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Paypal outperforms on revenue and net income, but lower-than-expected Q2 operating margin sends shares tumbling

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PayPal beat analysts’ expectations on multiple counts but shares still sunk after hours due to a lackluster operating margin reported in the second quarter.

The company reported quarterly revenue of $7.3 billion, up 7% year over year and just above the FactSet consensus of $7.27 billion, according to MarketWatch. PayPal also reported a net income of $1.02 billion, up from a loss of $341 million in the second quarter of 2022. Adjusted earnings per share were $1.16, surpassing analysts’ expectations of $1.15.

Still, analysts appeared more more focused on the company’s operating margin, which has raised concern in past quarters. The company’s margin of 21.4% missed expectations of 22%. 

The company’s stock fell more than 7% in after-hours trading.

Acting CFO Gabrielle Rabinovitch said the second half of the year should bring an increase in ecommerce and cross-border payments to help boost margins.

“We expect to exit the year in a much stronger position from a GM [gross margin] trajectory than where we are right now,” Rabinovitch said.

PayPal’s mixed quarter comes as it reported total payment volume of $376.5 billion, up 11% compared with the same quarter last year. Revenue from the fees charged to merchants and consumers during transactions made up 90% of all second-quarter revenue.

The company, whose app supports cryptocurrencies including Bitcoin and Ethereum, also said it expects year-over-year growth for revenue and adjusted earnings per share in the third quarter.

Learn more about all things crypto with short, easy-to-read lesson cards. Click here for Fortune’s Crypto Crash Course.



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