For the past four years, PayPal (PYPL) has tested investors’ patience. The stock has traded mostly sideways since 2022, even as the company continued to generate substantial cash flow. But today’s results may signal a turning point in sentiment. The legacy payments provider reported EPS of $1.34, thereby crushing Wall Street’s estimate of $1.20 while also posting a 12% year-over-year gain.
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Q3 earnings suggest PayPal’s growth engine is reaccelerating, and the company has reaffirmed its commitment to innovation. In addition to ongoing share buybacks, management also introduced a dividend, all while the stock trades at a compelling valuation.
Together, these developments mark a meaningful step forward for PayPal — potentially the start of a long-awaited recovery story.
The Numbers Behind PYPL’s Q3 Reacceleration Cheer
After a few disappointing quarters in terms of growth, Q3 marked a turnaround in momentum. PayPal’s total payment volume rose 8% year over year to $458.1 billion, while revenue climbed 7% to $8.4 billion, accelerating both QoQ from Q2’s 5% and YoY from Q3-2024’s 6%.
Furthermore, adjusted EPS jumped 12% to $1.34, marking another quarter in which earnings are outpacing sales. Lastly, PayPal’s “transaction margin dollars” excluding interest on customer balances rose 7%, and adjusted free cash flow hit $2.3 billion.
Behind the scenes, PayPal’s growth in Q3 was broad-based rather than driven by a single segment. The company’s “Branded Experiences” — its core PayPal button and in-store transactions — rose 8%. Meanwhile, Venmo accelerated 14% in total payment volume (TPV) with revenue up 20%, while the PSP/unbranded segment (Enterprise Payments, formerly Braintree) climbed 6% as earlier price-to-value adjustments faded. This balanced performance signals that PayPal’s core business is regaining momentum, Venmo is emerging as a key revenue engine, and Enterprise Payments is shifting from a drag to a contributor.
On profitability, management maintained disciplined cost control while investing strategically in future growth. Non-transaction operating expenses rose 6% as PayPal funded initiatives in AI, checkout redesign, and capital-light BNPL externalization.
Despite these investments, operating income increased and EPS grew by double digits, supported by continued share repurchases. The company repurchased $1.5 billion of stock in Q3 and $5.7 billion over the past 12 months, reducing its weighted-average share count by roughly 6%.
PayPal Becomes the First Digital Wallet Integrated into ChatGPT
Alongside its Q3 results, PayPal announced a landmark integration with ChatGPT, making it the first digital wallet embedded in the platform. Users will soon be able to discover products in ChatGPT and complete purchases directly through PayPal or Venmo. At the same time, PayPal’s vast merchant network becomes discoverable through the AI interface via the Agentic Commerce Protocol. This move effectively puts PayPal back at the center of digital innovation, aligning it with the emerging frontier of AI-driven product discovery.
Strategically, the integration accomplishes three key things. First, it streamlines the path from conversation to checkout, compressing the journey from discovery to purchase into just a few clicks — a meaningful boost to branded conversion, where PayPal already leads (biometric logins and redesigned paysheets have shown 2–5-point conversion improvements in testing).
Second, it builds on PayPal’s growing presence in AI commerce, following its earlier selection by Perplexity AI, enabling merchants to integrate once and reach customers across multiple AI-driven discovery platforms.
Finally, it shifts transaction volume toward higher-margin channels — namely, branded PayPal and Venmo — reducing reliance on lower-margin, commoditized processing activity.
Rising Capital Returns, Yet Shares Remain Cheap
Beyond the substantial share repurchases outlined earlier, PayPal has introduced a quarterly dividend of $0.14 per share — its first-ever. On an annualized basis, the $0.56 payout equates to a modest 0.7% yield, unlikely to excite income investors on its own.
However, it complements PayPal’s robust buyback program, and with the payout ratio sitting below 10% of adjusted earnings, dividend growth could accelerate quickly in the coming years. The combination of a strong repurchase engine and a newly established, scalable dividend policy is likely to attract investor attention as the market digests the news.
In tandem, PayPal’s valuation remains compelling. Even after today’s post-earnings rally, shares trading around $78–$79 reflect roughly a 14.6x multiple on the midpoint of management’s 2025 EPS guidance, and an 8%–9% free cash flow yield based on a $75–$76 billion market cap and $6–$7 billion in annual FCF. For comparison, the broader tech sector trades at around 30× forward earnings. While many peers boast higher growth rates, PayPal’s current valuation still positions it as a deep value opportunity within fintech.
Is PayPal Stock a Buy, Sell, or Hold?
As you would expect, given its choppy performance in recent years, Wall Street’s sentiment on PayPal is very mixed. The stock is now carrying a Hold consensus rating based on 10 Buy, 15 Hold, and three Sell ratings over the past three months. Still, PYPL’s average stock price target of $80.60 suggests a 10% upside upside from current levels, and I suspect that this figure will soon rise notably given how good Q3 was.
PayPal’s Growth Engines Are Firing Again
After several years of lackluster performance, PayPal’s stock may finally be turning a corner. The difference now is that momentum is building across multiple engines. Branded checkout is becoming faster and more prominent, Venmo is expanding monetization beyond peer-to-peer transactions, and Enterprise Payments is back in growth mode as PayPal layers on value-added services such as payouts, FX-as-a-service, and authentication optimization. Meanwhile, Buy Now, Pay Later (BNPL) continues to scale, with total payment volume expected to reach around $40 billion in 2025.
With the new OpenAI integration, PayPal is positioning itself at the forefront of AI-driven shopping discovery, meeting consumers where the next wave of commerce begins. Yet despite these advancements, the stock still trades at a significant valuation discount, even as capital returns accelerate through buybacks and dividends.
Taken together, these developments suggest a company regaining both operational and strategic momentum — and a stock whose upside potential is increasingly difficult to ignore.