All right. We are going to get started with the next session. Joining us next is Enrique Lores, President and Chief Executive Officer of PayPal. Enrique, thank you for joining us today. Really excited about the conversation.
No, thank you for having me here.
All right. Before we get started, I am just going to read a quick disclaimer. Please note that Enrique's remarks may include forward-looking statements. Please refer to the company's SEC filings, including its most recent Form 10-K and 10-Q, for a discussion of risks and certainties that could cause actual results to differ materially from these statements. All right. Enrique, you are roughly six months in. It has been a busy first few months. It is a two-part question. What has genuinely surprised you positively or negatively since moving from the board seat to the CEO seat? When you compare your day one hypothesis to where you sit today, where do you have more conviction? Where has the problem turned out to be harder or take longer than you initially assumed?
Sure. First of all, I think when I joined the company, I knew that there were some things that needed to be fixed, but I also knew that there were key assets and that the company operates in key growth markets. When I look at this before becoming CEO, I realized that the company strength and scale that we had, the number of loyal customers that we had was really difficult to replicate. The global presence that we had and the ability to transact in multiple countries at that scale was really a very valuable asset. As I started to dig into the company, I realized that there were some things that needed to be fixed. First of all, I have talked about this other times, the company was operating.
We had a fairly complex operating model with four dimensions, product, customer, regions, and functions, that really got in the way of executing and performing effectively. One of the big learnings also as I started was to realize that even if one of the key strengths of PayPal as a company is the fact that it's a two-sided network, the majority of the investment, the majority of attention of the company for some time had been on the merchant side, not on the consumer side. Changing that has been one of the key priorities that we have driven during the last months. As I think about what we have done during the last six months, I think they are aligned to five big changes that I think we need to drive in the company. Change number one is a change in the business model.
We have been relying on branded checkout as a source of profit for the company. We are rebalancing that, and we see a big opportunity across the full portfolio in financial services and expanding into this space.
Yeah.
Second big change is the opportunity that we have to grow both Venmo and Braintree, two growing markets where we see opportunities to do better. Third is what I was mentioning before about the need to rebalance our focus to the consumer side, which I'm sure we will be talking more along the discussion.
Great. Before we get further into it, maybe we can address some of the questions around industry consolidation head-on. There's been a number of news headlines over the last couple of months. I think most people know the context. Maybe if you could talk about how you are thinking about strategic alternatives for the company, and then as it relates to the company's standalone performance, what are you measuring those alternatives against?
Sure. First of all, as we have said before, we, management team and the board, have one objective, which is to maximize shareholder value, looking at all the potential options. What we did and what we have done is to first look at the strategy that we have confidence in the strategy that we have, and use this as a benchmark to compare any other alternatives. As alternatives have come and may come in the future, this is going to be the benchmark that we'll have. How does the alternative compare to the value that we think we're going to be able to create? We will always objectively recommend whatever option we think is better. This has been our approach, and this will continue to be our approach. At this point, our focus is in executing our plan.
We think we have an opportunity to create significant value to shareholders, and this is what we are doing.
Understood. Okay. Let's just hit on the broader macro environment. A lot of questions around spending levels, both in the U.S. and around the world. What have you seen in August and September quarter to date in the spend data? Specifically, there's been a lot of questions around the European tariff environment, de minimis. Maybe if you could talk through what you're seeing and the exposures there.
Sure. I think overall, the trends that we have seen are fairly aligned to what we saw in former quarters, and the expectations that we had when the quarter started. I think we have continued to see strong demand in the U.S., and probably the only area where what is happening is slightly different from what we were expecting at the beginning of the quarter is the impact that tariffs are having in Europe. They are impacting mostly customers that are doing cross-border business, especially from China, which is in some countries in Europe, a significant part of our business. Our original expectation was that this was going to have between half a point and one point of impact on TPV growth. We have seen bigger impact and probably happening for a longer period of time than we were expecting at the beginning.
And this is why when we look at what is our expectation for branded checkout growth this quarter, we think it's going to be in the 1%-2% range, driven by this impact that we see happening in Europe. Despite that, given the diversification that we have been driving in the business and that we will continue to drive, we continue to remain confident in the guide that we provide both for EPS and transaction margin growth, both for the quarter and for the year.
Okay, that's great. It sounds like big picture, while there's a larger impact out of Europe than what you had anticipated, it sounds like it's not enough to materially change the guide or-
Exactly.
-move brand of checkout out of that 1%-2% range.
Yeah.
Okay. That's very helpful. Let's maybe dive into some parts of the business. Germany in particular is one of your largest and historically most dominant markets. Management has spent several quarters describing a normalization of longstanding market share leadership positions in that market, alongside some macro softness and then some competition from alternative payment methods. Can you unpack just what you've seen on the ground in Germany and how you're thinking about the playbook for re-acceleration in that market over the next 12-18 months?
Sure. Putting aside the impact on tariffs that we just discussed, the trends that we see in Europe are very consistent to what we saw in Q2, and the opportunities that we have and that we are driving continue to be the same. As you said, Germany is one of our strongest markets, and the focus that we are putting on the consumer side of the network, revitalizing that, focusing on high-value customers, is happening everywhere, but especially in Germany given the relevance that we have. We are also very pleased in Germany with the growth that we see in BNPL. We announced about a few weeks ago that we had a partnership with Amazon in the country. This and the overall BNPL business are doing very well and growing as we were expecting.
Finally, from a consumer perspective, we are going to be launching also in Germany our loyalty product that will help us to continue to reinforce and accelerate our growth in that space. So we are doing well and similar to what we did in Q2, and we have a lot of initiatives to improve the performance in the country.
Got it. Makes sense. Maybe just talking about the broader dynamics in checkout. Growth has been hovering in that low single-digit range. Sounds like it is going to remain there in the third quarter. How is the execution on the checkout product changing going forward? From the outside, what are the proof points that we should be looking at to gauge whether the change in execution is leading to tangible results?
I think the biggest change in execution is the shift and the increased focus on what we call high-value customers. These are the customers that create for us the majority of the transaction margin of the company. By understanding who they are, understanding what they need, and offering that in terms of products and programs, is what we see the opportunity to really accelerate the growth on the Business Experience Optimization side. These customers value mostly three things. They value safety and trust, and this is clearly something that PayPal brings to them. They value flexibility, and this is one of the reasons why BNPL is so important for high-value customers. Finally, they value also the ability to maximize the value that they do with their transactions.
This is why launching a loyalty program that we will use to provide special offers to them is a key part of our strategy. This means that our focus in the future is going to shift from trying to get new customers to the platform to really maximize the value that we get from high-value customers, offering additional financial services like BNPL, and use this as a key metric that we will be looking at going forward and that we should be using to measure the success of the business.
Got it. Let's talk a little bit more about that. One of the, I think, most notable shifts in tone has been the focus on driving consumer demand and consumer value across PayPal's products, instead of going after things like merchant placement and merchant value. On the ground, what does rebuilding that consumer muscle look like? When you think about the investments in consumer value props this year, do you view this as a one-time step up in consumer value propositions, or is this a start of a multi-year investment cycle around increasing the value proposition for consumers across both PayPal and Venmo?
I think there are both. I think what this means is as we manage our business going forward, working with merchants to improve presentation and selection is important, but it's as important to make sure that we understand our consumers and that we bring to them the right value proposition. Which means as we define the new portfolio of offerings, as we define the new portfolio of programs that we put in place, we always need to have in mind who this consumer is. Also, there are some one-time investments that we are going to have to make. For example, we need to revitalize the marketing platform that we use to communicate with these consumers, and this is part of the tech modernization program that we are putting in place.
I think the key thing is that PayPal is a two-sided network, and to maximize the value of that, we really need to have a very strong activity on the consumer side. You were asking about what does it mean in the ground. It means that in a few selected countries, we are building local consumer teams that understand the local consumer and that can manage the activities of the company with these local consumers, for example.
Yeah. You've talked a lot about those consumer investments over the course of this year. How does that break down between the checkout and PayPal product versus the Venmo customer base?
I think it's going to be consistent across the board, but given that PayPal is a much bigger business than Venmo, and the opportunity that we have on that front, a more significant part of the marketing or consumer investment will be to the PayPal customers.
Got it. Sticking with this topic, I wanted to maybe talk through the increased focus on BNPL. This has been an area where consumers have adopted rapidly around the world. PayPal is a large player in the space, particularly in Europe, where a lot of your BNPL volume originates. How do you think about bringing BNPL to the top of the funnel for consumers and competing more aggressively for that consumer mind share to think of PayPal when they think about BNPL?
Traditionally, we were managing BNPL as a separate business, and this is one of the changes that we are driving. We look at BNPL as another option when customers are doing checkout, and we want to make it as integrated as possible in our offering. As you said, consumers like this way of buying. It's also much better for the company. The size of the ticket is bigger. The frequency of customers buying is bigger. We really prefer customers buying BNPL than in the traditional way. We are going to drive customers to buy this way, but also always, of course, providing them choice so they have the ability to choose it or not if it doesn't meet their needs.
We have been expanding also geographically where our BNPL offering is made, and over time, you will see us also completing and expanding the portfolio with different options to continue to grow and expand this line of business.
Yeah, that makes sense. Venmo has now delivered seven consecutive quarters of double-digit TPV growth. Revenue crossed $1.7 billion in 2025, growing roughly 20%. You have also seen momentum in products like Pay with Venmo, the Venmo Debit Card. How are you thinking about the growth algorithm in Venmo? From a product perspective, are there any obvious areas where you would like to build out further to drive more engagement with the products?
Yeah. I think we have a clear direction to grow Venmo, which is to make it more relevant to our consumers from a financial perspective. The work that we have been doing with payments, the work we have been doing with some of the offerings in credit and debit cards is just one step in that direction. We have a tremendous opportunity to maintain the growth that we see in Venmo, but at the same time, offer more value to our customers, increase the average revenue per user, which will really drive the expansion and the growth that this business will have in the future. I think we are really optimistic about the opportunities we have in that business. A lot of the products that we will be offering for them eventually will be offered also in PayPal.
We will be expanding both businesses in a similar direction.
Yep. From a product perspective, are there specific products on the Venmo side that you see as low-hanging fruit to expand both ARPU and customer engagement?
Well, if you think about the connect rate that we have now with the debit card that we have launched, it is still a relatively low connect rate. It is growing really fast. Grew in Q2 more than 70%, but the room for improvement is very significant. We are also very pleased with the progress we have made on Pay with Venmo. Expanding that to more merchants is another great opportunity that we have, and these two, in the short term, are the ones that will be driving growth for the business.
Got it. Makes sense. All right. Maybe switching gears to the PSP and Braintree part of the business. The results have normalized after seeing a period of rapid growth, and then a retracement on volumes that kind of coincided with improved economics. I think you have been clear the go-forward strategy is to grow PSP roughly at market volume levels, and value-added services will be a bigger part of the growth algorithm over time. Could you talk a little bit about where you are in that process of unifying all the products under kind of a single value-added services go-to-market in that segment?
Yeah. I think there are multiple questions in your question. First of all, we continue to see and we have continued to see double-digit growth on the core processing side of PSP or Braintree, which is an indication of, even if we have now addressed the concerns that we had from a profitability perspective, we have still a great opportunity to continue to grow. The next opportunity is in really to increase the connect rate of value-added services like payout or services like risk as a service. The connect rate is relatively small, and we have a very competitive set of value-added services. What we are doing to improve that is to create a specialized sales force that will be able to communicate to our customers the value of those services and make sure that we monetize them in the right way.
We have started to increase to create that sales force, and during the next quarter, we will continue to invest and to grow because we see a very clear opportunity to both accelerate growth, but especially to improve the profitability of that business.
When you think about the timelines for seeing value-added services contributing a greater share of the incremental revenue or gross profit growth in that business, what is a reasonable expectation?
I think during the end of the year, but especially through 2027, we need to start seeing tangible progress in that space, especially as the sales team starts to be active and starts kind of communicating the value proposition to customers.
Are your expectations broad-based across that portfolio, or are there specific value-added services that you think are going to be sort of a tip of the spear or do a lot of the heavy lifting?
I think in the area, for example, of payouts, we have a very differentiated offering. We have a large number of large enterprises already subscribed to that, and we see a big opportunity to expand it and to make it an even broader, to connect it to an even broader set of customers.
Okay. I wanted to switch gears a little bit and talk about some of the cost savings initiatives that you've announced. You've committed to at least $1.5 billion of gross run rate cost savings over two to three years. You've also been clear that a significant portion of that gets reinvested. $1.5 billion just creates a lot of flexibility to free up resources for the most important initiatives. So when you think about that opportunity, what are the latest thoughts around the best marginal return of those dollars?
Let me talk first a bit about where we see the saving opportunities and then what we'll do. We have identified three major areas where we see savings. One is simplification of our organizational structure, and this is something that we have actually completed. We have been working on this during the last two months, and by reducing the number of layers, expanding span of control, we are going to be able to achieve significant run rate savings starting now. Second big opportunity is the simplification of our portfolio and go-to-market activities. Again, this is something that we have started, will drive the next wave of savings. Third is automation and AI. There are many areas in the company where by adopting AI in a more aggressive way, we can significantly reduce our cost structure.
We have started to do that in areas like support of code development, but we still have a much bigger opportunity in front of us. As you said, our plan is to reuse the savings that we are going to be achieving to drive growth, and we will be investing in the areas where we see opportunities to grow. It will be in product areas like financial services to continue to expand, for example, the portfolio of BNPL offerings that we have. We are going to be investing, as we were talking before, in addressing better our high-value customers. This will be both in terms of infrastructure, in terms of marketing programs.
We have also announced that we are going to be modernizing our technology stack, and we have started a project to really recreate the key platforms that we have, integrate many of the ones that today are still not integrated because they were coming from multiple acquisitions, and in the next two years, we will have a fully new stack that will enable us to expand and to grow much faster. There are many areas where we think we need to invest, and these investments are really designed to drive sustainable growth for the company.
When you think about the other side of some of those investments and that reinvestment process, the simplification of systems, how does that change your view of what incremental margins or the cost of growth can be on the other side of it?
What we have communicated is that our goal is to be able to deliver double-digit EPS growth sustained by transaction margin growth. That has been what we have said until now. As we complete the definition of the strategy and the plans, we will provide more insights on how we think we will get there. But double-digit EPS growth is the goal that we have for the company.
Understood. You mentioned AI in that response, and I want to talk about one of the bigger themes in AI in the payments ecosystem, which is agentic commerce. It has obviously been a big topic of conversation over the last couple of weeks as some of the new agentic models have come to market. We are just so early in that build out, it is hard to know where the focus should be at any given point. What is a framework that PayPal is using in agentic to ensure that PayPal can sustain or grow market share as spend volumes potentially shift to a different channel?
We've seen that as agentic commerce grows, today it's difficult to know exactly what will be the model, but what we are certain is that trust will be critical in that model. Trust from two different perspectives, trust from the consumer perspective to know whether the merchants they will be interacting with are real merchants, and trust from a merchant perspective to make sure that the consumers they will be interacting are real consumers, and that the agents from both sides are validated. Validating that and creating that trust is the position that we want PayPal to take. If you step back for a second, this has been the position that we took many years ago in e-commerce.
For us, it's a natural position to take because this has been the core value proposition the company provided in the past, provides today, and will provide in the future. This is where our R&D investments and our innovation are focused. How do we develop the right products and systems to really validate identity and provide trust in the transactions both ways? We are working with multiple partners. We are piloting multiple experiences. We are learning from how consumers are interacting, because I think for agentic commerce to grow, it's not a technology problem anymore. Technology will enable this model. What we haven't found yet is what is the right consumer experience that will make this model expand, and this is why experimenting and working on different areas is going to be critical for us to be able to occupy the space that I mentioned before.
I guess with a different model or different competitor in the agentic space seemingly popping up every week, how do you choose which initiatives to participate in and really drive? Is your goal to enable all of them? Are you looking for the ones that have the most viability or the right kind of-
I think from one side, we try to work on those that have more viability, but especially those that will enable us to operate in this trust layer and create that trust infrastructure, which we think is going to be what will help us to build a differentiated value proposition in the future.
Got it. One of the major changes, switching gears a little bit, one of the major changes that you have begun is to move to the segmented operating model. You mentioned it in one of the earlier questions. I think it is easier for investors to maybe just dismiss this as improving or a change of the disclosures, but I think you have talked about this much more from an operational standpoint. When you think about this from an organizational perspective and an internal accountability perspective, how do you think this will change the decision-making process in the organization, and what are maybe some examples of decision processes that will look different under the new arrangement?
Sure. What we have done is internally to split the company in three different businesses, Checkout, Processing and Venmo, and Consumer Financial Services. The major reason to do that was to increase and clarify accountability and to accelerate decision making. In the previous model, it was not clear who had the final call when investment decisions were made or where deals needed to be approved or where changes were required. We have made it very clear that the leaders of the three businesses are the final decision makers. Of course, they need to interact with the rest of the company. The way I explain it internally is they have 51% of the vote.
They do not have 100% of the vote, means if at the end there is not alignment, they will make the call, but of course, need to listen and interact with the functions and with the rest of the company because there is value in that exchange of ideas. This has been a big change. This is through as we are building out the plan for 2027, it is clear how decisions will be made and who is going to be the final decision maker. This also goes together with accountability. They have the power to make the decisions, but they are also accountable for the results of each of the business. Having been running companies for a long time, accountability makes a big difference.
It is very easy to undervalue them from the external side, but when it is clear who makes the decision, it is clear who is accountable, and you are accountable for something, the energy you put in something sometimes is very different, and accountability drives better results.
And maybe kicking off where you started on the company having relied on Checkout for a lot of the profitability historically, and maybe looking to broaden out, diversify the business. From an accountability perspective, how do the leaders of Venmo and PSP, how are they empowered in order to drive their businesses, make decisions that will drive their businesses, and potentially at the expense of other segments of the business?
I think that they are going to be responsible for the full P&L of the business, so they will be responsible for what is the revenue that they create, what is the margin they create, what is the OpEx that is necessary, and then what is the operating profit that each business is going to generate. Of course, they need to partner. Of course, we need to maximize the return for the company, and this will be my role to make sure that the portfolio is managing the right way. But each of them is going to have key goals to grow and to expand revenue and operating profit, and this is how they will be evaluated internally, and this is what will drive results externally.
One of the changes that we have announced as well we will be doing is next year we will be moving to segment reporting because we think it's important that investors have the ability to see how the different businesses will be performing to align investor expectations to how the company will be managed internally.
Yeah, makes sense, and look forward to seeing some of those new disclosures.
Yeah.
Always fun to dig into. I had a couple minutes left and wanted to dig into maybe some of the specific product initiatives. PayPal Everywhere and PayPal World were two products that I think were reigniting that product engine within the PayPal business. Either one or maybe both, just wondering if you could give an update on how you are thinking about expansion of the network around the world.
We think that, I will start with PayPal World, continues to be a key medium to long-term growth opportunity. What we have decided is to focus on a few of the corridors where we saw the biggest potential. We are going to focus on the China, India, U.S. cases, and we are enabling these use cases. As we do that, we are using this also as an opportunity to learn, to understand how the different opportunities will materialize, but we want to make sure we make solid progress there before we continue to expand to more countries.
Yeah, makes sense. Just on the PayPal Everywhere side?
I think it is one of the key financial services that we will continue to offer. We have made good progress with the debit card. It gives us also presence in store, and we think that is something that we need to continue to emphasize and continue to drive next year.
Yeah. Okay, another one I wanted to hit on was just on the advertising strategy. I think obviously PayPal has a tremendously large data asset within the firm. When you think about that product, how is the scaling performing against the original expectations? What would give you confidence to lean in more into that strategy?
I think it needs to be one of the key components of our strategy to address and to maximize value for high-value customers, especially as we connect the information and data we have with them and the insights we have of them with the merchants they will be buying. Ads is one of the ways we are doing that. The business has been growing nicely. It is still relatively small, but as we look at how to continue to improve transaction margin for the core PayPal business, this needs to be, and this will be one of the drivers of incremental transaction margin.
Got it. All right. Last question here, maybe just more of a financial question around capital allocation and the balance sheet. PayPal is guiding to at least $6 billion of adjusted free cash flow, roughly $6 billion of buybacks, a quarterly dividend initiated last year. So a really strong and broad-based capital return strategy. As you are leaning into investments around the business, do you expect any changes around capital allocation?
In the short term, investors should expect that we will continue the same capital allocation strategy, but over time, we are going to be looking at M&A as another way to utilize the free cash flow we generate. If we do M&A, it will be totally related to the growth strategy that we will have defined. It will be managed in a very rigorous way, making sure that not only there is strategic fit, but also that we have a solid operational plan to integrate and a solid financial return plan. This needs to be part of our strategy. I think this will help us to accelerate our growth and to create more value. So at some point in the next quarter, we will start looking at that.
Right. Okay, great. Well, that's about all we have for today. Any final remarks that you'd leave the audience with?
I think it's more we are pleased with the progress that we have made during the last six months, I think six months and a week. But we also know that we still need to continue to make progress in multiple areas. But when I look at the opportunity the company has, the opportunity to continue to create value to our shareholders and to our customers, we are very confident in our ability to do that.
That's great. Well, thank you.
Thank you.
We'll look forward to following along. Thank you for joining us today.
Thank you.
Appreciate it.
Thank you.