PayPal posts strong Q2 results, but the stock is falling anyway

Shares of PayPal fell 5% in premarket trading Tuesday, even after the payments company reported better-than-expected Q2 results and hiked its outlook for the year.

Adjusted earnings per share came in at $1.40, compared to $1.30 expected by analysts polled by FactSet and above the company’s previous guidance of $1.29 to $1.31. Revenue grew 5% to $8.29 billion, also topping estimates of $8.0 billion.

Total payment volumes beat expectations as well, growing 6% to $443.55 billion. Meanwhile, the company’s popular Venmo payment app posted its strongest growth rate since 2023, with revenue jumping 20% during the quarter.

Looking ahead, PayPal raised its full-year adjusted EPS guidance to a range of $5.15 to $5.30, up from its previously forecast range of $4.95 to $5.10.

If there’s a fly in the ointment, it’s that profitability on transactions alone was a touch light relative to expectations.

“The transaction margin miss (46.4% vs 46.7% consensus) may be misleading, as it was led by a stronger revenue beat, while margin dollar amount beat by about 2%,” Bloomberg Intelligence senior industry analyst Diksha Gera wrote. “Net new account growth, 10% value-added-services revenue beat and 20% Venmo revenue gains are positive surprises showing monetization efforts are gaining momentum.”

Yesterday, the payment processor said it would soon allow US businesses to accept payments in more than 100 cryptocurrencies, as part of a massive expansion into digital assets.

PayPal shares were down 9% year to date prior to the earnings report.