PayPal PYPL is set to report its second-quarter 2026 results on July 28, before the opening bell.
This digital payment company expected currency-neutral revenue growth in the low single digits for the to-be-reported quarter. Non-GAAP earnings per share (EPS) are expected to have declined in the high-single digits or approximately -9%.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $8.51 billion, indicating an increase of 2.68% from the year-ago quarter’s reported figure.
The consensus mark for earnings is pinned at $1.28 per share and remains unchanged over the past two months. It indicates a decline of 8.57% from the figure reported in the year-ago quarter.
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The company’s EPS surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once, with the average surprise being 5.29%. The graph below depicts this surprising history:
PayPal Holdings, Inc. Price and EPS Surprise
PayPal Holdings, Inc. price-eps-surprise | PayPal Holdings, Inc. Quote
Q2 Earnings Whispers for PYPL
However, our proprietary model does not conclusively predict an earnings beat for PayPal this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
PayPal has an Earnings ESP of -0.02% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Likely to Shape PayPal’s Q2 Results
PayPal is evolving into a comprehensive commerce platform, moving far beyond payments by leveraging advanced data-powered tools to accelerate merchant expansion and foster customer loyalty. PYPL’s second-quarter results are expected to benefit from its scale, diversification and balance sheet strength. During the second quarter, the company continued to make progress on its transformation efforts and is likely to have gained from consumers and merchants expanding usage of PayPal.
PYPL is expected to have benefited from an improving Total Payment Volume (“TPV”). The metric is likely to have gained from the company’s strong relationship with merchants and consumers.
Despite strong fundamentals, diversified offerings and strategic moves, PayPal is likely to have faced competitive pressure from other digital payment companies. Broader macroeconomic pressures and uncertainty are also likely to have affected its second-quarter results.
The nature of business makes PayPal vulnerable to foreign exchange fluctuations. A significant part of the company’s operations is international. Thus, the appreciation or depreciation of the U.S. dollar versus foreign currencies could have impacted the company’s to-be-reported results.
Q2 Projections for PYPL
The Zacks Consensus Estimate for PayPal’s transaction revenues is pegged at $7.66 billion, which suggests a 3% increase from the year-ago quarter.
PYPL is also poised to have benefited from its value-added services. Its consensus mark for revenues from other value-added services is pegged at $857.8 million for the second quarter, up 1.3% from the year-ago period.
The consensus mark for TPV is pegged at $474.515 billion, indicating 7% year-over-year growth. PayPal’s active accounts are likely to have reached 439.9 million, which denotes an increase from the year-ago value of 438 million.
The consensus mark for the number of payment transactions stands at 6.537 billion, which is above the company’s reported figure of 6.226 billion in the same quarter last year.
However, the consensus mark for the transaction margin is pegged at 43.83%, down from the year-ago figure of 46.40%.
PayPal anticipated its second-quarter transaction margin (TM) dollars to decline in the low-single digits, excluding interest on customer balances. The company expected its non-transaction operating expenses to grow by a mid-single-digit percentage in the second quarter.
PYPL’s Price Performance & Valuation
PayPal shares have gained 32% in the past month. The Zacks Financial Transaction Services has increased 7.8%, while the S&P 500 has remained at 0.0% for the same period. Rivals like Visa Inc. V and Mastercard Incorporated MA continue to expand their offerings, challenging PayPal’s dominance in digital payments. Mastercard shares have increased 9.5%, while Visa shares have gained 7.2% over the same timeframe.
Compared to its peers, PayPal’s performance has been notably stronger, mainly due to a takeover speculation. PayPal is evaluating a reported $53-billion takeover proposal from Stripe and Advent International, according to a Reuters report. However, its board reportedly believes the offer undervalues the company, leaving the door open for further negotiations or competing bids.
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From a valuation standpoint, even after the stock’s recent rally, PayPal shares are trading cheaply, as suggested by the Value Score of A. In terms of forward 12-month P/E, PYPL stock is trading at 10.06X compared with the Zacks Financial Transaction Services industry’s 18.12X.
Shares of Visa and Mastercard are currently trading at P/E ratios of 24.21X and 24.84X, respectively.
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PYPL: Buy, Sell or Hold?
PayPal is evolving beyond a basic payment processor into an integrated commerce platform. By consolidating its services into a single ecosystem, the company is strengthening connections between consumers and merchants. By focusing on smoother user experiences, deeper merchant partnerships and growing internationally, PayPal is laying the groundwork for durable long-term growth. However, competition in digital payments, macroeconomic uncertainty and foreign-exchange volatility pose challenges for the to-be-reported quarter.
Given its strategic advantages and the existing headwinds, the stock is best treated as a hold. For long-term investors its important to wait before adding to positions due to short-term volatility.
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This article originally published on Zacks Investment Research (zacks.com).