The Public Ledger: PayPal Regroups (Again)

Hello, Fintech Friends!

They say the only constant in life is change. For PayPal, the last couple years have been filled with new beginnings (and one abrupt end).

Former CEO Alex Chriss (who took over for Dan Schulman in 2023) overhauled PayPal’s senior leadership and moved aggressively into new areas like stablecoins, agentic commerce, and advertising, but was ousted just over two years after promising to “shock the world” as PayPal’s core checkout experience atrophied and share loss accelerated.

Enter Enrique Lores, who replaced Chriss as PayPal’s CEO on March 1 (and has been a member of PayPal’s board for nearly five years). Last week, at Lores’ direction, PayPal announced it was reorganizing the company into three distinct segments: one centered around PayPal’s core checkout features; one placing Venmo at the center of an aspirational digital financial services brand; and one with PayPal’s processing assets, including Braintree, and other merchant value-added services.

Although some people believe the reorganization is designed to ease the sale, or separation, of parts of PayPal, a transaction (at least to my untrained eye) does not appear imminent, suggesting PayPal believes work may be needed before shareholder value can be maximized. That makes PayPal’s lack of a more developed strategic plan to share on the first quarter earnings call all the more baffling.

While Lores highlighted PayPal’s “strong foundation” and a “framework” for defining the company’s strategy, he suggested it will take a “few months” before a fully developed plan is implemented (and presumably shared). The lack of financial statements or detail to accompany the newly created segments was also disappointing as key questions about profitability (especially for Venmo and Braintree) must be answered before investors and analysts can begin to confidently quantify a fair value for the different parts of PayPal.

In terms of actual results, PayPal’s solid first quarter performance was overshadowed by weaker second quarter guidance and some cautious commentary. Specifically, branded online checkout TPV growth ticked up to 2% during the first quarter, but was running at the “low-end” of PayPal’s full-year expectation for “slightly positive to low single-digit growth” during the second quarter as PayPal highlighted weakness in the travel vertical and Europe. Finally, after growing 3% during the first quarter, PayPal expects transaction margin dollars excluding interest on customer balances to decline by a low single-digit percentage in the second quarter.

For PayPal, arresting share losses in branded online checkout is imperative to the company’s long-term health. Time is of the essence and multiple shifts (and delays) in strategy (implementation) do not help.

Bob Hammel

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