PayPal's Profit Could Get 50% Boost from Cost Cuts in Q1

PayPal headquarters building

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PayPal Holdings Inc. (PYPL), the world's largest online payment processor, likely will report an increase of more than 50% to net income for the first quarter of 2023 after trimming costs in a challenging broader economy.

Key Takeaways

  • PayPal is predicted to post adjusted first-quarter 2023 earnings per share (EPS) of 68 cents, up from 43 cents a year earlier.
  • Revenue at PayPal probably climbed about 8% to $7 billion.
  • PayPal announced in January that it would trim its headcount by 7%, or about 2,000 positions, in an effort to cut costs.

The payment giant probably will post net income of $779 million, up more than 53% from the same quarter a year earlier. This corresponds to adjusted earnings per share (EPS) of 68 cents, up from 43 cents in the first quarter of 2022. Revenue could climb almost 8% to $7 billion, according to estimates from Visible Alpha. PayPal reports fiscal results after markets close on Monday.

With inflation and interest-rate hikes weakening consumer spending in recent quarters, PayPal undertook measures to cut costs. In January, it announced that it would reduce its company headcount by 2,000, cutting roughly 7% of positions. The company is also undergoing changes to executive leadership, as Chief Financial Officer (CFO) Blake Jorgensen stepped down in March and President and CEO Dan Schulman will retire at the end of the year.

PayPal shares are down about 20% in the last year, while the benchmark S&P 500 Financials Sector Index has fallen 8%.

One-Year Trailing Total Return for S&P 500 Financials Sector Index and PayPal
Source: TradingView.
PayPal Key Stats
  Estimate for Q1 FY 2023 Actual for Q1 FY 2022 Actual for Q1 FY 2021
Adjusted Earnings Per Share ($) 0.68 0.43 0.92
Revenue ($B) 7.0 6.5 6.0
Total Payment Volume ($B) 345.0 323.0 285.5

Source: Visible Alpha

The Key Metric: Total Payment Volume

PayPal defines total payment volume (TPV) as the value of payments, net of reversals, that are successfully completed on its platform or via a partner's. TPV is a key measure of the overall strength of PayPal's business as it reflects customer spending across PayPal's core platform as well as partner payment services.

Analysts predict PayPal's TPV will climb by about 7% to $345 billion, the second-highest quarterly figure on record for the company. This is about half the pace of growth from the first quarter of 2021 to the same period in 2022.

Article Sources
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  1. MarketWatch. "PayPal To Lay Off 7% of Employees as Part of Cost-Cutting Push."

  2. Zippia. "20 PayPal Statistics + Facts [2023]: How Many People Use PayPal?"

  3. Visible Alpha. "Financial Data."

  4. PayPal Holdings Inc. "PayPal’s Q1 2023 Earnings Call."

  5. PayPal Holdings Inc. "President and CEO Dan Schulman Announces Intention to Retire from PayPal at Year-End."

  6. PayPal Holdings Inc. "Blake Jorgensen Stepping Down as CFO."

  7. PayPal Holdings Inc. "2021 Form 10-K," Page 6.

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