PayPal to cut 20% of staff as part of business reorganization - WSJ

PayPal is preparing to cut 20% of its staff as part of its business reorganization program, The Wall Street Journal has learned. The publication's announcement coincided with the company's publication of quarterly results. PayPal's profit for the last quarter exceeded analysts' forecasts, but the weak forecast for the second quarter of 2026 - in the next three months the company expects a 9% drop in profits - collapsed the shares of the payment giant. Quotes PayPal fell more than 10%, but then reduced the rate of decline.

According to a source familiar with the situation The Wall Street Journal, the company plans to cut 20% of its staff over the next two to three years. The planned cuts will amount to 4,760 positions, based on the 23,800 employees that PayPal said were working for the company at the end of 2025, WSJ writes. About the forthcoming cuts in the company earlier also reported Bloomberg.

PayPal recently announced a reorganization of its business into three lines of business, MarketWatch recalls: the first will focus on payment solutions and PayPal's core brand; the second will focus on consumer financial services and a service for transferring money between users, Venmo; and the third will focus on cryptocurrency and payment services.

PayPal CEO Enrique Lores, who joined the company in Ma after Alex Criss left, told investors on Ma. 5 that he believes PayPal is underinvesting in its technology platform and lagging behind other companies in the sector in financial services, The Wall Street Journal (WSJ) reports.

Also, according to the newspaper, Lores intends to cut what appear to him to be "unnecessary layers of management in the business." Thus, PayPal expects to achieve savings of at least $1.5 billion in annualized terms within two to three years - to put more money into AI development and become a technology leader in its field.

"First, we will eliminate duplication of functions and unnecessary layers in [our] organizational structure. Second, we will accelerate the introduction of artificial intelligence and automation in all of our operations," the CEO said. At the same time, PayPal did not specify which business areas will be affected by the cuts, notes The Wall Street Journal (WSJ).

- PayPal Holdings expects adjusted earnings per share to fall about 9% in the second quarter of 2026 year-over-year, which was worse than market expectations, MarketWatch reports. Analysts surveyed by FactSet had expected to see PayPal's adjusted earnings per share in the next quarter at $1.34, which would imply a drop in adjusted earnings of about 4% from the same period last year, the publication reports.

- That said, PayPal reaffirmed its full-year outlook, expecting full-year 2026 earnings per share to "decline in adjusted earnings per share by a few percent (within single digits) or grow modestly (within a few percent)."

However, a weak outlook for the next quarter overshadowed those expectations, as well as the payments giant's stronger-than-analysts predicted first-quarter results.

- In the first three months of 2026, the company's revenue rose 7% year-over-year to $8.35 billion, beating the FactSet consensus of $8.05 billion.

- Adjusted earnings per share for the same period rose 1% year-over-year to $1.34, also coming in above expectations at $1.27, MarketWatch writes.

- Transaction margin dollars (transaction margin dollars) - a key measure of PayPal's profitability - rose 3% year-over-year in the first quarter to $3.8 billion, The Wall Street Journal notes. The total volume of payments increased by 11% to $464 billion.

The company's shares fell by more than 10% at the May 5 trading low, at the time of publication they are losing 9%. Since the beginning of the year, they are down 22.6%.

"While the reporting presentation literally 'screams 'keep doing the same things and hope for better results,' we view these [PayPal] results as interim - until the board decides on a clearer strategy in the coming weeks or months," Barron's quoted Evercore analyst Adam Frisch as saying. In his view, investors are still waiting for more concrete decisions from the company.

Of the 47 analysts covering the company's stock, the majority - 32 - recommend holding it in their portfolios. Ten advise to buy and five advise to sell. The analysts' average target price for PayPay shares is $50.4, which corresponds to their closing price on Ma. 4.

This article was AI-translated and verified by a human editor