PayPal Holdings, Inc. received its quarterly earnings results on Thursday. It was a remarkable quarter for the company, setting new highs in transaction margin dollars and adjusted earnings per share, beating all expectations. No wonder the company raised its full-year guidance with confidence. This decision throws a spotlight on the success of its ongoing strategic initiatives, particularly the increasing demand for its payment solutions.
In the second quarter, PayPal’s transaction margin dollars increased by 7% to $3.84 billion. That makes this the sixth straight quarter of expansion for this key indicator of profitability. The company’s total payment volume beat estimates, coming in at $443.6 billion, a sign of continued strength in the booming digital payments market.
Looking forward, PayPal is now forecasting third quarter adjusted EPS between $1.18 and $1.22. This forecast is a tad higher than the average analyst estimate of $1.20. In addition, it expects that transaction margin dollars will increase 4%. With this additional increase, it will total between $3.76 billion and $3.82 billion in the same time frame.
PayPal raised its full-year adjusted earnings per share guidance. The new range is now $5.15 to $5.30, an increase from the earlier projected range of $4.95 to $5.10. The company’s new active accounts increased 2%, to 438 million, ahead of forecast for 437.8 million.
Despite these positive results, PayPal’s shares have faced challenges, slipping more than 4% following a report and showing an overall decline of 8.4% for the year as of Monday’s close. By way of context, the Nasdaq has actually gained about 10% over the same stretch.
PayPal’s higher end integrations continue to grow, now live at 45% of U.S. merchants, compared to 30% in December. This progress has been a big reason for recent surges in ridership on its services. Venmo, for instance, is now used by large corporations such as DoorDash, Starbucks, and Ticketmaster.
In fact, the company’s branded check out volumes have recently decelerated to 5%. Even factoring in Leap Day, that is down from 6% in Q1. Notwithstanding this Braintree slowdown, Braintree volumes are still reflecting tremendous momentum still going on.
PayPal expects to produce between $6 billion and $7 billion in free cash flow this year. Such a projection only serves to bolster the firm’s robust financial prospects amid an increasingly competitive digital payments environment.
“We delivered another quarter of profitable growth, driven by continued strength across many of our strategic initiatives ranging from PayPal and Venmo branded experiences.”
Looking forward, PayPal projects a free cash flow of $6 billion to $7 billion for the year, reinforcing its robust financial outlook amid a competitive digital payments landscape.