PayPal Holdings Inc (NASDAQ:PYPL, XETRA:2PP) shares fell about 9% after the company delivered first quarter 2026 results that beat expectations, along with a more cautious near-term outlook that weighed on sentiment.
PayPal said it expects non-GAAP EPS to fall approximately 9%, compared with Wall Street expectations for a decline closer to 4%.
The company also forecast a roughly 3% decline in transaction margin dollars, versus consensus expectations for a 1% drop, signaling deeper-than-anticipated margin compression.
For Q1 2026, PayPal reported adjusted earnings per share of $1.34, above analyst expectations of $1.27.
Revenue rose 7% year-over-year to $8.35 billion, also ahead of estimates of roughly $8.11 billion.
Profitability trends were more mixed. Transaction margin dollars increased 3% to $3.8 billion, while GAAP operating income declined 3% to $1.5 billion and non-GAAP operating income fell 5% to $1.5 billion. Operating margins contracted year-over-year, reflecting continued pressure on profitability despite revenue growth.
Management said it is focusing on simplifying operations and prioritizing investments in areas expected to support longer-term growth and improved efficiency.
“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,” PayPal CEO Enrique Lores said in a statement.
“I am confident in our ability to put the company on a more durable path to long-term growth and shareholder value creation, and we are executing with urgency.”