(Reuters) – PayPal raised its full-year adjusted profit forecast on Tuesday, as the payments giant benefited from robust consumer spending, while measures to cut costs improved operating margins in the first quarter.
Consumer spending has shown remarkable resilience even as economic worries clouded the outlook for the payments sector for months. Though lower-income brackets have curbed discretionary purchases, most Americans are still looking to shop online, dine-out and travel.
PayPal’s newly appointed management is also aiming to reignite investor confidence through efforts to make the company leaner and lower costs to ease pressure on its stock, which was among the worst performers on the Nasdaq last year.
Earlier this year, PayPal had announced plans to cut about 2,500 jobs, or 9% of its global workforce.
“2024 remains a transition year and we are focused on execution — driving our key strategic initiatives, realizing cost-savings and reinvesting appropriately,” said CEO Alex Chriss.
The company expects 2024 adjusted profit to increase by “mid-to-high single-digit percentage”, compared with its earlier forecast of it remaining flat.
PayPal also expects second-quarter revenue to grow 7% on FX-neutral basis, largely in line with Wall Street expectations.
Total payment volumes increased 14% to $403.9 billion in the first quarter, while net revenue climbed 10% to $7.7 billion on a currency-neutral basis.
PayPal’s upbeat payment volumes echo quarterly earnings at traditional card-based payments processors Visa and American Express.
PayPal’s operating margins improved 84 basis points, on an adjusted basis, to 18.2% in the first quarter. Its margins have been central to investor anxieties over the last year as growth slowed post-pandemic.
The company’s low-margin business products have risen strongly, while growth in its branded products slowed due to increased pressure from competitors such as Apple.
Its adjusted earnings per share rose to $1.08 in the three months ended March 31, compared with 85 cents a year ago.
(Reporting by Manya Saini and Jaiveer Singh Shekhawat in Bengaluru; Editing by Shilpi Majumdar)
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