PayPal (PYPL.O) has reported a slowdown in payments activity during September, a trend that has continued into October. CFO Jamie Miller noted on a call with analysts that consumers in both the U.S. and Europe are becoming more selective with their purchases. This observation tempered an initial surge in the company’s shares, which had jumped 17% following the announcement of a partnership with OpenAI and surprisingly strong results.
PayPal is a global financial technology company that operates an online payments system in the majority of countries that support online money transfers. It serves as an intermediary between users and merchants. Miller highlighted that U.S. companies across various sectors are experiencing pressure due to the growing disparity between lower-income and affluent consumers, further exacerbated by tariffs. He noted a decrease in basket sizes and average order values, especially in the retail sector, as consumers exhibit increased selectivity. This shift suggests a decline in discretionary spending while essential purchases remain stable, generally maintaining the payment sector’s stability.
Adding to concerns, PayPal’s forecast for the current-quarter adjusted EPS is between $1.23 and $1.27, falling short of the LSEG-compiled Street expectations of $1.31. According to Russ Mould, investment director at AJ Bell, anxieties over a weaker U.S. jobs market, signs of financial strain among lower-income households, and the slower-than-anticipated pace of interest rate cuts from the U.S. Federal Reserve are contributing to cyclical challenges.
Despite these headwinds, the upcoming year-end holiday season, traditionally a robust period for retailers and payment companies, offers a potential boost to spending. Retailers heavily depend on the fourth-quarter holiday season for a significant portion of their annual sales, with events like Christmas, Black Friday, and Thanksgiving driving increased purchasing activity. Miller stated, “The holiday season is very back-end loaded. So it’s something we’re watching.”
