In extended trading on Monday (8th May), shares of the payments firm dropped by 5% after PayPal Holdings Inc reduced its forecast for the annual adjusted operating margin. This overshadowed the company's increase in profit forecast.
PayPal anticipates an adjusted operating margin expansion of 100-point basis this year as compared to 125-point basis growth forecast done previously. PayPal's payment volume for the first quarter, which ended on March 31, was $354.5 billion on a forex-neutral basis. This is a decrease from the fourth quarter's payment volume of $357.4 billion.
According to Dan Dolev, an analyst at Mizuho, investors are concerned that PayPal's branded checkout button, which is a lucrative business, may not be performing as well as previously anticipated. The fear is that it is losing market share to Apple, which is causing the drop in PayPal's shares.
Additionally, analysts have noted that the current high interest-rate environment is dissuading shoppers from making expensive purchases. This is especially true for lower-income customers who are already burdened with significant debt.
During a call with analysts, the company emphasized its focus on artificial intelligence and noted that it anticipates new developments in generative AI will aid in its efforts to expedite productivity initiatives.
“We expect AI will enable us to meaningfully lower our costs for years to come,” CEO Dan Schulman said.
He further added- The company plans to utilize this technology to introduce additional features for both merchants and consumers on its platform.
Previously, PayPal had stated its focus on reducing expenses, while also acknowledging the impact of inflation on discretionary consumer spending. In the first quarter, PayPal's revenue increased by 10% to $7.04 billion on a forex-neutral basis. The company's adjusted profit per share was $1.17, up from 88 cents in the previous year.
