One of the world's largest digital payments platforms, PayPal lets shoppers pay online with its wallet and lets people split bills through its Venmo app, while merchants use its branded checkout and point-of-sale tools. It began in 1998 as Confinity, a security-software startup for PalmPilots, which then merged with Elon Musk's online bank X.com to build an email-based money transfer service that eBay bought in 2002 and spun off again in 2015. In its early days it grew by paying newcomers cash bonuses for signing up and referring friends.
PayPal Q2 2026 revenue rose 7.2% to $8.4B but operating income fell 2.7% as Braintree lifted transaction costs
's growing share pushed PayPal's back above last year's level. rose 7.2% to $8,353M and fell 6.2% to $1.21 as a higher mix of lower-margin Braintree volume lifted processing costs and compressed 2.7% to $1,488M. The company is leaning on a new reorganization for savings while margin pressure from product mix persists.
Key takeaways
increased approximately $400M in the quarter, but its higher-cost processing mix lifted transaction expense 12% in Q1 and kept the rate at 0.90% of TPV, pressuring margins versus the 0.89% FY2025 level.
rose 7.2% to $8,353M on 11% TPV growth and higher revenue from a partner institution, though it fell 3.7% sequentially from Q4 2025 and transaction revenue lagged volume from product mix shifts.
declined 2.7% to $1,488M and was 17.8%, down 1.8 points from Q2 2025, as transaction expense outpaced growth.
Section summaries
Management's Discussion and Analysis
Q2 revenue rose 5% to $8.7B on 10% TPV growth, but operating income fell 5% as higher transaction expense outpaced lower credit losses.
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Net revenues grew 5% to $8.7B, driven by 10% TPV growth and a favorable hedging impact, though transaction growth lagged TPV due to product mix shifts and higher co-marketing campaigns.
fell 13.5% to $1,113M and dropped 6.2% to $1.21, pressured by lower and net losses on versus gains a year earlier.
Transaction and credit losses fell 17% to $397M with the transaction loss rate improving to 0.07% of TPV from 0.09%, reversing the increases seen through 2025.
The company announced a strategic reorganization expected to deliver at least $1.5B in gross annualized run-rate savings over 2-3 years, with first-phase charges of $120M-$140M expected in H2 2026.
was $1,134M, down 2.2% but up from $898M in Q1, and the company issued $2.0B in new fixed-rate notes in May 2026.
What changed
Q1 2026 flagged the after mix lifted it to 0.90%; Q2 confirms it held at 0.90% of TPV, above the 0.89% FY2025 rate.
Merchant loan rose to 7.0% in Q1 from 4.6% at FY2025; Q2 did not report the rate, but transaction and credit losses fell 17% to $397M with the fraud rate improving to 0.07% of TPV.
FY2025 flagged Q1 2026 transaction and credit losses after a 19% rise to $1.7B; Q1 losses rose to $371M then Q2 fell to $397M, below the Q3 2025 $652M peak.
The up to €40B European buy now, pay later sale remained unmentioned in this filing, with no proceeds or closure disclosed since the FY2023 agreement.
Q1 2026 reorganization targeting at least $1.5B in savings was detailed in Q2 as a strategic reorganization with first-phase charges of $120M-$140M in H2 2026.
Risk factors updated to name AI-enabled cyberattacks, the GENIUS Act crypto regulation, and third-party crypto custodian risk as heightened exposures not carried from prior annual framing.
What to watch
Q3 2026 to see if mix holds it at 0.90% or pushes it higher above the 0.89% FY2025 level.
Merchant loan in Q3 after it rose to 7.0% in Q1 from 4.6% at FY2025.
First charges and early savings from the reorganization targeting at least $1.5B in annualized savings, with H2 2026 charges of $120M-$140M expected.
Any disclosure of proceeds or closure of the up to €40B European buy now, pay later sale.
increased approximately $400M, while PayPal-branded revenue declined roughly $130M due to higher co-marketing with large merchants and lower foreign exchange fees.
contracted to 16% from 18% as transaction expense rose 11% to $4.4B, driven by TPV growth and a higher mix of volume, which carries higher expense rates.
Transaction and credit losses fell 17% to $397M, with the transaction loss rate improving to 0.07% of TPV from 0.09%, reflecting lower fraud losses and benefits from risk mitigation strategies.
The company announced a strategic reorganization expected to deliver at least $1.5B in gross annualized over 2-3 years, with a first phase potentially incurring $120M-$140M in charges in H2 2026.
Net more than doubled to $2.0B in Q2, aided by timing of and lower annual incentive payments; the company also issued $2.0B in new fixed-rate notes in May 2026.
Quantitative and Qualitative Disclosures About Market Risk
Interest rate, foreign exchange, and equity investment risks are managed through policies, hedging programs, and sensitivity monitoring.
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A hypothetical 100 rate increase would reduce the fair value of cash equivalents and by $8 million as of June 30, 2026, down from $11 million at year-end 2025 due to a methodology refinement.
The company holds $12.3 billion in fixed-rate debt and $450 million in floating-rate debt; a 100 rate rise would not materially impact for the quarter.
A 10% adverse shift in all foreign currencies would negatively impact pre-tax income by $436 million before hedging, with foreign exchange contracts offsetting $367 million for a net $69 million exposure.
Strategic investments totaled $1.7 billion (11% of the portfolio) as of June 30, 2026; a 10% adverse change in carrying value would decrease the portfolio by approximately $174 million.
The company uses foreign exchange contracts designated as cash flow and , with gains and losses initially recorded in AOCI, to protect earnings and subsidiary investments from currency fluctuations.
The information set forth under “Note 13—Commitments and Contingencies—Litigation and Regulatory Matters” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.
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The information set forth under “Note 13—Commitments and Contingencies—Litigation and Regulatory Matters” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q is incorporated herein by reference.
PayPal faces heightened risks from evolving cyber threats, expanding cryptocurrency regulation, and persistent fraud and litigation exposures.
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Cyberattacks are growing more sophisticated, including AI-enabled threats, and could lead to data breaches, regulatory fines, and loss of customer trust.
The evolving regulatory landscape for cryptocurrency, including the new GENIUS Act, may require changes to PayPal's and crypto offerings or subject them to enforcement actions.
Reliance on third-party custodians for customer crypto assets introduces risks of loss, operational failure, or delayed asset recovery in a custodian's bankruptcy.
Fraud, account takeovers, and abuse of purchase protection programs could increase loss rates and diminish merchant and consumer confidence.
Adverse global economic conditions, including trade tensions and tariffs, may reduce transaction volumes and strain liquidity.