We came across a bullish thesis on PayPal Holdings, Inc. (PYPL) on Substack by Sergey. In this article, we will summarize the bulls’ thesis on PYPL. PayPal Holdings, Inc. (PYPL)’s share was trading at $66.32 as of April 29. PYPL’s trailing and forward P/E were 16.62 and 13.26 respectively according to Yahoo Finance.
PayPal’s first-quarter 2025 earnings reveal a company in the midst of a multifaceted transformation, marked by disciplined execution, high-margin growth initiatives, and strategic innovation in payments and commerce infrastructure. Non-GAAP EPS rose 23% year-over-year to $1.33, surpassing guidance and reflecting the fifth consecutive quarter of profitable growth. Transaction margin dollars increased 8% year-over-year, supported by an expanding non-GAAP operating margin of 20.7% and a 270-basis-point gain in transaction margin rate. While the transaction take rate slightly declined to 1.68% due to a mix shift toward lower-rate products like debit and peer-to-peer, the broader financial picture remains strong. Free cash flow was $1 billion, or $1.4 billion when adjusted for Buy Now, Pay Later (BNPL) receivable timing, bringing the trailing twelve-month figure to $6.2 billion.
The company’s Braintree segment experienced moderated volume growth of 2% year-over-year, down from 6% in Q4, as PayPal exited low-margin contracts. However, this refocusing on value-added services significantly improved economics, with one major enterprise client achieving a 20-point improvement in transaction margin by adopting bundled solutions like fraud protection and optimized debit routing. These Braintree initiatives are expected to contribute more than one point of transaction margin expansion in FY25, positioning the platform for more durable profitability.
A major strategic thrust is PayPal’s integration of artificial intelligence. The launch of the industry’s first remote MCP server enables AI agents to process payments, invoicing, and fulfillment. These technologies were demonstrated during Developer Days in San Jose, highlighting the early adoption of AI-driven commerce. AI also plays a key role in personalization, advertising, and checkout optimization — cornerstones of PayPal’s evolving smart wallet and digital experience strategy. According to CEO Alex Chriss, these innovations will empower consumers to make the smartest, most rewarding payment choices across platforms.
Venmo delivered a breakout performance with 20% revenue growth, its highest in years. Monthly active accounts grew 30%, fueled by increased merchant acceptance and the expansion of features such as Pay with Venmo, which saw a 50% increase in TPV. Partnerships with brands like JetBlue, Domino’s, TikTok Shop, and Instacart signaled broadening use cases, while debit card penetration reached 6% of the Venmo base, up from 4% a year prior. Users of the Venmo debit card were significantly more engaged, transacting six times more and producing twice the ARPU compared to online-only users. While international expansion remains a challenge, domestic success underscores a strong product-market fit.