkout's net take rate (which we estimate to be ~1.6-1.7% - we note

this year's TM$ investment is likely to impact this net take rate by ~MSD bps). These

concerns could be exacerbated by a continued need to invest, execution risk in ongoing

restructuring initiatives (notably, technology modernization, including merchant

adoption of technology modernization), and an uncertain role within agentic

commerce.

Additional detail on investment and cost savings initiatives: In addition to the

business-unit reorganization, PayPal reiterated its goal of at least ~$1.5b of gross run-

rate cost savings over the next 2-3 years and now expects to unlock ~$400m of gross

run-rate savings by YE 2026, with a portion realized in Q4. Savings are expected to come

from: 1) simplifying the organization, including removing three organizational layers and

increasing spans of control (~20-30% of gross savings); 2) operational and portfolio

optimization (~30-40% of gross savings); and 3) greater AI adoption across engineering,

customer support, operations, risk, and fraud (~40% of gross savings). We note that ~

$1.5b represents ~16.5% of PayPal’s 2025 non-transaction opex base. The company