PayPal reported earnings yesterday — and Wall Street liked what it saw. Shares were up 2 percent in after hour trading following the release of Q2 results that indicated PayPal’s revenue, earnings, profit, footprint, user base, merchant base and P2P payments customer base are all growing — and mostly at a rate faster than analysts were expecting.
PayPal also revised its earnings guidance for the year with an increase. It now expects adjusted earnings per share between $1.80 and $1.84 on revenue between $12.78 billion and $12.88 billion. Analysts had previously forecast PayPal earnings of $1.78 per share on $12.72 billion in revenue.
These days, PayPal’s market cap of $69.9 billion nearly doubles that of its former parent’s — eBay’s market cap is around $38.8 billion — and, as CEO Dan Schulman noted in his remarks to investors following the figure release, PayPal is nearly an entirely different operation than it was 24 months ago.
“We have fundamentally retooled our technology and infrastructure, leading to significant improvements and availability, and developed our productivity. We have meaningfully improved our core experiences and expanded our suite of products. Our overall scale is accelerating due to the network effects of our two-sided platform. It is clearly a macro-secular shift toward digital payments, and our customer choice results continue to exceed our expectations.”
Readers experiencing deja vu right now aren’t imagining things — even The Wall Street Journal noted that Q2’s earnings were so similar to Q1’s earnings that they felt a bit like an “encore” performance.
Here’s a closer look at what’s behind the numbers, and the pair of big announcements PayPal let loose with for their Q2 update.
By The Numbers
PayPal reported adjusted earnings of 46 cents per share, beating the average analyst estimate of 43 cents. PayPal also managed to beat revenue estimates, with quarterly revenue up 18.3 percent year over year to $3.14 billion — as opposed to the $3.09 billion analysts were expecting.
PayPal also reported 6.5 million net new active accounts, which Schulman noted was “the largest organic quarterly gain in the past three years and up over 80 percent from a year ago.” That brings PayPal’s total active accounts, as of the end of Q2, to 210 million. PayPal also reported 17 million active merchant accounts — which represents a 12 percent growth rate within PayPal’s merchant base year over year. Based on the first half of the year results, PayPal is forecasting net new active additions will exceed 25 million in 2017.
During the call yesterday, Schulman pointed out that PayPal doesn’t just have more customers — it has more active customers. PayPal’s customers, on average, transact through the platform 32.3 times per year. A year ago, consumers used the service on average 29.4 times a year ago — and as of last quarter, that figure was 31.7 times per year.
“Our growing base and increasing customer engagement enabled us to pass another milestone, as we processed $106 billion in payment volume, exceeding $100 billion in quarterly TPV for the first time,” Schulman told investors.
TPV was up 26 percent year over year — and according to PayPal, that growth was driven nearly entirely by PayPal’s very aggressive growth in mobile. As of Q2 2017, over a third of all transactions on PayPal (34 percent) come via mobile device.
PayPal processed approximately $36 billion in mobile payment volume in Q2, a 50 percent increase year over year.
“This growth is largely driven by the exceptional and differentiated consumer experiences we enabled on mobile devices. One Touch adoption continued to expand in the quarter with over 60 million consumer accounts opted in. Merchant accounts accepting One Touch now numbered just over 5.5 million, growing by 500,000 in the quarter,” Schulman noted.
PayPal also offered a peak at Venmo’s numbers. Users on the P2P platform sent and received $8 billion during Q2 — a 103 percent increase from this time last year.
Those looking for specific Braintree numbers will have to keep looking — PayPal once again didn’t break those out.
The Big Announcements
2017 has been a big year for partnerships for PayPal — Visa, Mastercard, Chase, Google, Apple, Citibank, Wells Fargo, HSBC and Facebook all got a name check during Schulman’s remarks to investors as he discussed how PayPal’s partnership-oriented model was having a transformational effect on the company.
“It’s hard to overstate the difference in the relationships we now have with companies across multiple sectors — many of which were once viewed as potential competitors. We are confident these partnerships will drive enhanced value to our mutual customers. The accelerating and extensive scale of our two-sided global platform, which will allow consumers and merchants to transact instantly in new contexts, across operating systems, technologies and platforms, creates a strong foundation and is very attractive to multiple partners,” Schulman noted.
PayPal also took the Q2 earnings release as an opportunity to add to their partner list — by announcing new agreements with both Bank of America and Chinese internet search player Baidu.
The Bank of America expanded partnership will allow BofA’s customers to link their bank cards into PayPal and use PayPal’s payment services in-store, online and in-app. BofA will gain access to PayPal’s tokenization services as part of this agreement, which is what allows for the in-store purchase capacity. BofA cardholders will additionally be able to use their PayPal accounts in-store via PayPal’s mobile wallet.
Baidu is China’s answer to Google — the internet search provider has approximately 700 million users — and it, too, has signed a strategic partnership with PayPal.
“This partnership allows Chinese consumers to pay with their Baidu Wallet and PayPal at our merchants outside of China. Beginning later this year, this partnership will provide Chinese consumers with more ways to discover and buy from PayPal merchants in the U.S. and will eventually expand PayPal’s entire global merchant base outside of China. We expect this partnership to drive significant demand and additional cross-border trade over the PayPal platform.”
PayPal shares price was up in overnight trading, though analysts this morning are questioning whether PayPal can keep up its remarkable growth (as well as doing a fair amount of grumbling about the lack of Braintree figures broken out separately). Time will tell, of course — but at least from PayPal’s perspective, they are only just getting started.
“We know we are still in the early stages of our transformation, and we are just scratching the surface of the opportunities in front of us,” Schulman told investors as he closed out his remarks.