PayPal (PYPL) earnings Q2 2022

Dan Schulman, president and chief executive officer of PayPal Holdings Inc., arrives for the morning session of the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, US, on Wednesday, July 10, 2019. The 36th annual event gathers many of America’s wealthiest and most powerful people in media, technology, and sports.

Patrick T. Fallon | Bloomberg | Getty Images

PayPal shares rose as much as 13% in extended trading on Tuesday after the financial-services firm issued stronger-than-expected second-quarter results. In its earnings materials PayPal said it had entered into an information-sharing agreement on value creation with Elliott Management.

“As one of PayPal’s largest investors, with an approximately $2 billion investment, Elliott strongly believes in the value proposition at PayPal. PayPal has an unmatched and industry-leading footprint across its payments businesses and a right to win over the near- and long term ,” Elliott Managing Partner Jesse Cohn was quoted as saying in a PayPal earnings presentation. The news comes a day after Elliott said it had become the top investor in social-network operator Pinterest.

Here’s how PayPal did in the second quarter:

  • Earnings: 93 cents per share, adjusted, vs. 86 cents per share as expected by analysts, according to Refinitiv.
  • Revenue: $6.81 billion, vs. $6.79 billion as expected by analysts, according to Refinitiv.

Revenue grew 9% year over, but the company reported a $341 million net loss, compared with a $1.18 billion profit in the year-ago quarter. At the end of the quarter PayPal had 429 million active accounts, up 6% year over year but below the 432.8 million consensus among analysts polled by StreetAccount.

PayPal emphasized the progress it has made on capital efficiency. It expects to reduce costs by $900 million this year, and it said annualized benefits from the cuts and other changes should save at least $1.3 billion in 2023. PayPal announced a new $15 billion share buyback program, four years after kicking off a $10 billion program .

And in conjunction with its agreement with Elliott Management, the company it has a “commitment to work with Elliott Investment Management LP on a comprehensive evaluation of capital return alternatives.”

PayPal said it’s seeking a replacement for Mark Britto, its chief product officer for the past two years. Britto will retire later this year.

For the full year, PayPal said it expects $3.87 to $3.97 in adjusted earnings per share, up from the range of $3.81 to $3.93 that it provided in April. Analysts polled by Refinitiv had expected $3.82 per share.

During the second quarter PayPal added about 400,000 net new active accounts, which the company calls NNAs. In the first quarter PayPal reported 2.4 million NNAs, for a total of about 2.8 million in the first half of 2022. But PayPal still intends to add 10 million NNAs for the full year.

“However, as with all of our forecasts, NNA growth could be affected by broader economic factors, given the channels that drive organic customer acquisition, may be negatively impacted by falling consumer sentiment and reduced demand for discretionary goods,” CEO Dan Schulman told analysts on a conference call.

Notwithstanding the after-hours move, PayPal shares had fallen 52% so far this year.

This story is developing. Please check back for updates.

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