PayPal Holdings Inc. has announced a projected decline in earnings for the current year as the financial-technology firm focuses on cost reduction and business optimization efforts.
According to a statement released on Tuesday, PayPal experienced a 14% surge in total payment volume, reaching $403.9 billion in the first quarter, surpassing analysts’ expectations of $392.9 million.
According to Bloomberg News, for all of 2024, the firm is expecting earnings per diluted share to be about $3.65, compared with $3.84 the prior year, when it included gains from the sale of Happy Returns — a firm that helps consumers return unwanted items — and from the company’s investment portfolio.
The forecast was lower than analysts are expecting.
According to the report, PayPal is seeking to curb expenses and right-size the business following a slew of acquisitions.
The company overhauled its upper leadership late last year and months later announced plans to cut about 9% of its workforce as part of Chief Executive Officer Alex Chriss’s efforts to boost profits.
The CEO said Tuesday that 2024 “remains a transition year” for the firm.
PayPal shares had climbed 9.1% this year through Monday. They dropped 3% at 7:33 a.m. in early New York trading.
PayPal reported $6.53 billion in total operating expenses for the quarter, up from $6.04 billion a year earlier.
Transaction margin dollars — a key indicator of expense control — rose 4% to $3.5 billion. Revenue increased 9% to $7.7 billion, higher than analysts estimated.
It was recently reported that the payments firm is planning to cut about 2,500 jobs, or 9% of its global workforce, this year, a letter from CEO Alex Chriss, seen by Reuters, showed.
In the letter to staff, newly appointed CEO Chriss said the decision was made to “right-size” the company through both direct cuts and the elimination of open roles throughout the year. The staff that will be affected are expected to be notified by the end of the week.
“We are doing this to right-size our business, allowing us to move with the speed needed to deliver for our customers and drive profitable growth,” Chriss wrote in the letter.
The company also posted the letter to its website after market close. Paypal’s shares ended the day down 0.13%.
In November, Chriss said he expects to increase revenue outside of purely transaction-related volume and pledged to turn the fintech firm leaner by reducing its cost base.
Though the announcement had helped rally the stock after third-quarter results, analysts have remained focused on PayPal’s margins in recent quarters.
Though the announcement had helped rally the stock after third-quarter results, analysts have remained focused on PayPal’s margins in recent quarters.
The company’s low-margin business products have risen strongly, while growth in its branded products has slowed due to increased pressure from competitors such as Apple (AAPL.O), opens new tab.
Investors hope Chriss, who was previously a senior executive at software company Intuit (INTU.O), opens new tab, will revive PayPal’s stock. It fell nearly 14% last year and missed a broader sector-wide rebound in high-growth technology shares.