PayPal to Cut Costs After 1Q Profit Falls

Published: 2026-05-05 07:17:28 ET PYPL

Published on 05/05/2026 at 07:17 am EDT

By Elias Schisgall

PayPal will accelerate its adoption of artificial intelligence to cut costs after reporting lower profit in the first quarter.

The company said on Tuesday that the effort is expected to yield, at minimum, $1.5 billion in gross run-rate savings over the next two to three years.

PayPal did not specify which areas of the business would see cost cuts, or whether employees would be laid off.

PayPal on Tuesday reported a first-quarter profit of $1.11 billion, or $1.21 a share, compared with a profit of $1.29 billion, or $1.29 a share, a year earlier.

Stripping out certain one-time items, the company reported adjusted earnings of $1.34 a share. Analysts polled by FactSet were expecting $1.27 a share.

PayPal also plans to reinvest savings in the business, especially when it comes to embedding AI in its products and operations. The company said it will look to expand its consumer financial services offerings through Venmo and use AI to improve the speed and interoperability of its platforms and products.

"We are taking deliberate steps to sharpen our strategy, simplify our organization, and improve both our growth trajectory and cost structure by focusing our investments where we believe they will have the greatest impact," Chief Executive Enrique Lores said.

Paypal's cost-cutting effort marks the second major initiative under Lores, a former HP CEO who took the helm at PayPal in March.

Last week, PayPal said it would reorganize into three business units: Checkout Solutions & PayPal, Consumer Financial Services & Venmo, and Payment Services & Crypto.

The changes are expected to improve accountability for managers and realign the corporate structure toward attractive market opportunities in checkout, payment processing, and consumer financial services, PayPal said Tuesday.

Revenue rose to $8.35 billion, from $7.79 billion in the year-ago quarter. Analysts were expecting $8.05 billion in revenue.

Transaction margin dollars, a closely watched measure of PayPal's profitability, rose 3% to $3.8 billion, the company said. Total payment volume rose 11% to $464 billion.

Transaction margin dollars for the company's online branded checkout business rose 2% in constant currency, the company reported. Transaction margin dollar growth was 10% in P2P and other consumer services and 11% in PayPal's payment service provider business, both in constant currency.

For the current second quarter, PayPal said it expects adjusted earnings to fall by high-single digit percentages, projecting a roughly 9% decrease. It said transaction margin dollars are expected to fall about 3%.

The company reiterated its guidance for full-year adjusted earnings growth in a range of a low-single digit decline to slightly positive growth.

Write to Elias Schisgall at [email protected]

(END) Dow Jones Newswires

05-05-26 0715ET