PayPal stock plunges 7% despite beating Q2 forecasts: here’s what went wrong

PayPal stock slipped about 7% on Tuesday, despite second-quarter earnings that topped analysts’ expectations.

While revenue and profit figures were solid on the surface, the reaction was shaped more by what the numbers didn’t show: a convincing sign that PayPal’s core business is turning a corner.

Despite beating the headline numbers, PayPal’s report didn’t calm investor nerves.

The main concern wasn’t profit, it was the lack of momentum.

Transaction growth was underwhelming, and user activity still hasn’t picked up in any meaningful way. Analysts weren’t surprised, and that’s part of the problem.

The quarter didn’t deliver anything new to shift the narrative, and for now, most are staying cautious.

Why PayPal stock plunge today?

PayPal delivered solid headline numbers this quarter, with adjusted EPS coming in at $1.40, comfortably ahead of the $1.30 Wall Street was looking for.

Revenue grew 5% to $8.3 billion, also beating estimates. Even transaction margin dollars, a closely watched profitability metric, rose 7% to $3.8 billion (or 8% if you strip out interest on customer balances).

Still, the market wasn’t convinced. Shares slid after the release, as investors dug into the fine print.

The drop in total payment transactions, down 5% to 6.2 billion, stood out, even if some of it came down to shifts in PayPal’s service provider mix.

The company did offer some bright spots: total payment volume rose 6% to $443.5 billion, and PayPal bumped up its full-year EPS guidance to between $5.15 and $5.30.

But for now, the broader concerns about engagement and long-term growth haven’t gone away.

What analysts say?

Analysts aren’t rushing to abandon PayPal, but they’re not pounding the table either.

As per TipRanks, most are maintaining a “moderate buy” rating, acknowledging the company’s steady earnings and overall financial health.

That said, there’s no ignoring the challenges ahead.

Competitive pressure is growing, consumer habits are shifting, and the broader economic picture remains murky, factors that make the stock a tough short-term call despite its long-term appeal.

PayPal’s strategy to evolve into a more complete commerce ecosystem is drawing interest.

Its push into omnichannel retail, Venmo enhancements, crypto offerings, and digital ads shows long-term promise.

But the real challenge now is reigniting user growth and transaction momentum, areas where the latest numbers still came up a bit short.

PayPal beat expectations on earnings, but that wasn’t what the market cared about.

What really stood out was the slowdown in core activity. That’s what investors latched onto, and why the stock sold off.

It’s a reminder that strong profit numbers aren’t always enough when there are questions about growth. Right now, PayPal’s story feels caught between solid results and some tough questions about what comes next.

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