PayPal revenue exceeds analyst expectations, boosted by AI payments | PaymentsSource

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PayPal’s focus on artificial intelligence-powered payment technology helped boost third-quarter profit and led the payments company to raise its full-year guidance.

For the quarter ended September 30, PayPal reported net revenue of $7.85 billion, up 6% from last year’s third quarter and just below analyst forecasts of $7.88 billion, according to FactSet.

Earnings per share rose to 99 cents from 93 cents a year ago, although net income fell from $1.02 billion to $1.01 billion a year ago.

The payments company also reported adjusted earnings of $1.20 per share, up 22% from the prior year and beating Wall Street’s call for $1.07 per share, according to FactSet.

For the full year, PayPal tightened its earnings per share forecast to $3.92-$3.96 from $3.88-$3.98 in July. It raised adjusted earnings expectations for the year to high mid-teens growth, from low to mid-teens growth previously.

For the fourth quarter, PayPal expects low single-digit revenue growth due to the impact of its price-value strategy and prioritization of profitable growth. The company raised its earnings per share forecast to $1.03-$1.07, up from $1.05 previously.

“We are making solid progress in our transformation as we bring new innovations to market, establish key partnerships with leading commercial players, and drive awareness and engagement through new marketing campaigns,” PayPal CEO Alex Chriss said in the earnings release.

PayPal’s shares traded around $86 before reporting profits, up from around $36 in January, as investors parse performance for signs the company is turning a corner after a stock slump in 2022 and 2023.

PayPal’s recovery plan has had to refocus on its traditional payments business, including merchant and consumer services, and on improvements to its Venmo peer-to-peer transfer app.

PayPal showed it Fastane checkout product as part of its strategy. Fastlane lets consumers pay with a one-time access code, designed to simplify the payment experience.

But some analysts think PayPal, which faces competition from Stripe, Block and other digital payment systems, will be challenged to deliver robust growth next year.

Bernstein downgraded PayPal’s rating to market perform from outperform in October, saying the potential for substantial stock gains appears limited.

In a research note issued ahead of PayPal’s earnings, Jeffries said PayPal shares rose thanks to a contribution from Fastlane that is “unlikely to have much impact” over the next twelve months. And a research note ahead of William Blair’s earnings release states: “From here on out, we believe the road ahead gets tougher as PayPal looks to drive brand volume growth and Venmo monetization, efforts we believe will be challenged by its strong wallet -competition and consumer inertia.”

Fastlane, which does not require users to have a PayPal account, uses consumers’ past payments to recommend a payment option, giving PayPal the ability to act as a payment method. payment facilitator. Payment facilitation has become a key front in the competition among payment companies, which use the feature to support multiple payment methods for merchants, reducing processing costs and time.

BigCommerce, one of Fastlane’s first customers, said e-commerce checkout conversion increased from about 45% to 70% after implementing Fastlane.

After BigCommerce, PayPal quickly gathered partners Expand Fastlane. A partnership with checkout technology company Bold Commerce will add Checkout for retailers using Adobe Commerce’s Magento e-commerce platform.

It’s part of a series of deals PayPal is making to grow its streamlined payments product, which serves as an alternative to online payment systems from card networks and other fintechs. A more recent collaboration with payment processor Global payments Fastlane’s addressable market has expanded to include Global Payments merchants in the US, with plans to expand internationally. Fastlane’s partners also include Netherlands-based payments technology company and processor Adyen and US-based banking technology vendor Fiserv. Both partnerships potentially expand PayPal’s Fastlane to thousands of merchants in multiple countries.

Among other publicly traded payments companies, Visa reports earnings after market close today, Mastercard reports earnings on Thursday before the market opens, and Block reports earnings on November 7.