Editor’s Note
This analysis highlights a notable shift in PayPal’s trajectory, acknowledging improved financial metrics and strategic clarity while recognizing the persistent challenges of a dynamic payments sector.
I’ll admit that historically I’ve been more cautious on PayPal because of the tough competitive landscape and how fast the payments industry changes. But over time, the company has proven me wrong in a few areas. Gross margins have started to improve again, recent quarters have been solid, and management has begun to paint a clearer picture of its long-term strategy. Looking back at the past few earnings calls, I noticed PayPal has consistently beaten EPS expectations and generally outperformed on revenue too. That tells me the business has been executing well through 2024 and 2025.
That said, there are still concerns. Revenue growth has slowed, with overall TPV only showing modest gains. While Venmo has been a bright spot, competition from players like Stripe has been tough, as they offer aggressive pricing and similar features. On top of that, PayPal’s consumer user growth has hit a ceiling, and that has limited expansion in higher-margin branded checkout. I think management understands this though, and their new strategic focus, especially around PayPal World, could be the shift needed to reignite growth.
What makes me optimistic right now is PayPal’s launch of PayPal World. This new initiative, introduced in Q2-FY25, could give PayPal a strong mid-to-long-term growth runway. The idea is to create a global wallet interoperability platform that connects wallets like PayPal, Venmo, Mercado Pago, Tenpay Global, and UPI. For years, one of the biggest issues in global commerce has been fragmentation between wallets, which makes it harder for both consumers and merchants. PayPal World directly addresses that pain point.
By linking these wallets together, PayPal could dramatically expand beyond its current 438 million active accounts and potentially reach over 2 billion users. What excites me most is that merchants won’t need to juggle multiple integrations; PayPal World will make it seamless for them, while driving higher TPV. Management has said demand to join this platform is already strong, with wallets from around the world showing interest. The platform is expected to go live in late 2025, and I think it could be a real catalyst for the stock as more details come out.
PayPal has already been showing it can grow profitably, with branded TPV up 8% and Venmo TPV jumping 12%. PayPal World could supercharge these numbers by opening the door to entirely new markets with high wallet adoption. This isn’t just a cosmetic update either. Management highlighted that its new checkout system loads faster, converts better, and passes through more transactions.
And importantly, these gains would come without merchants having to pay more or change systems, making adoption even easier.
I think what the market is missing is that none of this potential topline upside has really been baked into consensus for FY26 and FY27. That gives me confidence there’s still a valuation gap here for patient investors.
One common pushback I hear is PayPal’s declining take rate, which dropped 0.04%-points to 1.68% in Q2-FY25. Personally, I see this as more of a strategic decision than a problem. The company is deliberately accepting lower take rates to win volume and market share against the likes of Apple Pay and Google Pay. To me, that’s the right trade-off in a competitive industry like this.
The lower take rates are being driven by a mix of things: hedging, a bigger share of lower-margin businesses like Braintree, and pressure on pricing. But these moves also make PayPal more attractive to merchants, especially small businesses in cost-sensitive markets. For example, expanding PayPal Complete Payments (PPCP) to Singapore and partnering with Wix shows they’re pushing hard into new merchant segments. While margins per transaction might dip, total TPV is rising; up 6%; and the company is making up for it with value-added services like BNPL and credit, which rose 16% YoY to $847 million.