PayPal Holdings Inc (NASDAQ:PYPL, ETR:2PP) is heading into its third quarter earnings report with investors still waiting for signs of a meaningful turnaround in its branded payments business, according to Jefferies analysts.
The firm believes that while overall payment volumes are likely to show modest upside, the company remains “stuck” amid limited visibility into when branded growth might accelerate and with risks building to Street expectations for 2026.
Jefferies expects PayPal’s total payment volume to rise about 7% reported, or 6.5% FX-neutral, roughly a point above consensus, driven mainly by an acceleration in unbranded processing through Braintree.
Branded volume is projected to remain around 5%, with US growth at 3% and international volumes up 7%, reflecting softer spending in Germany.
Braintree volume is modeled to accelerate roughly four points to 4% year over year, lifting overall PSP growth to 7%.
PayPal is expected to miss consensus on the transaction take rate, as faster growth in lower-margin segments such as Braintree, Venmo, and debit products offsets gains from improved branded take rates.
Transaction margin dollars are forecast to rise 3%, slightly below the Street’s 3.5%, factoring in higher transaction losses from the German outage and a $25 million benefit from the sale of US BNPL receivables to Blue Owl, putting underlying TM$ growth at 4.2% year over year.
With branded growth expected to remain around 5% and US comparisons becoming tougher in the fourth quarter, the stock lacks a visible near-term catalyst, Jefferies believes.
“It all comes back to branded; without visibility into an acceleration, story is stuck,” the analysts wrote.
Jefferies also sees downside risk to fiscal year 2026 transaction margin growth, projecting about 3.5% versus Street estimates of 5%, due to headwinds from lower float income, reduced credit-related revenue, and only partial recovery from the German outage.
PayPal shares traded hands at $68 on Wednesday, down 20% in the year to date.
The company is expected to report its Q3 earnings on October 28.