PayPal Holdings Inc. (NASDAQ: PYPL) saw its shares drop more than 10% in premarket trading despite reporting first-quarter results that beat analyst expectations. The sell-off was driven by a weak near-term earnings outlook and the unveiling of a major restructuring plan under newly appointed CEO Enrique Lores.
The payments giant posted Q1 revenue of $8.35 billion, exceeding estimates of $8.05 billion, while adjusted earnings per share came in at $1.34, above the $1.27 consensus. Total payment volume rose 11% year-over-year to $464 billion, and transaction margin dollars grew 3% to $3.8 billion. Branded checkout volume improved to 2% growth, and Venmo volumes accelerated by 14%.
However, the market focused on the forward guidance. PayPal expects second-quarter adjusted EPS to fall by roughly 9%, while transaction margin dollars are projected to decline about 3%. For the full year, the company reiterated that adjusted earnings could range from a low-single-digit decline to slightly positive growth. Net income on a GAAP basis dropped to $1.11 billion, or $1.21 per share, from $1.29 billion a year earlier.
CEO Enrique Lores, who replaced Alex Chriss in March, announced a sweeping efficiency drive centered on artificial intelligence and automation. PayPal aims to generate at least $1.5 billion in gross run-rate savings over the next two to three years by cutting duplication and organizational layers. These savings will be reinvested into product capabilities and growth.
“We are taking deliberate steps to sharpen our strategy, simplify our organization, and improve both our growth trajectory and cost structure,” Lores said. The company has reorganized into three units: Checkout Solutions & PayPal, Consumer Financial Services & Venmo, and Payment Services & Crypto, with checkout remaining the top priority.
The restructuring announcement came on the same day Coinbase disclosed a roughly 14% workforce reduction, following Block’s earlier cuts. All three companies cited AI as a key factor behind the layoffs. PayPal did not specify the number of job cuts but indicated a significant realignment of teams.
Wall Street maintains a cautious view, with an average “hold” rating and a median 12-month price target of $48, slightly below the recent closing price of $50.39. The stock was trading at $45.77 in premarket action Tuesday.
