PayPal battles tariffs as it pushes global payment growth

PayPal

PayPal's turnaround strategy under CEO Alex Chriss showed signs of progress as the company posted strong earnings Tuesday, but the ongoing trade war is creating stress on payments volume. 

"We had our fifth consecutive quarter of profitable growth despite macroeconomic uncertainty," Chriss said during Tuesday's earnings call. Chriss was referring to the effect of Trump's tariffs. PayPal reported tariffs had slowed branded checkout growth in the second quarter, but said the pressure has started to ease in recent weeks. 

The company said it would monitor tariff impacts in the coming months, and highlighted work on artificial intelligence and efforts to make it easier to make payments internationally. 

"Our focus is on the things we can control," Chriss said. 

PayPal's earnings

For the quarter ending June 30, PayPal reported net revenue of $8.3 billion, up 5% from the prior year, and earnings per share of $1.40, up 18%. That beat FactSet analysts' expectations of $1.30 and $8.1 billion. PayPal's profit was $1.37 billion, up from $1.24 billion the prior year. Venmo's revenue grew 20% based on new initiatives, according to PayPal, which did not disclose financial figures for Venmo.

PayPal projected full-year earnings of $5.15 to $5.30, up from its prior projection of $4.95 to $5.10. Analysts' full year projections are $5.10. "We delivered another quarter of profitable growth, driven by continued strength across many of our strategic initiatives," Chriss said while touting PayPal's technology projects. "We believe the next five years will bring more changes in how people shop than the last two decades combined."

Read more earnings coverage. (Corporate Earnings News | American Banker)

In a research note, Jeffries analysts noted that branded total payment volume growth slowed to 5% year over year in the second quarter, compared to 6% in the first quarter, a slowdown the firm attributed to tariff headwinds. 

"Without that [tariff] pressure our branded checkout growth would have been at 6%," Chriss said under analyst questioning during PayPal's earnings call. "It's a small amount, but we're starting to see it stabilize." 

PayPal's stock slid about 2% early Tuesday, and is down about 11% over the past six months. It has increased more than 6% in the past month. 

Jeffries analysts said that "we expect more progress on [boosting] volume onto the latest [product launches] but without visibility into a branded [total payment volume] acceleration above mid-single digital yearly growth, which we don't believe is likely by year end, we don't see what drives [stock price growth]."Jeffries also said PayPal branded faces pressure from inbound payments from Chinese marketplaces such as Temo and Shein, and a 15% decline in China-related travel due to the tariffs.

"We wouldn't be surprised to see some underperformance in shares given the slightly soft branded checkout trends," JPMorganChase said in an analyst note. 

AI and blockchain

PayPal's strategy under Chriss is to use partners to expand a portfolio of artificial intelligence-powered payment applications.

The strategy is an effort to grow branded checkout and international payments, two areas that analysts are closely watching as PayPal battles Apple Pay, Block and Stripe in the small business payment market. Ahead of the earnings call, PayPal made several product-related moves.

On Monday it announced Pay with Crypto, which connects merchants to enable instant crypto or stablecoin to traditional currency conversion, a key step in supporting cryptocurrency for payments. The product covers more than 100 cryptocurrencies such as bitcoin, ether, USDC and PYUSD, and connects to wallets including Coinbase, Binance and Metamask.To explain why the product is necessary, PayPal mentioned cross-border payments, a use case that crypto, stablecoin and blockchain companies often cite, since it eliminates the need for intermediaries such as correspondent banks to manage currency exchange. (Also, it's unlikely crypto will be used for a domestic payment in the U.S., where the dollar is easy to use).

In a release, PayPal gave an example of a shopper in Guatemala buying a gift from a merchant in Oklahoma City. By using PapPal's platform, the merchant can accept crypto payments at lower costs due to the use of a blockchain and reap incentives in PYUSD if the funds are held in PayPal. 

"A big part of the future of commerce will be on chain," Chriss said Tuesday 

Pay with Crypto closely followed the announcement of PayPay World, an artificial intelligence-powered platform that makes PayPal and Venmo interoperable and connects to digital payment systems in India, China, Latin America and other regions. PayPal is chasing a cross-border retail payment market that totaled $40 trillion in 2024, and is on pace to pass $62 trillion by 2032, according to FXC Intelligence.

PayPal World is designed to address the need to navigate the hundreds of regional wallets that exist globally. "This presents friction in a global ecosystem. You are never sure if your wallet will be accepted. Traveling out of the country poses new challenges," Chriss said, adding that PayPal plans to add more wallets over time.

In a move involving more traditional payment methods, PayPal in May launched a contactless mobile wallet in the European Union that incorporates rewards and pay-over-time features. PayPal's wallet is designed to counter mobile wallets from Apple and Google, which dominate the sector. The technology giants are under antitrust pressure in the EU, which has resulted in a more open environment, attracting payment fintechs that are eager to take advantage of the looser market. 

PayPal has recorded three million NFC enrollments thus far following the German rollout, and will launch the NFC wallet in the U.K. later this year, Chriss said. "We think we can take this platform across all of our markets," he said.

Among other large payment companies, American Express recently reported earnings that beat Wall Street analyst estimates. Visa reports earnings later today, Mastercard Thursday and Block August 7.