PayPal's stock suffers near-historic decline upon 'dramatic' CEO change

By Emily Bary

PayPal just saw a major slowdown on a metric closely watched by investors. Soon, HP veteran Enrique Lores will be tasked with turning the company around.

PayPal missed expectations with its first-quarter profit guidance.

A previous version of this report contained an incorrect figure for PayPal's branded-checkout growth in the second and third quarters.

PayPal Holdings lost about a fifth of its value on Tuesday after the company reported a sharp slowdown in a key metric and announced an unexpected leadership shift.

Enrique Lores will become PayPal's (PYPL) CEO on March 1, succeeding Alex Chriss. "While some progress has been made in a number of areas over the last two years, the pace of change and execution was not in line with the board's expectations," the company said in a release.

Lores comes to PayPal from HP and said he would "accelerate the delivery of new innovations and to shape the future of digital payments and commerce."

PayPal on Tuesday posted just 1% growth in fourth-quarter payment volume for its branded-checkout business, after adjusting for currency. That growth rate was below the 5% clip seen in both the second and third quarters. Branded checkout includes things like the core PayPal checkout button. It is generally a more profitable business than the company's unbranded option, which is why it's a focus for investors.

In a shareholder presentation, PayPal attributed the deceleration to "weakness in U.S. retail, international headwinds and tough compares in high-growth verticals" - a reference to the idea that the year-earlier numbers set a high bar.

The CEO change "is no less dramatic" than the heavy pressure on PayPal's financial metrics, wrote Mizuho analyst Dan Dolev.

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PayPal also outlined the various tactics it will use as it tries to reignite growth in the branded business. These include focusing on "a modern checkout experience that is fast, intuitive and consistent," getting more customers to use biometrics for checkout, ensuring PayPal payment options are "competitively" surfaced during a customer's transaction journey and leaning into rewards.

PayPal shares sank 20.3% on Tuesday, their second-worst day on record, behind a 24.6% drop seen Feb. 2, 2022.

PayPal's profit guidance for the first quarter came up short of the consensus view. The company expects adjusted earnings per share to fall by a "mid-single-digit" rate from the $1.33 figure reported a year ago. The FactSet consensus of $1.38 implied that investors were anticipating growth on the metric.

For the full year, PayPal expects adjusted earnings per share in the range of a "low-single-digit decline to slightly positive" growth. Analysts were looking for $5.74, up about 8% from what PayPal posted for 2025.

See also: How to play payments stocks after essentially their worst run in 15 years

The company said it's taking strides to diversify its business. PayPal's Pay With Venmo and buy-now-pay-later offerings are winning market share, according to the investor presentation. And what the company now refers to as PSP, the part of the business that includes unbranded checkout, is now contributing to growth on a key profit metric after PayPal recalibrated the business to focus on relatively more profitable volume.

Overall payment volume for the fourth quarter amounted to $475 billion in the fourth quarter and was up 6% on a currency-neutral basis. Revenue came in at $8.68 billion, up 3% after currency adjustments, while analysts were modeling $8.79 billion. And adjusted EPS was $1.23, up 3% from a year before but below the $1.29 consensus view.

-Emily Bary

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02-03-26 1706ET