PayPal Holdings, Inc.
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ITEM 1. BUSINESS
OVERVIEW
At PayPal Holdings, Inc., our mission is to revolutionize commerce globally. Our products are designed to enable digital payments and simplify commerce experiences for consumers and merchants to make selling, shopping, and sending and receiving money simple, personalized, and secure, whether online or in-person.
We operate a global, two-sided network at scale that connects consumers and merchants with 439 million active accounts across approximately 200 markets as of December 31, 2025.
•Consumers: We provide consumers with digital wallets and other solutions that allow them to shop and pay with PayPal and Venmo—both online and in-person—manage their finances (including saving and buying and selling cryptocurrencies), and send and receive money between friends and family. When shopping, we offer consumers flexibility in how they pay, which may include a bank account, a PayPal or Venmo account balance, PayPal-branded consumer credit and debit products, other credit and debit cards, certain cryptocurrencies, or other stored value products such as gift cards, and eligible rewards.
•Merchants: We help merchants connect with customers, increase conversion rates and sales, and grow their businesses in the markets where our services are available. We provide large enterprises and small and medium businesses with online branded checkout solutions, including PayPal and Venmo; online unbranded payments processing; PayPal buy now, pay later (“BNPL”) solutions; in-person point of sale solutions; business financing; payouts capabilities; and risk tools.
We earn revenues primarily by charging fees for completing payment transactions for our customers and other payment-related services, which are typically based on the volume of activity processed on our payments platform. We also generate revenue from customers for currency conversion, for instant transfers from their PayPal or Venmo account to their bank account or debit card, and to facilitate the purchase and sale of cryptocurrencies; however, we generally do not charge customers to fund or draw from their accounts. We also earn revenue by providing other value-added services, which primarily comprise revenue earned through partnerships, interest and fees from our consumer and merchant credit products, interest earned on certain assets underlying customer balances, referral fees, subscription fees, and gateway services.
Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the Company,” or “PayPal” refer to PayPal Holdings, Inc. and its consolidated subsidiaries.
FY 2025 FORM 10-K | 4 | ||||||||||
KEY PERFORMANCE METRICS
In 2025, we processed $1.79 trillion of total payment volume (“TPV”), an increase of 7% compared to 2024, and 25.4 billion payment transactions, a decrease of 4% compared to 2024. As of December 31, 2025, we had 439 million active accounts, an increase of 1% compared to December 31, 2024.
We measure the scale of our platform and the relevance of our products and services to our customers through certain metrics, including TPV, payment transactions, and active accounts:
TPV is the value of payments, net of payment reversals, successfully completed on our payments platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.
Number of payment transactions is the total number of payments, net of payment reversals, successfully completed on our payments platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.
An active account is an account registered directly with PayPal or a platform access partner that has completed a transaction on our platform, not including gateway-exclusive transactions, within the past 12 months. A platform access partner is a third party whose customers are provided access to PayPal’s platform or services through such third-party’s login credentials, including individuals and entities that utilize Hyperwallet’s payout capabilities. A user may register on our platform to access different products and may register more than one account to access a product. Accordingly, a user may have more than one active account. The number of active accounts provides management with additional perspective on the overall scale of our platform, but may not have a direct relationship to our operating results.
OUR STRENGTHS
Our business is built on a strong foundation designed to drive profitable growth and differentiate us from our competitors. We believe that our competitive strengths include the following:
•Two-sided platform—we facilitate online and offline transactions for millions of consumers and merchants. Our relationship on both sides of a transaction enables us to utilize data to innovate and offer unique product experiences designed to remove friction, drive sales, and enhance shopping experiences.
•Trusted brands—we have built well-recognized and trusted brands, including PayPal and Venmo. Our communications and marketing efforts across multiple geographies and demographic groups play an important role in building brand visibility, usage, and overall preference among customers.
•Platform agnostic—we are technology and platform agnostic. This approach allows our merchants to offer and use a variety of our branded and unbranded payment processing solutions and business financing products, alongside other tools. We give consumers flexibility to make and receive payments using a wide variety of funding options and digital wallet solutions, including their bank account, PayPal and Venmo account balance, BNPL, certain cryptocurrencies, and debit and credit card options.
•Scale—our global scale helps us to drive organic growth. As of December 31, 2025, we had 439 million active accounts across approximately 200 markets1 around the world.
•Customer-back innovation—we are orienting and transforming our culture towards innovating in ways that benefit our customers and drive profitable growth. We have released numerous products, services, and improvements to our platform in 2025.
•Risk and compliance management—our enterprise risk and compliance management program is designed to help keep customer information secure and to help ensure we process legitimate transactions around the world, while identifying and minimizing illegal, high-risk, or fraudulent transactions.
•Regulatory licenses—we believe that our regulatory licenses, which enable us to operate in markets around the world, are a distinct advantage and help support business growth.
1A market is a geographic area or political jurisdiction, such as a country, territory, or protectorate, in which we offer some or all of our products and services. A country, territory, or protectorate is identified by a distinct set of laws and regulations.
FY 2025 FORM 10-K | 5 | ||||||||||
CONSUMER AND MERCHANT PAYMENT SOLUTIONS
Consumer solutions
We help consumers transact securely with merchants, manage their finances, and send to and receive money from friends and family around the globe. Our goal is to create the simplest checkout experience possible for consumers online or in-person including mobile. We drive increased consumer engagement by providing them with a wide range of services to manage their finances and enhance their ability to shop online and offline. Our PayPal and Venmo branded checkout experiences allow consumers to complete purchases in just a few steps without having to enter payment and address information. We also focus on simplifying and personalizing shopping experiences for our consumers by offering tools for product discovery, price tracking, saving through deals and offers, convenient package tracking, and earning and redeeming of shopping rewards. The PayPal- and Venmo-branded debit and credit cards, as well as our contactless mobile wallet using near-field communication (“NFC”) capabilities, give consumers the ability to transact in-person through our platform and earn incentives, including cash-back rewards.
We also offer consumers person-to-person (“P2P”) payment solutions for domestic and international transfers through our PayPal, Venmo, and Xoom products and services. Our Venmo digital wallet in the United States (“U.S.”) is a leading mobile application used to move money between friends and family. Our Xoom international money transfer service enables our customers to send money to bank accounts, mobile wallets, and cash pick-up destinations around the world in a secure, fast, and cost-effective way. P2P is an important source of customer engagement and also serves as a customer acquisition channel that facilitates organic growth by enabling potential users to establish active accounts with PayPal or Venmo at the time they make or receive a P2P payment.
We offer credit products to eligible consumers in certain markets as a funding source at checkout. Our consumer credit offerings include our BNPL products in the U.S., Germany, France, United Kingdom (“U.K.”), and Australia, among other markets, and in Japan through our Paidy brand. A key attribute of our short-term BNPL products is the absence of interest or consumer late fees for missed payments in most of the geographies where we offer them. Further, we offer interest-bearing installment products for consumers in the U.S. (issued by an independent chartered financial institution) and in Germany, among other markets. In the U.S., consumers may apply for the PayPal- and Venmo-branded consumer credit cards, including the PayPal Credit revolving consumer credit product, which are issued through a partnership with an independent chartered financial institution. We offer a PayPal-issued PayPal Credit product in the U.K. We believe that our consumer credit products help us to increase engagement with consumers and merchants on our two-sided network.
We generate revenue from consumers from: foreign currency conversions, instant transfers from their PayPal or Venmo account to their bank account or debit card, and facilitating the purchase and sale of cryptocurrencies; interest, fees, or other revenue from our credit products; and other miscellaneous fees. We also earn revenue from interest earned on certain assets underlying customer balances.
Merchant solutions
Merchants use our solutions to increase conversion rates and grow and manage their business. We employ a technology and platform agnostic approach intended to enable merchants of all sizes to utilize our various products. Our diversified suite of products and services is tailored to meet the needs of merchants regardless of their size or business complexity. We offer a seamless omnichannel solution that helps merchants manage and grow their business.
Our PayPal and Venmo branded checkout experiences allow customers to complete purchases in just a few steps without having to enter payment and address information. These seamless experiences reduce cart abandonment and drive higher conversion rates for merchants. Our BNPL solutions are embedded into our branded checkout experiences, which can help increase consumer spend and enable merchants to grow sales.
Our unbranded payments processing solutions allow merchants to quickly and easily provide digital checkout online with a variety of popular ways to pay, including debit and credit cards, digital wallets, BNPL, certain cryptocurrencies, and local payment methods.
We offer a suite of value added services, including payouts, payments orchestration, and fraud prevention and risk management solutions that help reduce merchant losses through our proprietary protection programs. We also offer omnichannel solutions that allow merchants to make sales in person using our PayPal Point of Sale app, card reader, or point of sale systems.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans, or intentions (such as those relating to future business, future results of operations or financial condition, new or planned features or services, mergers or acquisitions, or management strategies). These forward-looking statements can be identified by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “continue,” “strategy,” “future,” “opportunity,” “plan,” “project,” “forecast,” “outlook,” and other similar expressions. These forward-looking statements involve risks and uncertainties that could cause our actual results and financial condition to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”), as supplemented in the risk factors set forth below in Part II, Item 1A, Risk Factors, of this Form 10-Q, as well as in our unaudited condensed consolidated financial statements, related notes, and the other information appearing in this report and our other filings with the Securities and Exchange Commission. We do not intend, and undertake no obligation except as required by law, to update any of our forward-looking statements after the date of this report to reflect actual results, new information, or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. You should read the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in conjunction with the unaudited condensed consolidated financial statements and the related notes that appear in this report. Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the Company,” and “PayPal” refer to PayPal Holdings, Inc. and its consolidated subsidiaries.
BUSINESS ENVIRONMENT
THE COMPANY
At PayPal, our mission is to revolutionize commerce globally. Our products are designed to enable digital payments and simplify commerce experiences for consumers and merchants to make selling, shopping, and sending and receiving money simple, personalized, and secure, whether online or in-person. Our two-sided platform serves millions of consumers and merchants worldwide.
Regulatory environment
We operate globally and in a rapidly evolving regulatory environment characterized by a heightened focus by regulators globally on all aspects of the payments industry, including anti-money laundering, countering terrorist financing, privacy, cybersecurity, and consumer protection. The laws and regulations applicable to us, including those enacted prior to the advent of digital payments, continue to evolve through legislative and regulatory action and judicial interpretation. New or changing laws and regulations, including changes to their interpretation and implementation, as well as increased penalties and enforcement actions related to non-compliance, could have a material adverse impact on our business, results of operations, and financial condition. We monitor these areas closely and are focused on designing compliant solutions for our customers.
Cybersecurity and information security
Cybersecurity and information security risks for global payments and technology companies like us have increased significantly in recent years. Although we have developed systems and processes designed to protect the data we manage, prevent data loss and other security incidents, and enable us to effectively respond to known and potential risks, and expect to continue to expend significant resources to bolster these protections, we have experienced and expect to continue to experience cybersecurity incidents and remain subject to these risks. There can be no assurance that our security measures will provide sufficient protection or security to prevent breaches or attacks. For additional information regarding our cybersecurity and information security risks, see Part I, Item 1A, Risk Factors in our 2025 Form 10-K, as supplemented and, to the extent inconsistent, superseded below (if applicable) in Part II, Item 1A, Risk Factors of this Form 10-Q.
1Q 2026 FORM 10-Q | 44 | ||||||||||
Recent developments
On April 29, 2026, the Company announced a strategic reorganization of its business and executive leadership team intended to accelerate execution of its long-term growth priorities, simplify its operating structure, streamline decision-making, and drive innovation. This strategic reorganization and business simplification program, which will focus on realigning our operating structure and accelerating the adoption of Artificial Intelligence and automation across the company, is expected to deliver at least $1.5 billion in gross annualized run-rate savings over the next two to three years. The Company expects to provide additional details regarding the structure of the program and anticipated phasing of savings realization in future periods as the program is developed and implemented.
MACROECONOMIC ENVIRONMENT
A deterioration in macroeconomic conditions resulting from uncertainties and effects from tariffs, inflation, international conflicts, and interest rates could continue to increase the risk of lower consumer spending, merchant and consumer bankruptcy, insolvency, business failure, higher credit losses, foreign exchange fluctuations, or other business interruption, which may adversely impact our business. We are unable to reasonably estimate the total potential impact on our financial results that may ultimately result from such changes in the macroeconomic environment.
OVERVIEW OF RESULTS OF OPERATIONS
The following table provides a summary of our condensed consolidated financial results for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | Increase/(Decrease) | ||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||||||||||||||||||
| (In millions, except percentages and per share data) | |||||||||||||||||||||||||||||||||||||||
| Net revenues | $ | 8,353 | $ | 7,791 | $ | 562 | 7 | % | |||||||||||||||||||||||||||||||
| Operating expenses | 6,865 | 6,261 | 604 | 10 | % | ||||||||||||||||||||||||||||||||||
| Operating income | 1,488 | 1,530 | (42) | (3) | % | ||||||||||||||||||||||||||||||||||
| Operating margin | 18 | % | 20 | % | ** | ** | |||||||||||||||||||||||||||||||||
| Other income (expense), net | (95) | 73 | (168) | (230) | % | ||||||||||||||||||||||||||||||||||
| Income tax expense | 280 | 316 | (36) | (11) | % | ||||||||||||||||||||||||||||||||||
| Effective tax rate | 20 | % | 20 | % | ** | ** | |||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 1,113 | $ | 1,287 | $ | (174) | (14) | % | |||||||||||||||||||||||||||||||
| Net income (loss) per diluted share | $ | 1.21 | $ | 1.29 | $ | (0.08) | (6) | % | |||||||||||||||||||||||||||||||
Net cash provided by operating activities | $ | 1,134 | $ | 1,160 | $ | (26) | (2) | % | |||||||||||||||||||||||||||||||
All amounts in tables are rounded to the nearest million, except as otherwise noted. As a result, certain amounts may not recalculate using the rounded amounts provided.
** Not meaningful.
THREE MONTHS ENDED MARCH 31, 2026 AND 2025
The increase in net revenues was driven primarily by growth in total payment volume (“TPV”) of 11% and growth in revenue earned from an independent chartered financial institution (“partner institution”), partially offset by the unfavorable impact of hedging activities.
The increase in operating expenses was due primarily to an increase in transaction expense.
Our operating margin declined, reflecting the unfavorable impact of a higher transaction expense growth rate.
The decrease in net income was due to a decrease in operating income and a decrease in other income (expense), net, which was primarily attributable to net losses and impairments on strategic investments in the current period compared to net gains in the prior period, partially offset by a decrease in income tax expense driven by a lower level of pre-tax income and tax effects of stock-based compensation.
1Q 2026 FORM 10-Q | 45 | ||||||||||
IMPACT OF FOREIGN EXCHANGE RATES
We have significant international operations that are denominated in foreign currencies, primarily the British pound, Euro, Australian dollar, Canadian dollar, and Indian rupee, subjecting us to foreign exchange risk which may adversely impact our financial results. The strengthening or weakening of the United States (“U.S.”) dollar versus foreign currencies in which we conduct our international operations impacts the translation of our net revenues and expenses generated in these foreign currencies into the U.S. dollar. We generated approximately 42% and 43% of our net revenues from customers domiciled outside of the U.S. in the three months ended March 31, 2026 and 2025, respectively. Because we generate substantial net revenues internationally, we are subject to the risks of doing business outside of the U.S. See Part I, Item 1A, Risk Factors in our 2025 Form 10-K, as supplemented and, to the extent inconsistent, superseded (if applicable) below in Part II, Item 1A, Risk Factors of this Form 10-Q.
We calculate the year-over-year impact of foreign exchange rate movements on our business using prior period foreign exchange rates applied to current period transactional currency amounts. While changes in foreign exchange rates affect our reported results, we have a foreign currency exposure management program in which we use foreign exchange contracts, designated as cash flow hedges, intended to reduce the impact on earnings from foreign exchange rate movements. Gains and losses from these foreign exchange contracts are recognized as a component of transaction revenues or operating expenses (as applicable) in the same period the forecasted transactions impact earnings.
In the three months ended March 31, 2026, year-over-year foreign exchange rate movements relative to the U.S. dollar had the following impact on our reported results:
| Three Months Ended March 31, 2026 | |||||||||
| (In millions) | |||||||||
Favorable impact to net revenues (exclusive of hedging impact) | $ | 257 | |||||||
| Hedging impact | (86) | ||||||||
Favorable impact to net revenues | 171 | ||||||||
| Unfavorable impact to operating expenses (exclusive of hedging impact) | (137) | ||||||||
| Hedging impact | (2) | ||||||||
| Unfavorable impact to operating expenses | (139) | ||||||||
| Net favorable impact to operating income | $ | 32 | |||||||
KEY METRICS AND FINANCIAL RESULTS
KEY METRICS
TPV, number of payment transactions, active accounts, and number of payment transactions per active account are key non-financial performance metrics (“key metrics”) that management uses to measure the scale of our platform and the relevance of our products and services to our customers, and are defined as follows:
•TPV is the value of payments, net of payment reversals, successfully completed on our payments platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.
•Number of payment transactions is the total number of payments, net of payment reversals, successfully completed on our payments platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.
•An active account is an account registered directly with PayPal or a platform access partner that has completed a transaction on our platform, not including gateway-exclusive transactions, within the past 12 months. A platform access partner is a third party whose customers are provided access to PayPal’s platform or services through such third-party’s login credentials, including individuals and entities that utilize Hyperwallet’s payout capabilities. A user may register on our platform to access different products and may register more than one account to access a product. Accordingly, a user may have more than one active account. The number of active accounts provides management with additional perspective on the overall scale of our platform, but may not have a direct relationship to our operating results.
1Q 2026 FORM 10-Q | 46 | ||||||||||
•Number of payment transactions per active account reflects the total number of payment transactions within the previous 12-month period, divided by active accounts at the end of the period. The number of payment transactions per active account provides management with insight into the average number of times an account engages in payments activity on our payments platform in a given period. The number of times a consumer account or a merchant account transacts on our platform may vary significantly from the average number of payment transactions per active account.
As our transaction revenue growth is typically correlated with TPV growth and the number of payment transactions completed on our payments platform, management uses these metrics to gain insights into the scale and strength of our payments platform, the engagement level of our customers, and underlying activity and trends which may be indicators of current and future performance. We present these key metrics to enhance investors’ evaluation of the performance of our business and operating results.
Our key metrics are calculated using internal company data based on the activity we measure on our payments platform and compiled from multiple systems, including systems that are internally developed or acquired through business combinations. While the measurement of our key metrics is based on what we believe to be reasonable methodologies and estimates, there are inherent challenges and limitations in measuring our key metrics globally at scale. The methodologies used to calculate our key metrics require significant judgment. We regularly review our processes for calculating these key metrics, and from time to time we may make adjustments to improve the accuracy or relevance of our metrics. For example, we continuously apply models, processes, and practices designed to detect and prevent fraudulent account creation on our platforms, and work to improve and enhance those capabilities. When we detect a significant volume of illegitimate activity, we generally remove the activity identified from our key metrics. Although such adjustments may impact key metrics reported in prior periods, we generally do not update previously reported key metrics to reflect these subsequent adjustments unless the retrospective impact of process improvements or enhancements is determined by management to be material.
NET REVENUES
Our revenues are classified into the following two categories:
•Transaction revenues: Net transaction fees charged to merchants and consumers on a transaction basis based on the TPV completed on our payments platform. Growth in TPV is directly impacted by the number of payment transactions that we enable on our payments platform. We generate additional revenue from merchants and consumers: on transactions where we perform currency conversion, when we enable cross-border transactions (i.e., transactions where the merchant and consumer are in different countries), when we facilitate the instant transfer of funds for our customers from their PayPal or Venmo account to their bank account or debit card, when we facilitate the purchase and sale of cryptocurrencies, as contractual compensation from sellers that violate our contractual terms (for example, through fraud or counterfeiting), and other miscellaneous fees.
•Revenues from other value added services: Net revenues derived primarily from revenue earned through partnerships, referral fees, subscription fees, gateway fees, and other services we provide to our consumers and merchants. We also earn revenues from interest and fees earned on our portfolio of loans receivable, and interest earned on certain assets underlying customer balances.
Net revenue analysis
The components of our net revenues for the three months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, | Increase/(Decrease) | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||||||||||||||
| Transaction revenues | $ | 7,501 | $ | 7,016 | $ | 485 | 7 | % | |||||||||||||||||||||||||||
| Revenues from other value added services | 852 | 775 | 77 | 10 | % | ||||||||||||||||||||||||||||||
| Total revenues | $ | 8,353 | $ | 7,791 | $ | 562 | 7 | % | |||||||||||||||||||||||||||
1Q 2026 FORM 10-Q | 47 | ||||||||||
Transaction revenues
The increase in transaction revenues for the three months ended March 31, 2026 compared to the same period of the prior year was driven primarily by an increase of approximately $410 million, $140 million, and $70 million in revenue from Braintree, PayPal, and Venmo products and services, respectively, which was largely driven by growth in TPV and number of payment transactions, partially offset by approximately $120 million of unfavorable impact from hedging activities resulting from losses in the current period compared to gains in the prior period.
The following table provides a summary of key metrics:
| Three Months Ended March 31, | Percent Increase/(Decrease) | ||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
| (In millions, except percentages and number of payment transactions per active account) | |||||||||||||||||||||||||||||
Active accounts(1) | 439 | 436 | 1 | % | |||||||||||||||||||||||||
| Number of payment transactions | 6,475 | 6,045 | 7 | % | |||||||||||||||||||||||||
| Number of payment transactions per active account | 58.7 | 59.4 | (1) | % | |||||||||||||||||||||||||
| TPV | $ | 463,955 | $ | 417,208 | 11 | % | |||||||||||||||||||||||
| Percent of TPV generated outside of the U.S. | 35 | % | 35 | % | ** | ||||||||||||||||||||||||
(1) Reflects active accounts at the end of the applicable period.
** Not meaningful.
Transaction revenues growth was lower than the growth in TPV in the three months ended March 31, 2026 compared to the same period in the prior year due primarily to changes in product mix and unfavorable impact from foreign exchange hedging activities.
Revenues from other value added services
The increase in revenues from other value added services for the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to an increase of approximately $90 million from revenue earned from a partner institution as well as approximately $40 million in interest and fee revenue earned from our loans receivable portfolios. Revenue from the partner institution is earned primarily through a revenue share arrangement based on the economic performance of the program related to our U.S. revolving consumer credit product and PayPal and Venmo branded credit cards, when such performance exceeds a minimum threshold. These factors favorably impacting revenues from other value added services were partially offset by lower revenues from interest earned on certain assets underlying customer account balances resulting from lower interest rates.
1Q 2026 FORM 10-Q | 48 | ||||||||||
OPERATING EXPENSES
The following table summarizes our operating expenses and related metrics we use to assess the trends in each:
| Three Months Ended March 31, | Increase/(Decrease) | ||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||||||||||||||||||
| Transaction expense | $ | 4,165 | $ | 3,704 | $ | 461 | 12 | % | |||||||||||||||||||||||||||||||
| Transaction and credit losses | 378 | 371 | 7 | 2 | % | ||||||||||||||||||||||||||||||||||
| Customer support and operations | 446 | 398 | 48 | 12 | % | ||||||||||||||||||||||||||||||||||
| Sales and marketing | 518 | 488 | 30 | 6 | % | ||||||||||||||||||||||||||||||||||
| Technology and development | 793 | 731 | 62 | 8 | % | ||||||||||||||||||||||||||||||||||
| General and administrative | 491 | 503 | (12) | (2) | % | ||||||||||||||||||||||||||||||||||
| Restructuring and other | 74 | 66 | 8 | 12 | % | ||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 6,865 | $ | 6,261 | $ | 604 | 10 | % | |||||||||||||||||||||||||||||||
Transaction expense rate(1) | 0.90 | % | 0.89 | % | ** | ** | |||||||||||||||||||||||||||||||||
Transaction and credit loss rate(2) | 0.08 | % | 0.09 | % | ** | ** | |||||||||||||||||||||||||||||||||
(1) Transaction expense rate is calculated by dividing transaction expense by TPV.
(2) Transaction and credit loss rate is calculated by dividing transaction and credit losses by TPV.
** Not meaningful.
Transaction expense
The increase in transaction expense for the three months ended March 31, 2026 compared to the same period in the prior year was primarily attributable to the increase in TPV of 11% and a higher proportion of TPV from our Braintree products and services, which generally have higher expense rates than our other products and services. The increase in transaction expense rate for the three months ended March 31, 2026 compared to the same period in the prior year was primarily attributable to the unfavorable changes in product mix, partially offset by the favorable impact of changes in merchant mix.
Our transaction expense rate is impacted by changes in product mix, merchant mix, regional mix, funding mix, and fees paid to payment processors and other financial institutions. The cost of funding a transaction with a credit or debit card is generally higher than the cost of funding a transaction from a bank or through internal sources such as a PayPal or Venmo account balance or our consumer credit products. The cost of funding a transaction is also impacted by the geographic region or country in which a transaction occurs, as we generally pay lower rates for transactions funded with credit or debit cards outside the U.S.
Transaction and credit losses
The components of our transaction and credit losses for the three months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, | Increase/(Decrease) | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Dollar | Percent | ||||||||||||||||||||||||||||||||
| (In millions, except percentages) | |||||||||||||||||||||||||||||||||||
| Transaction losses | $ | 276 | $ | 278 | $ | (2) | (1) | % | |||||||||||||||||||||||||||
| Credit losses | 102 | 93 | 9 | 10 | % | ||||||||||||||||||||||||||||||
| Transaction and credit losses | $ | 378 | $ | 371 | $ | 7 | 2 | % | |||||||||||||||||||||||||||
Transaction loss rate(1) | 0.06 | % | 0.07 | % | ** | ** | |||||||||||||||||||||||||||||
(1) Transaction loss rate is calculated by dividing transaction losses by TPV.
** Not meaningful.
Transaction losses and the associated transaction loss rate in the three months ended March 31, 2026 remained consistent compared to the same period in the prior year. The increase due to TPV growth was offset by benefits realized from risk mitigation strategies and higher recoveries.
1Q 2026 FORM 10-Q | 49 | ||||||||||
The components of credit losses for the three months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, | |||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||
| (In millions) | |||||||||||||||||||
Net charge-offs(1) | $ | 74 | $ | 78 | |||||||||||||||
Reserve build (release)(2) | 28 | 15 | |||||||||||||||||
| Credit losses | $ | 102 | $ | 93 | |||||||||||||||
(1) Net charge-offs includes principal charge-offs partially offset by recoveries for consumer and merchant receivables.
(2) Reserve build (release) represents change in allowance for principal receivables excluding foreign currency remeasurement.
Credit losses in the three months ended March 31, 2026 and 2025 were primarily attributable to loan originations during the period.
Consumer loan portfolio
We have entered into forward flow arrangements with third-party investors to sell certain loans receivable portfolios. As of March 31, 2026 and 2025, loans and interest receivable, held for sale were $1.8 billion and $714 million, respectively.
The consumer loans and interest receivable balance as of both March 31, 2026 and 2025 was $5.4 billion, net of participation interest sold. The balance remained relatively consistent driven by growth in our revolving credit product portfolio in the United Kingdom (“U.K.”) of approximately $270 million as well as an increase in our interest-bearing installment credit product portfolio in the U.S. of approximately $190 million, offset by the impact of the reclassification of our U.S. short-term, non-interest bearing installment loans to held for sale in the third quarter of 2025 and the associated forward flow arrangement.
The following table provides information regarding the credit quality of our consumer loans and interest receivable balance:
| March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
Percent of consumer loans and interest receivable current | 96.3 | % | 96.3 | % | |||||||
Percent of consumer loans and interest receivable > 90 days outstanding(1) | 1.6 | % | 1.6 | % | |||||||
Net charge-off rate(2) | 3.0 | % | 4.5 | % | |||||||
(1) Represents percentage of balances which are 90 days past the billing date or contractual repayment date, as applicable.
(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended March 31, 2026 and 2025, excluding fraud losses, on consumer loans as a percentage of the average daily amount of consumer loans and interest receivable balance during the same period.
In response to changing portfolio performance and macroeconomic environment, we continue to monitor risk and evaluate and modify our acceptable risk parameters. Modifications to the acceptable risk parameters did not have a material impact on our consumer loans for the three months ended March 31, 2026.
Merchant loan portfolio
We offer access to merchant finance products for certain small and medium-sized businesses, which we refer to as our merchant finance offerings. Total merchant loans, advances, and fees receivable outstanding, net of participation interest sold, as of March 31, 2026 and 2025 was $1.9 billion and $1.6 billion, respectively, reflecting an increase of 18%. The increase was due primarily to growth of approximately $180 million in our PayPal Business Loans product portfolio in the U.S. and growth in our PayPal Working Capital product portfolio of approximately $100 million, primarily in Germany.
The following table provides information regarding the credit quality of our merchant loans, advances, and fees receivable balance:
| March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Percent of merchant loans, advances, and fees receivable current | 89.4 | % | 90.0 | % | |||||||
Percent of merchant loans, advances, and fees receivable > 90 days outstanding(1) | 3.9 | % | 3.2 | % | |||||||
Net charge-off rate(2) | 7.0 | % | 4.6 | % | |||||||
(1) Represents percentage of balances which are 90 days past the original expected or contractual repayment period, as applicable.
(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended March 31, 2026 and 2025, excluding fraud losses, on merchant loans and advances as a percentage of the average daily amount of merchant loans, advances, and fees receivable balance during the same period.
1Q 2026 FORM 10-Q | 50 | ||||||||||
In response to changing portfolio performance and macroeconomic environment, we continue to monitor risk and evaluate and modify our acceptable risk parameters. Modifications to the acceptable risk parameters did not have a material impact on our merchant loans for the three months ended March 31, 2026.
For additional information, see “Note 11—Loans and Interest Receivable” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.
Customer support and operations
The increase in customer support and operations expenses in the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to an increase in employee-related and contractor and consulting costs.
Sales and marketing
The increase in sales and marketing expenses in the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to higher spend on marketing and brand advertising, predominantly for Venmo, partially offset by lower amortization expense for acquired intangible assets.
Technology and development
The increase in technology and development expenses in the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to increases in employee-related costs, software maintenance costs, depreciation and amortization expense, and contractor and consulting costs.
General and administrative
The decrease in general and administrative expenses in the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to a decline in indirect tax expense and professional services expense, partially offset by an increase in employee-related costs.
Restructuring and other
During the second quarter of 2025, management undertook a large-scale initiative (the “2Q 2025 Plan”) to reengineer our existing technology infrastructure to improve scalability, reduce network latency, decrease operational costs, and optimize our workforce. The 2Q 2025 Plan is a transformative unified program designed to streamline operations and includes exiting certain data centers to migrate to more efficient cloud-based solutions. The 2Q 2025 Plan is expected to be executed over a period of 18 to 42 months with the workforce component expected to be substantially completed in 2026 and the technology infrastructure component expected to be substantially completed in 2028. The associated restructuring charges during the three months ended March 31, 2026 were $11 million, consisting of $2 million in employee severance and benefits costs and $9 million in other restructuring costs.
In connection with this restructuring, we expect to incur employee severance and benefits costs of approximately $100 million, asset impairment and accelerated depreciation charges of approximately $40 million to $60 million, and other restructuring costs of approximately $110 million to $140 million over the term of the 2Q 2025 Plan. Other restructuring costs relate to process re-engineering and one-time migration to cloud solutions and consist of contractor costs, consulting fees, and prepaid software and maintenance costs without future economic benefit. We expect annualized cost savings of approximately $280 million associated with the impacted workforce and operational costs for our technology infrastructure. We expect that we will begin to realize these cost savings upon the completion of the components of the 2Q 2025 Plan, and also expect to reinvest a portion of the reduction in annual costs to drive business priorities. The timing of activities, cost, and savings estimates continue to be developed and are subject to change.
During the first quarter of 2025, management initiated a workforce reduction to ensure compliance with a new regulation impacting operations in an international market. The associated restructuring charges during the three months ended March 31, 2025 were $39 million and included employee severance and benefits costs, which were completed in the third quarter of 2025.
For information on the associated restructuring liabilities, see “Note 17—Restructuring and Other” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.
1Q 2026 FORM 10-Q | 51 | ||||||||||
During the three months ended March 31, 2026 and 2025, approximately $61 million and $25 million, respectively, of losses were recorded in restructuring and other, which included net loss on sale of loans and interest receivable previously held for sale and fair value adjustments to measure loans and interest receivable, held for sale, at the lower of cost or fair value.
Other income (expense), net
The decrease in other income (expense), net in the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to net losses and impairments on strategic investments in the current period compared to net gains in the prior period, which contributed a decrease of approximately $150 million.
Income tax expense
Our effective income tax rate was 20% for both the three months ended March 31, 2026 and 2025. Our effective tax rate remained consistent compared to the same period in the prior year and was impacted by offsetting factors including: foreign and U.S. income taxed at different rates and discrete tax adjustments, including tax effects of stock-based compensation.
LIQUIDITY AND CAPITAL RESOURCES
We require liquidity and access to capital to fund our global operations, including our customer protection programs, credit products, capital expenditures, investments in our business, potential acquisitions and strategic investments, stock repurchases and dividend payments, working capital, and other cash needs. We believe that our existing cash, cash equivalents, and investments, cash expected to be generated from operations, and our expected access to capital markets, together with potential external funding through third-party sources, will be sufficient to meet our cash requirements within the next 12 months and beyond.
SOURCES OF LIQUIDITY
Cash, cash equivalents, and investments
The following table summarizes our cash, cash equivalents, and investments as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | ||||||||||
| (In millions) | |||||||||||
Cash, cash equivalents, and investments(1),(2) | $ | 11,661 | $ | 12,848 | |||||||
(1) Excludes assets related to funds receivable and customer accounts of $39.5 billion and $38.2 billion at March 31, 2026 and December 31, 2025, respectively.
(2) Excludes total strategic investments of $1.8 billion and $1.9 billion at March 31, 2026 and December 31, 2025, respectively.
Cash, cash equivalents, and investments held by our foreign subsidiaries were $6.7 billion and $7.5 billion at March 31, 2026 and December 31, 2025, or 57% and 58% of our total cash, cash equivalents, and investments as of those respective dates. At December 31, 2025, all of our cash, cash equivalents, and investments held by foreign subsidiaries were subject to U.S. taxation under Subpart F, Net Controlled Foreign Corporation Tested Income formally known as Global Intangible Low Taxed Income, or the one-time transition tax under the Tax Cuts and Jobs Act of 2017. Subsequent repatriations to the U.S. will not be taxable from a U.S. federal tax perspective except for any tax on foreign exchange gains and losses; however, they may be subject to state income or foreign withholding tax.
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-04-29 | Natali Chris | SVP, Chief Accounting Officer | Sell | -1,337 | $49.46 | -$66,128 |
| 2026-04-29 | Keller Frank | Pres., Checkout Sol. & PayPal | Sell | -10,732 ×2 | $49.96 | -$536,205 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-07-28 10-Q expected by 2026-08-06 (in 83 days)
- ~2026-10-27 10-Q expected by 2026-11-05 (in 174 days)
- ~2027-02-02 10-K expected by 2027-02-25 (in 272 days)
- ~2027-05-04 10-Q expected by 2027-05-13 (in 363 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-05-05 8-K Earnings Release; Financial Statements and Exhibits
- 2026-05-05 10-Q Quarterly Report
- 2026-04-30 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-04-07 DEF 14A Proxy Statement
- 2026-03-25 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-02-03 10-K Annual Report
- 2026-02-03 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-02-03 8-K Earnings Release; Financial Statements and Exhibits
- 2025-11-17 8-K Material Agreement Entered; Material Financial Obligation; Other Events; Financial Statements and Exhibits
- 2025-11-14 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
- 2025-10-28 10-Q Quarterly Report
- 2025-10-28 8-K Earnings Release; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-07-29 10-Q Quarterly Report
- 2025-07-29 8-K Earnings Release; Financial Statements and Exhibits
- 2025-06-24 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits