By skyforbes • PayPal continues to grow revenue and raised FY25 guidance, yet the stock remains far below its 2021 highs.
• Margins are improving (transaction margin dollars +7% in Q2’25) and management raised the full-year outlook for both EPS and TM$.
• A new advertising business (PayPal Ads Manager) launched in October 2025, creating a higher-margin revenue stream tied to merchant data.
• PayPal updated its Privacy Statement to explicitly include AI/automated decision-making, aligning with its push into agentic commerce tools for developers.
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What’s changed in the numbers
• Revenue still growing: Q2’25 net revenue was $8.3B (+5% YoY; +5% FX-neutral) with TPV $443.5B (+6%). On a run-rate basis, external trackers peg TTM revenue around $32B.
• Margin improvement: Q2’25 transaction margin dollars (TM$) rose 7% to $3.8B as mix/pricing discipline improved.
• Raised guidance: After Q2, PayPal raised full-year guidance to non-GAAP EPS $5.15–$5.30 and lifted its TM$ outlook to $15.35–$15.50B.
• Yet the stock ($70 today) is still down sharply from the $309 ATH (Jul 23, 2021), despite the revenue climb.
Interpretation: The market has discounted PYPL for competitive fears and past execution issues, but operational KPIs show stabilization and early margin repair.
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Why margins can keep healing
• Mix & pricing discipline: Management has prioritized profitable volume; that’s showing up in TM$ growth even with only mid-single-digit revenue growth.
• Branded + Venmo momentum: In Q2, Venmo revenue grew ~20% and active accounts ticked up, supporting higher-quality branded economics.
• Headwind to watch: CFO/COO Jamie Miller noted that rate cuts could trim ~$125M from TM$ in 2H’25 as interest on customer balances normalizes. This is a manageable macro headwind, but real.
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New higher-margin growth vector: PayPal Ads
• Ads Manager launched (Oct 7, 2025): PayPal is turning its merchant footprint into an SMB retail-media network, letting sellers run ads on their own sites and across PayPal surfaces—an inherently higher-margin line vs. processing.
• Independent coverage underscores the strategy: building a network of small-business media networks, expanding inventory and advertiser demand.
Why this matters: Payments yields low take-rates; ads monetize intent + transaction data and can expand gross margin without heavy capital. If execution is solid, Ads can supplement TM$ growth even in slower TPV environments.
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Agentic AI: Policy & product are lining up
• Privacy Statement update (effective Nov 17, 2025): PayPal now explicitly states it may use personal information to train AI models and for automated decision-making (fraud, risk, personalization). This is a clear, formal foundation for scaled AI use.
• Agentic commerce push: In April 2025, PayPal rolled out tools so developers can embed agentic AI experiences (e.g., pay, track shipments, manage invoices) directly within AI agents—exactly where shopping is heading.
Business angle: Better fraud models, smarter routing, and agent-driven checkout can lift authorization rates, reduce losses, and improve conversion, all of which expand TM$ without chasing low-margin volume.
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Execution focus areas (what to watch)
1. Checkout & conversion: Rollout of Fastlane (accelerated guest checkout) and broader checkout modernization; third-party and company materials point to faster flows and potential margin tailwinds.
2. Branded vs. unbranded: Q2 commentary highlighted softer branded checkout growth (~5%) and ongoing repositioning in Braintree; the story is mix quality over raw volume. 3. Guidance credibility: After the Q2 raise, watch Q3/Q4 delivery against EPS/TM$ targets.
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Valuation snapshot (high-level)
• Market cap ~ $72B; P/E ~15 on current prints—well below many payment peers given PayPal’s scale and cash generation potential if margins continue normalizing.
• With TM$ improving and new high-margin vectors (Ads, AI-driven personalization), multiple expansion is plausible if execution remains consistent.
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Bottom line:
PayPal is growing revenue while repairing margins and raised FY25 guidance, yet trades at a modest multiple with new catalysts (Ads; agentic-AI-powered commerce) now shipping. The setup is classic: sentiment lags the fundamentals. If PayPal sustains TM$ growth and proves out Ads + AI benefits through 2026, there’s room for both earnings growth and re-rating.
I currently hold 50 contracts of $PYPL 11/7 $75 Calls
Sources: PayPal Q2’25 earnings release/SEC filing; Reuters/WSJ coverage of raised guidance; PayPal press releases on Ads Manager and Agentic AI; PayPal Privacy Statement (AI/automated decision-making); market/pricing data as of today, Oct 24, 2025.
Edit: reformatted the bullet points to the correct position.