PayPal Holdings Inc.
07/28/2026 | Press release | Distributed by Public on 07/28/2026 15:04
Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans, or intentions (such as those relating to future business, future results of operations or financial condition, new or planned features or services, mergers or acquisitions, or management strategies). These forward-looking statements can be identified by words such as "may," "will," "would," "should," "could," "expect," "anticipate," "believe," "estimate," "intend," "continue," "strategy," "future," "opportunity," "plan," "guidance," "project," "forecast," "outlook," and other similar expressions. These forward-looking statements involve risks and uncertainties that could cause our actual results and financial condition to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K"), as supplemented in the risk factors set forth below in Part II, Item 1A, Risk Factors, of this Form 10-Q, as well as in our unaudited condensed consolidated financial statements, related notes, and the other information appearing in this report and our other filings with the Securities and Exchange Commission. We do not intend, and undertake no obligation except as required by law, to update any of our forward-looking statements after the date of this report to reflect actual results, new information, or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. You should read the following "Management's Discussion and Analysis of Financial Condition and Results of Operations" in conjunction with the unaudited condensed consolidated financial statements and the related notes that appear in this report. Unless otherwise expressly stated or the context otherwise requires, references to "we," "our," "us," "the Company," and "PayPal" refer to PayPal Holdings, Inc. and its consolidated subsidiaries.
BUSINESS ENVIRONMENT
THE COMPANY
At PayPal, our mission is to revolutionize commerce globally. Our products are designed to enable digital payments and simplify commerce experiences for consumers and merchants to make selling, shopping, and sending and receiving money simple, personalized, and secure, whether online or in-person. Our two-sided platform serves millions of consumers and merchants worldwide.
Regulatory environment
We operate globally and in a rapidly evolving regulatory environment characterized by a heightened focus by regulators globally on all aspects of the payments industry, including anti-money laundering, countering terrorist financing, privacy, cybersecurity, and consumer protection. The laws and regulations applicable to us, including those enacted prior to the advent of digital payments, continue to evolve through legislative and regulatory action and judicial interpretation. New or changing laws and regulations, including changes to their interpretation and implementation, as well as increased penalties and enforcement actions related to non-compliance, could have a material adverse impact on our business, results of operations, and financial condition. We monitor these areas closely and are focused on designing compliant solutions for our customers.
Cybersecurity and information security
Cybersecurity and information security risks for global payments and technology companies like us have increased significantly in recent years. Although we have developed systems and processes designed to protect the data we manage, prevent data loss and other security incidents, and enable us to effectively respond to known and potential risks, and expect to continue to expend significant resources to bolster these protections, we have experienced and expect to continue to experience cybersecurity and data privacy incidents and remain subject to these risks. There can be no assurance that our security measures will provide sufficient protection or security to prevent breaches or attacks. For additional information regarding our cybersecurity and information security risks, see Part I, Item 1A, Risk Factors in our 2025 Form 10-K, as supplemented and, to the extent inconsistent, superseded below (if applicable) in Part II, Item 1A, Risk Factors of this Form 10-Q.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
Recent developments
In April 2026, the Company announced a strategic reorganization of its business and executive leadership team intended to accelerate execution of its long-term growth priorities, simplify its operating structure, streamline decision-making, and drive innovation. This strategic reorganization and business simplification program, which will focus on realigning our operating structure and accelerating the adoption of artificial intelligence and automation across the company, is expected to deliver at least $1.5 billion in gross annualized run-rate savings over the next two to three years. The Company intends to reinvest a significant portion of these savings back into its highest-priority growth initiatives. As part of this program, certain actions have been identified that are expected to be completed by the end of this year and which have the potential to generate approximately $400 million of run-rate gross savings, with a portion to be realized in the fourth quarter. The Company is still finalizing plans but this first phase of actions could result in a transformation related charge within the range of approximately $120 million to $140 million during the second half of 2026. The Company expects to provide additional details regarding the structure of the program and anticipated phasing of savings realization in future periods as the program is developed and implemented.
MACROECONOMIC ENVIRONMENT
A deterioration in macroeconomic conditions resulting from uncertainties and effects from tariffs, inflation, international conflicts, and interest rates could continue to increase the risk of lower consumer spending, merchant and consumer bankruptcy, insolvency, business failure, higher credit losses, foreign exchange fluctuations, or other business interruption, which may adversely impact our business. We are unable to reasonably estimate the total potential impact on our financial results that may ultimately result from such changes in the macroeconomic environment.
OVERVIEW OF RESULTS OF OPERATIONS
The following table provides a summary of our condensed consolidated financial results for the three and six months ended June 30, 2026 and 2025:
| Three Months Ended June 30, |
Increase/(Decrease)
|
Six Months Ended June 30, | Increase/(Decrease) | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Dollar |
Percent
|
2026 | 2025 | Dollar | Percent | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except percentages and per share data) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net revenues | $ | 8,682 | $ | 8,288 | $ | 394 | 5 | % | $ | 17,035 | $ | 16,079 | $ | 956 | 6 | % | |||||||||||||||||||||||||||||||
| Operating expenses | 7,255 | 6,784 | 471 | 7 | % | 14,120 | 13,045 | 1,075 | 8 | % | |||||||||||||||||||||||||||||||||||||
| Operating income | 1,427 | 1,504 | (77) | (5) | % | 2,915 | 3,034 | (119) | (4) | % | |||||||||||||||||||||||||||||||||||||
| Operating margin | 16 | % | 18 | % | ** | ** | 17 | % | 19 | % | ** | ** | |||||||||||||||||||||||||||||||||||
| Other income (expense), net | (117) | 25 | (142) | (568) | % | (212) | 98 | (310) | (316) | % | |||||||||||||||||||||||||||||||||||||
| Income tax expense | 206 | 268 | (62) | (23) | % | 486 | 584 | (98) | (17) | % | |||||||||||||||||||||||||||||||||||||
| Effective tax rate | 16 | % | 18 | % | ** | ** | 18 | % | 19 | % | ** | ** | |||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 1,104 | $ | 1,261 | $ | (157) | (12) | % | $ | 2,217 | $ | 2,548 | $ | (331) | (13) | % | |||||||||||||||||||||||||||||||
| Net income (loss) per diluted share | $ | 1.25 | $ | 1.29 | $ | (0.04) | (3) | % | $ | 2.46 | $ | 2.58 | $ | (0.12) | (5) | % | |||||||||||||||||||||||||||||||
|
Net cash provided by operating activities
|
$ | 1,983 | $ | 898 | $ | 1,085 | 121 | % | $ | 3,117 | $ | 2,058 | $ | 1,059 | 51 | % | |||||||||||||||||||||||||||||||
All amounts in tables are rounded to the nearest million, except as otherwise noted. As a result, certain amounts may not recalculate using the rounded amounts provided.
** Not meaningful.
THREE MONTHS ENDED JUNE 30, 2026 AND 2025
The increase in net revenues was driven primarily by growth in total payment volume ("TPV") of 10% and favorable impact from hedging activities.
The increase in operating expenses was due primarily to an increase in transaction expense and, to a lesser extent, an increase in technology and development expense, partially offset by a decline in transaction and credit losses.
Our operating margin declined, reflecting the unfavorable impact of a higher transaction expense growth rate, partially offset by the decline in transaction and credit losses.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
The decrease in net income was due to a decrease in operating income and a decrease in other income (expense), net, which was primarily attributable to net losses and impairments on strategic investments in the current period compared to net gains in the prior period, partially offset by a decrease in income tax expense driven by a lower level of pre-tax income and U.S income taxed at different rates.
SIX MONTHS ENDED JUNE 30, 2026 AND 2025
The increase in net revenues was driven primarily by growth in TPV of 10% and growth in revenue earned from an independent chartered financial institution ("partner institution").
The increase in operating expenses was due primarily to an increase in transaction expense and, to a lesser extent, increases in technology and development expense and customer support and operations expense, partially offset by a decline in transaction and credit losses.
Our operating margin declined, reflecting the unfavorable impact of a higher transaction expense growth rate.
The decrease in net income was due to a decrease in operating income and a decrease in other income (expense), net, which was primarily attributable to net losses and impairments on strategic investments in the current period compared to net gains in the prior period, partially offset by a decrease in income tax expense driven by a lower level of pre-tax income and U.S income taxed at different rates.
IMPACT OF FOREIGN EXCHANGE RATES
We have significant international operations that are denominated in foreign currencies, primarily the British pound, Euro, Australian dollar, Canadian dollar, and Indian rupee, subjecting us to foreign exchange risk which may adversely impact our financial results. The strengthening or weakening of the United States ("U.S.") dollar versus foreign currencies in which we conduct our international operations impacts the translation of our net revenues and expenses generated in these foreign currencies into the U.S. dollar. We generated approximately 42% and 43% of our net revenues from customers domiciled outside of the U.S. in the three and six months ended June 30, 2026 and 2025, respectively. Because we generate substantial net revenues internationally, we are subject to the risks of doing business outside of the U.S. See Part I, Item 1A, Risk Factors in our 2025 Form 10-K, as supplemented and, to the extent inconsistent, superseded (if applicable) below in Part II, Item 1A, Risk Factors of this Form 10-Q.
We calculate the year-over-year impact of foreign exchange rate movements on our business using prior period foreign exchange rates applied to current period transactional currency amounts. While changes in foreign exchange rates affect our reported results, we have a foreign currency exposure management program in which we use foreign exchange contracts, designated as cash flow hedges, intended to reduce the impact on earnings from foreign exchange rate movements. Gains and losses from these foreign exchange contracts are recognized as a component of transaction revenues or operating expenses (as applicable) in the same period the forecasted transactions impact earnings.
In the three and six months ended June 30, 2026, year-over-year foreign exchange rate movements relative to the U.S. dollar had the following impact on our reported results:
| Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 | ||||||||||
| (In millions) | |||||||||||
|
Favorable impact to net revenues (exclusive of hedging impact)
|
$ | 74 | $ | 331 | |||||||
| Hedging impact | 6 | (80) | |||||||||
|
Favorable impact to net revenues
|
80 | 251 | |||||||||
| Unfavorable impact to operating expenses (exclusive of hedging impact) | (20) | (157) | |||||||||
| Hedging impact | (5) | (7) | |||||||||
| Unfavorable impact to operating expenses | (25) | (164) | |||||||||
| Net favorable impact to operating income | $ | 55 | $ | 87 | |||||||
|
2Q 2026 FORM 10-Q
|
||||||||||||||
KEY METRICS AND FINANCIAL RESULTS
KEY METRICS
TPV, number of payment transactions, active accounts, and number of payment transactions per active account are key non-financial performance metrics ("key metrics") that management uses to measure the scale of our platform and the relevance of our products and services to our customers, and are defined as follows:
•TPV is the value of payments, net of payment reversals, successfully completed on our payments platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.
•Number of payment transactions is the total number of payments, net of payment reversals, successfully completed on our payments platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.
•An active account is an account registered directly with PayPal or a platform access partner that has completed a transaction on our platform, not including gateway-exclusive transactions, within the past 12 months. A platform access partner is a third party whose customers are provided access to PayPal's platform or services through such third-party's login credentials, including individuals and entities that utilize Hyperwallet's payout capabilities. A user may register on our platform to access different products and may register more than one account to access a product. Accordingly, a user may have more than one active account. The number of active accounts provides management with additional perspective on the overall scale of our platform, but may not have a direct relationship to our operating results.
•Number of payment transactions per active account reflects the total number of payment transactions within the previous 12-month period, divided by active accounts at the end of the period. The number of payment transactions per active account provides management with insight into the average number of times an account engages in payments activity on our payments platform in a given period. The number of times a consumer account or a merchant account transacts on our platform may vary significantly from the average number of payment transactions per active account.
As our transaction revenue growth is typically correlated with TPV growth and the number of payment transactions completed on our payments platform, management uses these metrics to gain insights into the scale and strength of our payments platform, the engagement level of our customers, and underlying activity and trends which may be indicators of current and future performance. We present these key metrics to enhance investors' evaluation of the performance of our business and operating results.
Our key metrics are calculated using internal company data based on the activity we measure on our payments platform and compiled from multiple systems, including systems that are internally developed or acquired through business combinations. While the measurement of our key metrics is based on what we believe to be reasonable methodologies and estimates, there are inherent challenges and limitations in measuring our key metrics globally at scale. The methodologies used to calculate our key metrics require significant judgment. We regularly review our processes for calculating these key metrics, and from time to time we may make adjustments to improve the accuracy or relevance of our metrics. For example, we continuously apply models, processes, and practices designed to detect and prevent fraudulent account creation on our platforms, and work to improve and enhance those capabilities. When we detect a significant volume of illegitimate activity, we generally remove the activity identified from our key metrics. Although such adjustments may impact key metrics reported in prior periods, we generally do not update previously reported key metrics to reflect these subsequent adjustments unless the retrospective impact of process improvements or enhancements is determined by management to be material.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
NET REVENUES
Our revenues are classified into the following two categories:
•Transaction revenues: Net transaction fees charged to merchants and consumers on a transaction basis based on the TPV completed on our payments platform. Growth in TPV is directly impacted by the number of payment transactions that we enable on our payments platform. We generate additional revenue from merchants and consumers: on transactions where we perform currency conversion, when we enable cross-border transactions (i.e., transactions where the merchant and consumer are in different countries), when we facilitate the instant transfer of funds for our customers from their PayPal or Venmo account to their bank account or debit card, when we facilitate the purchase and sale of cryptocurrencies, as contractual compensation from sellers that violate our contractual terms (for example, through fraud or counterfeiting), and other miscellaneous fees.
•Revenues from other value added services: Net revenues derived primarily from revenue earned through partnerships, referral fees, subscription fees, gateway fees, and other services we provide to our consumers and merchants. We also earn revenues from interest and fees earned on our portfolio of loans receivable, and interest earned on certain assets underlying customer balances.
Net revenue analysis
The components of our net revenues for the three and six months ended June 30, 2026 and 2025 were as follows:
|
Three Months Ended June 30, |
Increase/(Decrease)
|
Six Months Ended June 30, |
Increase/(Decrease)
|
||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 |
Dollar
|
Percent
|
2026 | 2025 |
Dollar
|
Percent
|
||||||||||||||||||||||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Transaction revenues | $ | 7,832 | $ | 7,441 | $ | 391 | 5 | % | $ | 15,333 | $ | 14,457 | $ | 876 | 6 | % | |||||||||||||||||||||||||||||||
| Revenues from other value added services | 850 | 847 | 3 | - | % | 1,702 | 1,622 | 80 | 5 | % | |||||||||||||||||||||||||||||||||||||
| Total revenues | $ | 8,682 | $ | 8,288 | $ | 394 | 5 | % | $ | 17,035 | $ | 16,079 | $ | 956 | 6 | % | |||||||||||||||||||||||||||||||
Transaction revenues
The increase in transaction revenues for the three months ended June 30, 2026 compared to the same period of the prior year was primarily attributable to:
•an increase of approximately $400 million in revenue from Braintree products and services, which was largely driven by growth in TPV and number of payment transactions;
•approximately $80 million of favorable impact from hedging activities resulting from net gains in the current period compared to net losses in the prior period;
•an increase of approximately $60 million in revenue from Venmo products and services, which was largely due to growth in TPV and number of payment transactions; and
•partially offset by a decline in revenue from PayPal products and services of approximately $130 million primarily attributable to higher co-marketing campaigns with large merchants, which are recorded as reductions to revenues, and lower foreign exchange fee revenue.
The increase in transaction revenues for the six months ended June 30, 2026 compared to the same period of the prior year was primarily attributable to:
•an increase of approximately $810 million and $130 million in revenue from Braintree and Venmo products and services, respectively, which was largely driven by growth in TPV and number of payment transactions;
•an increase of $130 million in revenue from PayPal products and services, which was offset by a $120 million decline due to higher co-marketing campaigns with large merchants; and
•partially offset by approximately $50 million of unfavorable impact from hedging activities resulting from higher net losses in the current period compared to the prior period.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
The following table provides a summary of key metrics:
|
Three Months Ended June 30, |
Percent Increase/(Decrease) |
Six Months Ended June 30, |
Percent Increase/(Decrease) | ||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||
| (In millions, except percentages and number of payment transactions per active account) | |||||||||||||||||||||||||||||||||||
|
Active accounts(1)
|
439 | 438 | - | % | 439 | 438 | - | % | |||||||||||||||||||||||||||
| Number of payment transactions | 6,750 | 6,226 | 8 | % | 13,225 | 12,271 | 8 | % | |||||||||||||||||||||||||||
| Number of payment transactions per active account | 60.0 | 58.3 | 3 | % | 60.0 | 58.3 | 3 | % | |||||||||||||||||||||||||||
| TPV | $ | 486,448 | $ | 443,547 | 10 | % | $ | 950,403 | $ | 860,755 | 10 | % | |||||||||||||||||||||||
| Percent of TPV generated outside of the U.S. | 35 | % | 38 | % | ** | 35 | % | 36 | % | ** | |||||||||||||||||||||||||
(1) Reflects active accounts at the end of the applicable period.
** Not meaningful.
Transaction revenues growth was lower than the growth in TPV in the three and six months ended June 30, 2026 compared to the same periods in the prior year due primarily to changes in product mix, higher co-marketing campaigns, lower foreign exchange fee revenue, and lower partner incentives.
Revenues from other value added services
Revenues from other value added services for the three months ended June 30, 2026 remained relatively consistent compared to the same period in the prior year due to:
•an increase of approximately $40 million from interest and fee revenue earned from our loans receivable portfolios; and
•offset by approximately $40 million lower revenues from interest earned on certain assets underlying customer account balances resulting from lower interest rates on higher average cash and investment balances.
The increase in revenues from other value added services for the six months ended June 30, 2026 compared to the same period in the prior year was primarily attributable to:
•an increase of approximately $100 million in revenue earned from a partner institution;
•an increase of approximately $80 million from interest and fee revenue earned from our loans receivable portfolios;
•partially offset by approximately $60 million lower revenues from interest earned on certain assets underlying customer account balances resulting from lower interest rates on higher average cash and investment balances; and
•a decline of approximately $40 million from lower revenues from Honey and other value added services.
Revenue from the partner institution is earned primarily through a revenue share arrangement based on the economic performance of the program related to our U.S. revolving consumer credit product and PayPal and Venmo branded credit cards, when such performance exceeds a minimum threshold.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
OPERATING EXPENSES
The following table summarizes our operating expenses and related metrics we use to assess the trends in each:
|
Three Months Ended June 30, |
Increase/(Decrease)
|
Six Months Ended June 30, |
Increase/(Decrease)
|
||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 |
Dollar
|
Percent
|
2026 | 2025 |
Dollar
|
Percent
|
||||||||||||||||||||||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Transaction expense | $ | 4,385 | $ | 3,968 | $ | 417 | 11 | % | $ | 8,550 | $ | 7,672 | $ | 878 | 11 | % | |||||||||||||||||||||||||||||||
| Transaction and credit losses | 397 | 476 | (79) | (17) | % | 775 | 847 | (72) | (9) | % | |||||||||||||||||||||||||||||||||||||
| Customer support and operations | 462 | 413 | 49 | 12 | % | 908 | 811 | 97 | 12 | % | |||||||||||||||||||||||||||||||||||||
| Sales and marketing | 546 | 583 | (37) | (6) | % | 1,064 | 1,071 | (7) | (1) | % | |||||||||||||||||||||||||||||||||||||
| Technology and development | 849 | 767 | 82 | 11 | % | 1,642 | 1,498 | 144 | 10 | % | |||||||||||||||||||||||||||||||||||||
| General and administrative | 503 | 461 | 42 | 9 | % | 994 | 964 | 30 | 3 | % | |||||||||||||||||||||||||||||||||||||
| Restructuring and other | 113 | 116 | (3) | (3) | % | 187 | 182 | 5 | 3 | % | |||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 7,255 | $ | 6,784 | $ | 471 | 7 | % | $ | 14,120 | $ | 13,045 | $ | 1,075 | 8 | % | |||||||||||||||||||||||||||||||
|
Transaction expense rate(1)
|
0.90 | % | 0.89 | % | ** | ** | 0.90 | % | 0.89 | % | ** | ** | |||||||||||||||||||||||||||||||||||
|
Transaction and credit loss rate(2)
|
0.08 | % | 0.11 | % | ** | ** | 0.08 | % | 0.10 | % | ** | ** | |||||||||||||||||||||||||||||||||||
(1) Transaction expense rate is calculated by dividing transaction expense by TPV.
(2) Transaction and credit loss rate is calculated by dividing transaction and credit losses by TPV.
** Not meaningful.
Transaction expense
The increase in transaction expense for the three and six months ended June 30, 2026 compared to the same periods in the prior year was primarily attributable to the increase in TPV of 10% in each respective period, and a higher proportion of TPV from our Braintree products and services, which generally have higher expense rates than our other products and services. The increase in transaction expense rate for the three and six months ended June 30, 2026 compared to the same periods in the prior year was primarily attributable to unfavorable changes in funding mix, partially offset by the favorable impact of changes in merchant mix.
Our transaction expense rate is impacted by changes in product mix, merchant mix, regional mix, funding mix, and fees paid to payment processors and other financial institutions. The cost of funding a transaction with a credit or debit card is generally higher than the cost of funding a transaction from a bank or through internal sources such as a PayPal or Venmo account balance or our consumer credit products. The cost of funding a transaction is also impacted by the geographic region or country in which a transaction occurs, as we generally pay lower rates for transactions funded with credit or debit cards outside the U.S.
Transaction and credit losses
The components of our transaction and credit losses for the three and six months ended June 30, 2026 and 2025 were as follows:
|
Three Months Ended June 30, |
Increase/(Decrease)
|
Six Months Ended June 30, |
Increase/(Decrease)
|
||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 |
Dollar
|
Percent
|
2026 | 2025 |
Dollar
|
Percent
|
||||||||||||||||||||||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Transaction losses | $ | 323 | $ | 383 | $ | (60) | (16) | % | $ | 599 | $ | 661 | $ | (62) | (9) | % | |||||||||||||||||||||||||||||||
| Credit losses | 74 | 93 | (19) | (20) | % | 176 | 186 | (10) | (5) | % | |||||||||||||||||||||||||||||||||||||
| Transaction and credit losses | $ | 397 | $ | 476 | $ | (79) | (17) | % | $ | 775 | $ | 847 | $ | (72) | (9) | % | |||||||||||||||||||||||||||||||
|
Transaction loss rate(1)
|
0.07 | % | 0.09 | % | ** | ** | 0.06 | % | 0.08 | % | ** | ** | |||||||||||||||||||||||||||||||||||
(1) Transaction loss rate is calculated by dividing transaction losses by TPV.
** Not meaningful.
Transaction losses and the associated transaction loss rate in the three and six months ended June 30, 2026 decreased compared to the same periods in the prior year due to lower fraud losses, benefits realized from risk mitigation strategies, and higher recoveries partially offset by an increase due to higher TPV.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
The components of credit losses for the three and six months ended June 30, 2026 and 2025 were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
|
Net charge-offs(1)
|
$ | 101 | $ | 75 | $ | 175 | $ | 153 | |||||||||||||||
|
Reserve build (release)(2)
|
(27) | 18 | 1 | 33 | |||||||||||||||||||
| Credit losses | $ | 74 | $ | 93 | $ | 176 | $ | 186 | |||||||||||||||
(1) Net charge-offs includes principal charge-offs partially offset by recoveries for consumer and merchant receivables.
(2) Reserve build (release) represents change in allowance for principal receivables excluding foreign currency remeasurement.
Credit losses in the three and six months ended June 30, 2026 and 2025 were primarily attributable to loan originations during the periods.
Consumer loan portfolio
We have entered into forward flow arrangements with third-party investors to sell certain loans receivable portfolios. As of June 30, 2026 and 2025, loans and interest receivable, held for sale were $1.9 billion and $817 million, respectively.
The consumer loans and interest receivable balance as of June 30, 2026 and 2025 was $5.5 billion and $5.8 billion, respectively, net of participation interest sold, representing a decrease of 6%. The decline in consumer loans and interest receivable outstanding was primarily driven by the impact of the reclassification of our U.S. short-term, non-interest bearing installment loans to held for sale in the third quarter of 2025 and the associated forward flow arrangement and a decline of approximately $200 million in our installment credit product portfolio in Japan, partially offset by growth in our revolving credit product portfolio in the United Kingdom ("U.K.") and our interest-bearing installment credit product portfolio in the U.S. of approximately $200 million and $180 million, respectively.
The following table provides information regarding the credit quality of our consumer loans and interest receivable balance:
| June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
|
Percent of consumer loans and interest receivable current
|
96.6 | % | 96.2 | % | |||||||
|
Percent of consumer loans and interest receivable > 90 days outstanding(1)
|
1.5 | % | 1.6 | % | |||||||
|
Net charge-off rate(2)
|
4.8 | % | 3.6 | % | |||||||
(1) Represents percentage of balances which are 90 days past the billing date or contractual repayment date, as applicable.
(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended June 30, 2026 and 2025, excluding fraud losses, on consumer loans as a percentage of the average daily amount of consumer loans and interest receivable balance during the same period.
In response to changing portfolio performance and macroeconomic environment, we continue to monitor risk and evaluate and modify our acceptable risk parameters. Modifications to the acceptable risk parameters did not have a material impact on our consumer loans for the three and six months ended June 30, 2026.
Merchant loan portfolio
We offer access to merchant finance products for certain small and medium-sized businesses, which we refer to as our merchant finance offerings. Total merchant loans, advances, and fees receivable outstanding, net of participation interest sold, as of June 30, 2026 and 2025 was $1.9 billion and $1.7 billion, respectively, reflecting an increase of 14%. The increase was due primarily to growth of approximately $140 million in our PayPal Business Loans product portfolio in the U.S. and growth in our PayPal Working Capital product portfolio of approximately $100 million, primarily in Germany.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
The following table provides information regarding the credit quality of our merchant loans, advances, and fees receivable balance:
| June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Percent of merchant loans, advances, and fees receivable current | 89.6 | % | 89.9 | % | |||||||
|
Percent of merchant loans, advances, and fees receivable > 90 days outstanding(1)
|
3.9 | % | 3.6 | % | |||||||
|
Net charge-off rate(2)
|
7.6 | % | 6.1 | % | |||||||
(1) Represents percentage of balances which are 90 days past the original expected or contractual repayment period, as applicable.
(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended June 30, 2026 and 2025, excluding fraud losses, on merchant loans and advances as a percentage of the average daily amount of merchant loans, advances, and fees receivable balance during the same period.
In response to changing portfolio performance and macroeconomic environment, we continue to monitor risk and evaluate and modify our acceptable risk parameters. Modifications to the acceptable risk parameters did not have a material impact on our merchant loans for the three and six months ended June 30, 2026.
For additional information, see "Note 11-Loans and Interest Receivable" in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.
Customer support and operations
The increase in customer support and operations expenses in the three and six months ended June 30, 2026 compared to the same periods in the prior year was due primarily to an increase in employee-related costs of approximately $40 million and $60 million, respectively. The increase in customer support and operations expenses in the six months ended June 30, 2026 compared to the same period in the prior year was also attributable to higher contractor and consulting costs.
Sales and marketing
The decrease in sales and marketing expenses in the three months ended June 30, 2026 compared to the same period in the prior year was due primarily to declines in marketing and brand advertising spend and amortization expense for acquired intangible assets, partially offset by an increase in employee-related costs. The decrease in sales and marketing expenses in the six months ended June 30, 2026 compared to the same period in the prior year was due primarily to a decline in amortization expense for acquired intangible assets, partially offset by an increase in employee-related costs and higher spend on marketing and brand advertising, predominantly for Venmo.
Technology and development
The increase in technology and development expenses in the three and six months ended June 30, 2026 compared to the same periods in the prior year was due primarily to increases in employee-related costs, depreciation and amortization expense from internally developed software, and cloud computing costs utilized in delivering our products and services.
General and administrative
The increase in general and administrative expenses in the three and six months ended June 30, 2026 compared to the same periods in the prior year was due primarily to an increase in indirect tax expense. The increase in general and administrative expenses in the six months ended June 30, 2026 compared to the same period in the prior year was also attributable to an increase in employee-related costs.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
Restructuring and other
In the three and six months ended June 30, 2026, we recorded $44 million in restructuring charges associated with the strategic reorganization announced in April 2026. These charges were primarily employee severance and benefits costs including stock-based compensation.
During the second quarter of 2025, management undertook a large-scale initiative (the "2Q 2025 Plan") to reengineer our existing technology infrastructure to improve scalability, reduce network latency, decrease operational costs, and optimize our workforce. The 2Q 2025 Plan is a transformative unified program designed to streamline operations and includes exiting certain data centers to migrate to more efficient cloud-based solutions. The 2Q 2025 Plan is expected to be executed over a period of 18 to 42 months with the workforce component completed in the second quarter of 2026 and the technology infrastructure component expected to be substantially completed in 2028. The associated restructuring charges during the three and six months ended June 30, 2026 were $2 million and $13 million, respectively, consisting of employee severance and benefits costs and other restructuring costs. The associated restructuring charges for both the three and six months ended June 30, 2025 were $95 million and included employee severance and benefits costs.
In connection with this restructuring, we expect to incur employee severance and benefits costs of approximately $85 million, asset impairment and accelerated depreciation charges of approximately $40 million to $60 million, and other restructuring costs of approximately $110 million to $140 million over the term of the 2Q 2025 Plan. Other restructuring costs relate to process re-engineering and one-time migration to cloud solutions and consist of contractor costs, consulting fees, and prepaid software and maintenance costs without future economic benefit. We expect annualized cost savings of approximately $260 million associated with the impacted workforce and operational costs for our technology infrastructure. We expect that we will begin to realize these cost savings upon the completion of the components of the 2Q 2025 Plan, and also expect to reinvest a portion of the reduction in annual costs to drive business priorities. The timing of activities, cost, and savings estimates continue to be developed and are subject to change.
During the first quarter of 2025, management initiated a workforce reduction to ensure compliance with a new regulation impacting operations in an international market. The associated restructuring charges during the six months ended June 30, 2025 were $36 million and included employee severance and benefits costs, which were completed in the third quarter of 2025.
For information on the associated restructuring liabilities, see "Note 17-Restructuring and Other" in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.
During the three and six months ended June 30, 2026, approximately $65 million and $126 million, respectively, of losses were recorded in restructuring and other, which included net loss on sale of loans and interest receivable previously held for sale and fair value adjustments to measure loans and interest receivable, held for sale, at the lower of cost or fair value. During the three and six months ended June 30, 2025, approximately $27 million and $52 million, respectively, of losses were recorded in restructuring and other, which included net loss on sale of loans and interest receivable previously held for sale and fair value adjustments to measure loans and interest receivable, held for sale, at the lower of cost or fair value.
Other income (expense), net
The decrease in other income (expense), net in the three and six months ended June 30, 2026 compared to the same periods in the prior year was due primarily to:
•net losses and impairments on strategic investments in the current period compared to net gains in the prior period, which contributed a decrease of approximately $80 million and $230 million, respectively; and
•lower interest income due to lower interest rates, which contributed a decrease of approximately $30 million and $70 million, respectively.
Income tax expense
Our effective income tax rate was 16% and 18% for the three months ended June 30, 2026 and 2025, respectively. Our effective tax rate decreased compared to the same period in the prior year primarily due to U.S. income taxed at different rates.
Our effective income tax rate was 18% and 19% for the six months ended June 30, 2026 and 2025, respectively. Our effective tax rate decreased compared to the same period in the prior year primarily due to U.S. income taxed at different rates, partially offset by discrete tax adjustments, including tax effects of stock-based compensation.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
LIQUIDITY AND CAPITAL RESOURCES
We require liquidity and access to capital to fund our global operations, including our customer protection programs, credit products, capital expenditures, investments in our business, potential acquisitions and strategic investments, stock repurchases and dividend payments, working capital, and other cash needs. We believe that our existing cash, cash equivalents, and investments, cash expected to be generated from operations, and our expected access to capital markets, together with potential external funding through third-party sources, will be sufficient to meet our cash requirements within the next 12 months and beyond.
SOURCES OF LIQUIDITY
Cash, cash equivalents, and investments
The following table summarizes our cash, cash equivalents, and investments as of June 30, 2026 and December 31, 2025:
| June 30, 2026 | December 31, 2025 | ||||||||||
| (In millions) | |||||||||||
|
Cash, cash equivalents, and investments(1),(2)
|
$ | 13,530 | $ | 12,848 | |||||||
(1) Excludes assets related to funds receivable and customer accounts of $39.7 billion and $38.2 billion at June 30, 2026 and December 31, 2025, respectively.
(2) Excludes total strategic investments of $1.7 billion and $1.9 billion at June 30, 2026 and December 31, 2025, respectively.
Cash, cash equivalents, and investments held by our foreign subsidiaries were $6.9 billion and $7.5 billion at June 30, 2026 and December 31, 2025, or 51% and 58% of our total cash, cash equivalents, and investments as of those respective dates. At December 31, 2025, all of our cash, cash equivalents, and investments held by foreign subsidiaries were subject to U.S. taxation under Subpart F, Net Controlled Foreign Corporation Tested Income formally known as Global Intangible Low Taxed Income, or the one-time transition tax under the Tax Cuts and Jobs Act of 2017. Subsequent repatriations to the U.S. will not be taxable from a U.S. federal tax perspective except for any tax on foreign exchange gains and losses; however, they may be subject to state income or foreign withholding tax.
A significant aspect of our global cash management activities involves meeting our customers' requirements to access their cash while simultaneously meeting our regulatory financial ratio commitments in various jurisdictions. Our global cash balances are required not only to provide operational liquidity to our businesses, but also to support our global regulatory requirements across our regulated subsidiaries. Accordingly, not all of our cash is available for general corporate purposes.
Cash flows
The following table summarizes our condensed consolidated statements of cash flows:
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (In millions) | |||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 3,117 | $ | 2,058 | |||||||
| Investing activities | (4,985) | (3,677) | |||||||||
| Financing activities | (156) | (2,180) | |||||||||
| Effect of exchange rates on cash, cash equivalents, and restricted cash | (21) | 289 | |||||||||
|
Net change in cash, cash equivalents, and restricted cash
|
$ | (2,045) | $ | (3,510) | |||||||
Operating activities
Net cash provided by operating activities increased $1.1 billion in the six months ended June 30, 2026 compared to the same period of the prior year due primarily to the impact of:
•changes in other current and non-current assets of approximately $450 million predominantly from timing differences in payment partner receivables and income tax receivables;
•changes in other current and non-current liabilities of approximately $240 million resulting from lower annual incentive plan payments;
•an increase of approximately $230 million in net income adjusted primarily for non-cash items; and
•changes in accounts receivable of approximately $190 million.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
In the six months ended June 30, 2026 and 2025, cash paid for income taxes, net was $225 million and $837 million, respectively. The difference between our cash paid for income taxes in the periods presented primarily relates to the final transition tax installment payment paid in the previous period.
Investing activities
Net cash used in investing activities increased $1.3 billion in the six months ended June 30, 2026 compared to the same period of the prior year due primarily to:
•a decrease of approximately $3.4 billion in maturities and sales, net of purchases of investments, partially offset by
•the positive impact of changes in funds receivable of approximately $2.0 billion.
Financing activities
Net cash used in financing activities decreased $2.0 billion in the six months ended June 30, 2026 compared to the same period of the prior year due primarily to:
•an increase of approximately $1.6 billion in borrowings under financing arrangements, net of repayments; and
•the positive impact of changes related to funds payable and amounts due to customers of approximately $410 million.
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
Foreign currency exchange rates had a negative impact of $21 million and a positive impact of $289 million on cash, cash equivalents, and restricted cash for the six months ended June 30, 2026 and 2025, respectively. The negative impact on cash, cash equivalents, and restricted cash in the six months ended June 30, 2026 was due primarily to unfavorable fluctuations in the exchange rate of the U.S. dollar to the British pound, Indian rupee, and Euro, partially offset by favorability from fluctuations in exchange rate of the U.S. dollar to the Australian dollar. The positive impact on cash, cash equivalents, and restricted cash in the six months ended June 30, 2025 was due primarily to favorable fluctuations in the exchange rate of the U.S. dollar to the British pound and, to a lesser extent, the Euro and Australian dollar.
Available credit and debt
In May 2026, we issued fixed-rate notes with varying maturity dates for an aggregate principal amount of $2.0 billion. Proceeds from the issuance of these notes may be used for general corporate purposes, which may include funding the repayment or redemption of outstanding debt, share repurchases, ongoing operations, capital expenditures, and possible acquisitions of businesses, assets, or strategic investments. As of June 30, 2026, we had an aggregate principal amount of $12.7 billion in notes outstanding with varying maturity dates.
Other than as described above, there were no significant changes to the available credit and debt disclosed in our 2025 Form 10-K. For additional information, see "Note 12-Debt" in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.
Depending on market conditions, we may from time to time issue debt, including in private or public offerings, to fund our operating activities, finance acquisitions, make strategic investments, repurchase shares under our stock repurchase program, or reduce our cost of capital.
Credit ratings
As of June 30, 2026, we continue to be rated investment grade by Standard and Poor's Financial Services, LLC, Fitch Ratings, Inc., and Moody's Investors Services, Inc. We expect that these credit rating agencies will continue to monitor our performance, including our capital structure and results of operations. Our goal is to be rated investment grade, but as circumstances change, various factors could result in our credit ratings being downgraded or put on a watch list for possible downgrading. If that were to occur, it could increase our borrowing rates, including the interest rate on borrowings under our credit agreements.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
CURRENT AND FUTURE CASH REQUIREMENTS
Our material cash requirements include funds to support current and potential: operating activities, credit products, customer protection programs, stock repurchases, dividend payments, strategic investments, acquisitions, other commitments, capital expenditures, and other future obligations.
Credit products
Growth in our portfolio of loans receivable increases our liquidity needs and any inability to meet those liquidity needs could adversely affect our business. We continue to evaluate partnerships and third-party sources of funding for our credit products.
The Luxembourg Commission de Surveillance du Secteur Financier (the "CSSF") has agreed that PayPal's management may designate up to 50% of European customer balances held in our Luxembourg banking subsidiary to fund European and U.K. credit activities. As of June 30, 2026 and December 31, 2025, the cumulative amount approved by PayPal to be designated to fund credit activities was $2.0 billion as of those respective dates and represented approximately 26% of European customer balances made available for our corporate use as of those respective dates, as determined by applying financial regulations maintained by the CSSF. In July 2026, an additional $500 million was approved by management to fund our credit activities, increasing the aggregate cumulative amount approved by management for this purpose to $2.5 billion. We may periodically seek to change the designation of amounts of European customer balances for our credit activities, as we deem necessary, based on utilization of the approved funds and anticipated credit funding requirements. Under certain exceptional circumstances, corporate liquidity could be called upon to meet our obligations related to our European customer balances.
We have entered into forward flow arrangements with third-party investors to sell certain loans receivable portfolios. During the six months ended June 30, 2026 and 2025, we had net proceeds of $15.8 billion and $11.6 billion, respectively, from loans and interest receivable sold under these arrangements. See "Note 11-Loans and Interest Receivable" in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for additional information.
While our objective is to expand the availability of our credit products with capital from external sources, there can be no assurance that we will be successful in achieving that goal.
Customer protection programs
The risk of losses from our customer protection programs are specific to individual consumers, merchants, and transactions, and may also be impacted by regional variations in, and changes or modifications to, the programs, including as a result of changes in regulatory requirements. For the periods presented in these condensed consolidated financial statements included in this report, our transaction loss rate ranged between 0.06% and 0.09% of TPV. Historical loss rates may not be indicative of future results.
Capital return program
Stock repurchases
During the six months ended June 30, 2026, we repurchased approximately $3.0 billion of our common stock in the open market under our stock repurchase program authorized in February 2025. As of June 30, 2026, a total of approximately $10.9 billion remained available for future repurchases of our common stock under our February 2025 stock repurchase program.
Dividend program
In February 2026, the Company's Board of Directors declared a cash dividend of $0.14 per share on our common stock, totaling approximately $130 million. The dividend was paid on March 25, 2026, to stockholders of record of our common stock as of the close of business on March 4, 2026. In May 2026, the Company's Board of Directors declared a cash dividend of $0.14 per share on our common stock, totaling approximately $125 million. The dividend was paid on June 25, 2026, to stockholders of record of our common stock as of the close of business on June 4, 2026. Dividend payments in future quarters will be subject to and contingent upon market conditions and approval by our Board of Directors at its sole discretion.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
Other considerations
Our liquidity, access to capital, and borrowing costs could be adversely impacted by declines in our credit rating, our financial performance, and global credit market conditions, as well as a broad range of other factors. In addition, our liquidity, access to capital, and borrowing costs could also be negatively impacted by the outcome of any of the legal or regulatory proceedings to which we are a party. See Part I, Item 1A, Risk Factors of our 2025 Form 10-K, as supplemented and, to the extent inconsistent, superseded below in Part II, Item 1A, Risk Factors of this Form 10-Q, as well as "Note 13-Commitments and Contingencies" in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for additional discussion of these and other risks that our business faces.
|
2Q 2026 FORM 10-Q
|
||||||||||||||
PayPal Holdings Inc. published this content on July 28, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 28, 2026 at 21:04 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]