PayPal Profit Surges in Q1 2025-Is the New Strategy Finally Paying Off?

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•  29 Apr 2025
 

PayPal Holdings ($PYPL) delivered better-than-expected results for the first quarter of 2025 — a promising sign that its new strategic focus may be gaining traction. The company reported adjusted earnings per share of $1.33, beating analyst estimates by 15% (which stood at $1.16) and reflecting a 15% year-over-year improvement. Total revenue grew modestly by 1% to $7.8 billion, or 2% when adjusted for currency effects.

CEO Alex Chriss, who took the helm in 2023, said, “PayPal started the year strong, and our strategy is working.” He highlighted major advances in key focus areas: the branded checkout experience, app enhancements for Venmo, and the company’s omnichannel payment capabilities, which unify various payment methods into a seamless consumer experience.

Transaction Margins & User Metrics Improve
A key performance indicator, Transaction Margin Dollars — revenue minus transaction expenses and credit losses — rose 7% year-over-year to $3.7 billion, outperforming estimates of $3.62 billion. This figure is crucial in evaluating PayPal's operational efficiency and profitability.

Monthly Active Accounts increased 2% to 224 million.
Transactions per Account rose by 4%, excluding PayPal’s legacy payment processing.

Total Payment Volume (TPV) climbed 3% to $417.2 billion, with 1.5 million new accounts added in the quarter.

In a call with investors, Chriss elaborated on a strategic shift: PayPal deliberately moved away from low-margin volume within its Braintree platform, instead doubling down on high-value clients. One major merchant relationship was transitioned from breakeven to profitability, improving transaction margins by nearly 20 percentage points in a year.

“These are the types of conversations that create value for both our customers and for PayPal,” Chriss emphasized, pointing to the impact of PayPal’s value-added services.

Operating expenses dropped year-over-year to $6.26 billion, although still above the $6.06 billion forecast. Chriss noted that PayPal’s checkout performance remains industry-leading across desktop and mobile, and that the growing adoption of Venmo’s debit card continues to serve as a significant growth driver.

Despite the strong results, management maintained its full-year guidance, citing ongoing global macroeconomic uncertainty.
Adjusted EPS between $4.95 and $5.10 (6%–10% YoY growth)
Transaction margin dollars of $15.2 to $15.4 billion (4%–5% growth)

For Q2 2025, PayPal anticipates EPS of $1.29 to $1.31, again well above analyst expectations of $1.21. However, some Wall Street analysts remain cautious. Morgan Stanley, for example, maintained a bearish stance, pointing to competitive pressure from Apple Pay and Shopify, as well as potential impacts from rising tariffs.

Can PayPal Maintain Its Momentum?
This marks the fifth consecutive quarter of profit growth under the leadership of CEO Alex Chriss — a trend that supports the company’s strategic overhaul. However, with shares down 23% year-to-date and 2% over the past 12 months, PayPal still faces skepticism from the market. Investors will be watching closely to see if it can sustain profitability while driving meaningful top-line growth in an increasingly competitive fintech environment.