PayPal Holdings Inc. reduced its 2025 profit outlook on Tuesday, citing sluggish growth in its branded payments segment its most profitable business line. The revised forecast sent shares lower in afternoon trading, as investors expressed concern about the company’s ability to maintain leadership in an increasingly competitive digital payments industry.
During its second quarter earnings call, the San Jose-based fintech company reported that softness in branded checkout volumes where consumers actively choose PayPal at the point of sale was weighing on future profitability. While the company has made strides in cost management and platform modernization, executives acknowledged that the slower pace of branded transaction growth presents a challenge.
“Branded volume continues to underperform expectations, especially in more mature markets,” said Chief Executive Officer Alex Chriss. “We are taking action to address this headwind while investing in the long-term health and competitiveness of our platform.”
The company’s branded payments business traditionally commands higher margins than its unbranded processing segment, which has grown steadily but delivers lower profitability. Branded volume performance is widely seen by analysts as a key metric of consumer engagement and brand strength both of which appear to be under pressure.
The updated guidance follows a series of strategic changes at PayPal, including workforce reductions, product enhancements, and a renewed focus on artificial intelligence tools designed to personalize the checkout experience and support merchants. While these changes are showing some early promise, the results have yet to fully translate into stronger branded payment growth.
PayPal’s shares fell more than 5 percent on Tuesday following the announcement, reflecting investor skepticism about the near-term trajectory of the company’s core business.
Despite the setback, Chriss emphasized PayPal’s long-term vision, pointing to progress in expanding its unbranded merchant processing services, integrating new technologies, and improving overall efficiency. The company is on track to deliver over one billion dollars in annual cost savings by the end of next year.
Still, analysts warn that PayPal’s future hinges on its ability to defend its role at the center of consumer checkout behavior, particularly as newer and more integrated options such as Apple Pay and Google Pay become increasingly popular among mobile users.
“The pressure on branded volume highlights how much the payments landscape has changed,” said Jordan McKee, a fintech analyst with S&P Global Market Intelligence. “PayPal is no longer the default for many online shoppers, and regaining that position will not be easy.”
Looking ahead, PayPal plans to unveil more product improvements in the second half of 2025, including AI-driven fraud tools, updated merchant dashboards, and expanded loyalty program integrations. The company also reiterated its commitment to returning capital to shareholders through buybacks and dividends.
An updated financial outlook is expected later this year during PayPal’s investor day presentation. Until then, market watchers will be focused on signs that the company can turn around branded volume trends and reignite consumer preference at checkout.
source: reuters.com
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