3 key takeaways from PayPal’s Q2 earnings report

PayPal Holdings Inc (NASDAQ: PYPL) reported better than expected profit for the fiscal second quarter on Wednesday. Shares of the company, however, tanked about 9% in after-hours trading on weak guidance for Q3 related to eBay, which is quickly becoming self-sufficient for payments.

Financial performance

PayPal said its net income in the second quarter printed at $1.18 billion that translates to $1.0 per share. In the same quarter last year, its net income stood at a higher $1.53 billion or $1.29 per share.

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On an adjusted basis, the online payments company earned $1.15 per share versus the year-ago figure of $1.07. PayPal generated $6.24 billion of revenue in the recent quarter – an increase from $5.26 billion last year.

According to FactSet, experts had forecast the company to post $6.27 billion of revenue and $1.12 of adjusted EPS.

Total payment volume

Total payment volume climbed to $311 billion from $221.7 billion in Q2 of the previous financial year and $295.2 billion expected. Net new active accounts grew by 11.4 million in the recent quarter. PayPal now has 408 million total active accounts.

The San Jose-based company valued total payment volume from Venmo at $58 billion in the second quarter, with the mobile payment service boasting 76 million active accounts.

Future guidance

For Q3, PayPal expects up to $6.25 billion of revenue, including a $465 million hit from eBay’s transition. Adjusted EPS is expected at $1.07. In comparison, analysts are calling for $6.44 billion of revenue and $1.14 of adjusted per-share earnings.

By the end of 2021, PayPal says its revenue and total payment volume will see an under 3% contribution from eBay. The eCommerce giant’s move is likely to be a headwind this year. Since eBay is shifting quickly, however, 2022 will not face a negative impact, as per CEO Dan Schulman.