PayPal Aktie

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Officer and Chief Operating Officer of PayPal. Jamie joined PayPal as CFO in 2023 and has been at the front lines of the evolution since. It's been quite a ride. So before PayPal, she's held the CFO roles at E&Y, Cargill and General Electric, where she also served as President and CEO of GE Transportation. So thank you for joining us. Really appreciate your time.

So maybe, Jamie, you could start with PayPal being in a transformational mode for some years now. You've had a unique vantage point through this evolution. Maybe as you look at the business today under Enrique's leadership, what do you think is genuinely different about PayPal's strategy and its execution? And what gives you greater confidence in the path forward?

So first, thanks for having me. Happy to be here. And when you look at PayPal, we have been in transformation. And I think doing a lot of the right things, but 2026 for us has been really about focus and execution. And Enrique Lores came in, in March. And in April, we reorganized the businesses to really align around the markets we serve and the consumers we serve in them. So our business units are Checkout & PayPal, Consumer Financial Services & Venmo, and processing and Payment Services & Crypto. And so when you look across that, you can see kind of really distinctly how that captures the product sets and how it captures just the technology and the enablement behind that. So really streamlining how we work in a big way.

The second piece that Enrique did very quickly was jump in and really go deep on our strategy. And so getting into the numbers, getting into the markets, the customers, all the cohorting and really refocusing the strategy around just a handful of things. And there's really a number of things that are primarily different in that. One is a much deeper focus on financial services. The other is deeper focus on continuing the momentum in Venmo and processing. The third is adding more emphasis in our ecosystem on the consumer. We've been very merchant-focused, but the consumer piece of it really needed a lot more investment. I'd say the fourth is simplification. So with the reorganization, we've really launched a lot of cost out designed to simplify the company and drive for more speed. And the last is really underpinning this just tech modernization, and we've talked a lot about that. We're making good progress, but that is really another piece of the enablement and the speed piece of it.

But more than anything, probably the biggest difference is Enrique. And having Enrique inside PayPal has been really awesome. He is an operator, and he is decisive. He is very focused. But all the work we've done, coupled with just his leadership around accountability, I think, is really helping us to start to move the needle.

That's great. So it seems like the headline growth rates don't reflect the progress that's being made, right? And so maybe you could talk about the next 6 to 12 months and how we'll see like growth accelerate and evidence of that.

Yes. So we -- in 2026, we've raised guidance twice. Right now, we're targeting transaction margin dollar growth of 2%, earnings per share growth of mid-single digits. And when you look across what we've seen this year as we've begun to pivot, I'd say the real bright spots have been in the U.S., we're seeing nice sequential growth. And the work we've done on our merchant playbook has been, I think, really good in terms of helping us understand what's working and starting to move the needle forward.

The other piece I talked about a minute ago was our focus on consumer. And when we did all of our strategy work and really looked at the consumer cohorting, I think one of the things you see pretty clearly in PayPal is that about 1/3 of our consumers drive more than half of our margin dollars. And so really looking at and staring at how do you align our product strategy and our attach and habituation and all the motions around that, how do you embed that into our execution and our plan has been a really key part of it.

And if you lift up from that, we've been really focused on durable transaction margin dollar growth over time. And so this medium-term growth algorithm that we talked about a couple of weeks ago really is what we're very focused on and aligning the strategy against, which is mid-single-digit transaction margin dollar growth, good operating leverage and good capital allocation, driving a nice attractive EPS growth return over time.

And this like 1/3 of consumers driving half the margin, is the goal to get more out of those consumers? Or is it to get more consumers look like those 1/3 of consumers?

It's really both, honestly. The high-value consumers for us give us a really good right to win around attaching more product to them. And you start to look at the numbers of consumers that have more than 2 products attached, how much ARPA multiples you can have when you have that kind of attachment. It gives our strategy -- it gives us the opportunity to align our strategy with more product to work with them around.

PayPal is a very, I'll call it, middle consumer sort of brand. You look at Buy Now, Pay Later and the success of that, you look at our first-party credit card, the success we've had with debit, there's a lot of opportunity to continue to grow the monetization of our consumers in a way that doesn't mean we necessarily have to grow our total consumer base. It's just the shifting and the movement around the consumer base itself on the attach.

Understood. So branded checkout growth has remained in the low single-digit range, but the underlying trajectory by region is quite different. Maybe you could walk us through what you're seeing in the U.S. and Germany versus the U.K. and other European markets that have been more challenging? And how do you expect those to evolve over time?

Branded checkout this year, we've been pleased because it really has stabilized throughout this year. All 4 quarters over the last 4 quarters have been 1% to 2% growth. And when you look at third quarter, in particular, we did feel an impact of about 70 basis points from the European de minimis tariff policy actions. Having said that, we're really seeing nice and consistent growth around Buy Now, Pay Later, growing in the mid-20s, Pay with Venmo growing more than 40%. So checkout itself has had a stabilized profile.

When you shift and start to look at the U.S., I'd say there's a couple of things there that have been bright spots this year. First has been we see nice strong growth in services and travel and other verticals that has been sort of a consistent pull up for us. The second piece, and I'm sure we'll spend some time talking about this, is the merchant playbook work we've been doing. And where we've done that, we've seen really nice shifting in the growth profiles of our U.S. merchants. But when you go to Europe, I would say Europe is stable as well. Germany, in particular, stable and improving, which is good. We've seen a little bit of macro pull on that, but stable and improving. We've launched new product with Amazon around Buy Now, Pay Later in Germany and Austria in the third quarter. So those have been nice growers and off to a good start.

The U.K. has continued to be challenging, but it's been consistent. And places like France and Italy have been stable and good growers for us. So what's important about Europe right now is the work we're doing in the U.S. has given us a good lens on things that are working. And as we begin to expand that, we'll get into Europe next year and be investing against that same strategy and playbook there as well. And that's a key part of really continuing to move the branded checkout growth profile over time, but maybe more importantly, even the transaction margin dollar growth.

Would you agree that like Europe seems a lot -- the competitive intensity there is lower than it is in the U.S.? Or do you think it's as strong there?

I think they're different. I think there are overlaps, but I think they're different. Europe tends to be more country to country as opposed to the U.S. is just so much bigger than any one country in Europe. And you tend to see big players in the U.S., but they are not uniformly in the same place everywhere in Europe, and you tend to have more local competition in addition to some of those global companies. So I think the answer competitively is different.

But when you come back to the consumer and the merchants and what they need and want, that part of it actually is pretty similar, which is why when you look at both our strengths around trust and security and kind of compliance and risk globally, paired with the investments we're making around better consumer experience, better merchant conversion and just more co-investing alongside that against what consumers want. I think what we're really seeing is that's what's starting to shift and move the needle.

Got it. So the early results from your enhanced checkout integrations have been quite encouraging. As you moved from targeted merchant deployments to a broader rollout, what gives you the confidence that those benefits can be replicated at scale?

Yes. So this is an area that we've been working on for a couple of years. And this year, in particular, we stepped up our investments in what we're calling our merchant playbook. And this is really about experience -- consumer experience, it's about presentment and where our product presents in the checkout flow. And it's about just selection, so things like co-marketing. And so when you look across all of that, what we find is that merchants need or want different things as we work with them. For some, solving the consumer experience, so just taking friction out of the process with biometrics, our new pay sheet redesign, that really can shift the needle for growth for both of us in a good way.

For others, Buy Now, Pay Later is a really attractive product. And so we make investments around whether it's upstream messaging, whether it's around presentment of either our button or the Buy Now, Pay Later button or both, more present at checkout is a piece of it. Some we do co-development work around onboarding and co-development work around Buy Now, Pay Later product that has both our brands on it.

And I'd say the last piece, that co-marketing piece has been around making sure that when a consumer gets to checkout, they select us every time. And so we, with merchants, will come up with campaigns, and you see some of these where 5% cash back if you select PayPal at checkout, things like that, where we codesign that with merchants. And so as we've done that, I think we've gotten much deeper on what patterns work with which kinds of merchants. And we've also gotten much more targeted with the kinds of merchants where it really makes sense to make certain investments.

And what you -- a couple of weeks ago when we did our third quarter earnings call, one of the things we shared was that examples of 11 really large merchants that make up more than 20% of our U.S. checkout TPV, where when we've got all or portions of that playbook in place with them, we've been able to grow at rates higher than their e-commerce growth, which really tells you we're really moving the needle and beginning to move that share needle back, which has been really important. But that is a lot of what gives us confidence as we go into 2027. We've talked about we're going to be investing more, both in margin dollars and in OpEx dollars against that strategy. But as we begin to do that deeper into the U.S. merchant field or start to move it into Europe, that gives us more confidence around that.

Got it. And like in terms of the penetration of modernization, have you -- I mean, do you want to like talk about sort of how far you've gotten?

Well, with respect to pay sheet redesign and biometrics, it's pretty far, pretty penetrated. But with respect to the other pieces of it, I would say it's still fairly early, meaning in the U.S., we focused on our top 50 merchants. And I would say we're decently moving into that at this point. I mean this is work that takes time. I mean there's either integrations we have to work on. I talked about some of the co-development. The marketing just takes time to work and start to unfold.

But when we get into next year, we'll be widening the aperture around our top 200 global merchants. And in Europe, in particular, it's around the top 25 merchants that really matter. And so -- and the European work will start maybe midyear next year. So more U.S. work, and then we'll start to deepen that scale globally.

Got it. And I want to talk about Europe because that's the next market. I guess like when you think about which markets you'd go into first, what are those markets that you're prioritizing? And then like as you think about the investments you'll make, how quick a return can you get relative to the ones that you've made here in the United States? Like can you make a faster return on those investments given the learnings from here?

Yes. So well, maybe I'll start with the return, and then we'll get into the latter part of your question. When we originally began this process, we really were looking to underwrite roughly a 2- to 3-year time line here. And I think what we're finding is that this will take time. And as we get into Europe and other places, I think there's a lot of characteristics that make it easier, meaning you're going to see more targeted and maybe more large merchants versus mega merchants that we'd be working with. So the idea of scaling with them more quickly, I think, will be faster. We'll also have a lot more experience under our belt.

But primary geographies, Germany, for sure. We have a huge market in Germany that consumers love our brand. We've got a really nice share of the market there. And we've done a really nice job with product innovation, but continuing to keep that forward with merchants will be really important. We've been experimenting in the U.K. quite a bit over the last year, rolling out both rewards programs, doing some product sampling and testing and things like that. So the U.K. will be another piece of that. But then you get into France, Italy, Spain and other places, all of that will be a part of it.

Got it. So obviously, there's been this clear willingness to invest in rewards and other engagement initiatives to sort of maximize the TMD growth. Maybe you could just talk about the amount of reinvestment that's inside of TMD and where you're seeing the strongest returns on those investments.

Yes. So from an investment perspective, in '26, it's about $300 million. It's a couple of points of margin dollar growth. And when you look across that, those investments really are underpinning a lot of what I just talked about. So when you look at the experience side of it, we're either investing in actually rolling that out ourselves, so engineering and in the scaling and rollout. In some cases, we incentivize merchants to actually do the work on their checkout flow and make sure we actually get implemented.

When you look at presentment, it's really making, in many cases, decisions about whether we want to pay for presentment. Or do we wanted to undertake the co-development work to do co-branded onboarding and really begin to share and deepen in a much deeper way. I mean that involves the development time and work, the cost of the people to do it. But in many cases, too, we're beginning to do more rev share and really more tiered incentive-based pricing where they win, we win, sorts of things that really positions us differently. And then the co-marketing piece of it is a lot more straightforward in terms of traditional marketing measurement.

But all in, when you look at the kinds of return profiles, it's really within the zone of what I was talking about before. And what I like right now about what we're seeing is I think we've learned a lot, and we've just continued to hone and pivot the strategy and know and be able to see where we're seeing unit economics come through that align with our models, where we're seeing halo comes through that aligns and then we're able to be even better underwrite going forward.

Okay. Great. So I want to talk about the expense savings program that's supposed to yield something like $1.5 billion plus. Maybe you could talk about how much progress has been made against those -- that $1.5 billion and how that unfolds over the next year or so?

Yes. So the program we announced in late April. And we're targeting taking more than $1.5 billion of cost out over the next 2 to 3 years. And what we said was that, that would largely be reinvested in the business. To date, we expect to have about well, more than $700 million worth of gross cost out by the end of the year, really coming across 3 areas. We've been focused on organizational structure and alignment. And here, we've taken several actions this year starting in April, we had another big action at the end of August, where we've taken out 3 layers in the company. We've gone from 9 to 6. We've increased our spans. We've taken out more than 25% of our management layers.

And really, when you look at that, what it's doing is allowing us to move faster. You take that, coupled with this reorganization around our product sets, it's much more clear who owns what. And then we're just really streamlining how we work, which I think is a hugely helpful part of it. The next piece is around operational and portfolio realignment. So that's really around prioritization and deprioritization. So it's doubling down in a handful of countries where we really matter. And it's really saying the long tail we're actually just going to let that sit or in some cases, actually exit. But it's really prioritizing what matters.

One of the things at PayPal, like many great tech companies, we love to love all of our children. But Enrique has been consistently very clear around hammering on prioritization because we can't do everything. And so that's that piece of it. And the third piece is around AI and automation. And part of that, we talk a lot about our tech modernization. That's a big body of work. But this piece is really around how do we make things more efficient, how do we take work out of the system? How do we get much better consumer and merchant outcomes as a result of using AI to enable service, to enable price optimization, like lots of different things. So that body of work is really just getting started, but that's also what's going to keep going through '27 and '28.

When you get into fourth quarter, I expect that OpEx growth will be flat to low single-digit-ish. I think the only important thing to remember, and you talked about this a little bit earlier, is that you can't just take second half OpEx run rate and annualize it to get to 2027. I do think kind of trying to time cost out with investment timing and all of that, there's going to be some level of being able to take cost out while we're investing and the pace of those 2 things coming into the zone together will take a little bit of time to even out.

And can we talk about like -- and I know you've hit on this a little bit, but like where this cost out is being deployed and maybe how much of it actually drops down to the bottom line at some point or has been?

Yes. It has been a little bit this year. But I fully expect that -- like I said, I fully expect over time that we will reinvest most of this, if not all of it. And that's really how we put the plan together for the moment. When you talk about our strategy and you really look at PayPal, a shift to financial services and consumer and marketing attach, investment there is really around product build with financial services. It's real investment in consumer. So this means investing in the consumer teams in the markets where we're in, in European countries and other places, investing in life cycle management and really getting much, much better with our data and customer cohorting and a marketing attach.

When you look at Venmo Financial Services, it's around the financial services product build-out and around the marketing and the attachment around that as well, engineering resources, things like that. And then all the way over to processing and crypto, where that's about more build-out of value-added services, and it's about building out our specialist seller force. One of our challenges with VAS is that when we've gone in over the past several years, we typically have allowed VAS to be a pull-through in our natural selling process with merchants and really pulling that out to be distinct value-add, building out more services and more capabilities. We've got a huge focus on that in the last 2 years. Like those are the kinds of things that are super important to our merchants, but we also need, in many cases, to have a specialist seller force alongside that so we can really demonstrate the value and get that attached. So those are the kinds of things that over the next 2-ish years, 2.5 years, we'll be very focused on.

And like how does that compare to your competitors? Like when they go out and they have their sales motion, like how does what you're trying to achieve compare to them?

Well, in many cases, it's very similar. I mean you see some clear examples out there where our ambition, we should have a right to win there. We've shown -- take processing and crypto, we've had really nice growth in transaction margin dollars over the last 2 years, employing a VAS build-out strategy and then just being very focused on building profitable growth as opposed to growth for growth's sake. And I think that's really shown that we can execute against that.

What I'm excited about is that we still have a lot of runway around not only build out of VAS, the ability to take this to other geographies outside of the U.S. And I think that specialist sales force, where we're pretty much just getting started is a pretty well-worn path with some of our other companies we see in the industry, and we'll be able to follow that pretty well.

Great. So Agentic Commerce, it seems like it has the potential to reshape how commerce is done online, and it would appear like PayPal has got pretty significant right to win with a 2-sided platform that's kind of payments choice agnostic around you have choice to make payments. As you think about the investments you're making and the assets you have, like how do you think it scale -- it sort of turns into success with Agentic?

Yes. So I think -- I mean, Agentic is still pretty early. But I would just double down on your point about our right to win. I think we're really well positioned. When you look at PayPal, we've got 400 million consumers. We have 20 million merchants. We've got systems at scale around fraud prevention and detection, risk and compliance, security, trust, all of the things that consumers need and want. But importantly, it's cross-border. And that kind of a system is really hard to replicate.

And so when you get back to Agentic itself, high brand recognition, but also kind of turnkey situations for the different Agentic players, whether it's something like Muse and Meta, where we'll be going live on that in the next couple of weeks to other players or places where we've got other partnerships around platforms, around standard setting, things like that. But if you take a step back, I mean, bottom line, I think that our brand really does afford us the right, but there's more work to do, and it's still pretty early.

And I guess there's a lot of different players in the market that are trying to do the same thing. And even the inference engines are trying to create their own wallets in some ways. Like how do you think about them working with you but also competing against you? I mean that's sort of rules of engagement or...

Sort of how we live across elements of our market. Yes. I mean, we have lots of places where we both compete and partner. And I think that's something we're pretty comfortable with. And it depends on what we're looking at, whether it's distribution or whether it's Agentic or other places, I think that's part of the game.

Got it. So Venmo is one of the key monetization opportunities within the ecosystem. I'm curious -- and you've talked about a 4 to 5x opportunity to increase ARPA over time. Like what do you think is the biggest drivers of getting there?

Yes. Venmo is such a fun product to talk about. 70 million consumers, largely a young and affluent demographic, but it's super interesting when you get in and look at the customer cohorting underneath that because we've got very large populations within that, that are teens and parents. You've got the college age. You've got micro sellers and sole proprietors. And I think we can all think about who that would be, whether you're at the farmers market, whether you're at the hairdresser, and people who regularly use the product like Venmo as a core part of their daily life and their business.

And when you look at Venmo, we have begun in the last couple of years with debit penetration and Pay with Venmo penetration, but we are really in early innings there. Both of those have grown consistently at 40% to 50% clips. When you look at people who use those products versus people who only use peer-to-peer, I mean, the actual monetization is 2x just in that cohort alone. But the ARPA opportunity around all of this, and you could see it again in our competitors, is an opportunity to really grow ARPA 4 to 6x from where we are today. We are literally just a couple of years into this.

What's fun and exciting about it is I think the brand affords us a lot of opportunity to build out more product and attach, whether that's spending limits and controls and visibility for teens and parents, whether that's really looking at micro sellers and sole proprietors around different kinds of credit products that help them manage their business better or manage their cash flow better. When you look at others where they just want a credit card or they want more access to debit and Pay with Venmo in more places so that they can use this as more of their hub and their funds in and funds outflow, all that's good for us. And so we talked before about investment strategies and things like that. A lot of the next couple of years is that product build-out, but then it's also continuing to invest in attach and habituation around it to really capture the ARPA.

So you guys have talked a lot about financial services, and I'm sure that's a big part -- and you kind of mentioned it a little bit. That's a big part of the improvement that you expect to see in ARPA. What do you think is PayPal's right to win because there are so many different players sort of trying to get there?

I actually think we've got a very unique right to win. I think our brand in and of itself, we talked about safety. We talked about trust and risk and compliance, all the things that go with it, I think, sits with the consumer in a very staying way. And when you look at what consumers want, and this is a big part of what we studied in the strategy work this summer, I mean, consumers want a place where they can go to do a lot of things in one place. And I think right now, they very much see PayPal as a way to pay.

Buy Now, Pay Later is a great example of that. We've had that product for a long time. But just in the last couple of years is when we've really said, you know what, we're going to position this differently. And we're growing Buy Now, Pay Later at 25% quarter-over-quarter. And that Buy Now, Pay Later is pay monthly, it's Pay in 2, Pay in 3, Pay in 4. It might be larger ticket sizes, different forms for different merchants. But if you're the consumer, it gives you more flexibility and consumers want that kind of relationship.

And then you look at Venmo, where I think people want a place where the money is coming in from their friends and other places, they want one place to really have their funds work for them in many different ways. So our studies show that our brand is really well positioned for all of that, and we see it in the penetration we've had so far, but this is where we're going to lay the groundwork and keep going.

And so as we think about like financial services, how big can it become as a part of PayPal? And how broad could it become outside of Buy Now, Pay Later?

Yes. So I'll start with the broad. Financial services today within PayPal underpins each of our businesses. So with PayPal, we talked about it, credit and debit are core parts of the PayPal, Buy Now, Pay Later, core parts of the PayPal brand and product set. In Venmo, same thing. We've got debit and we've got some credit, but we've got a huge opportunity there to build that out. But what is probably not well understood is even underneath our processing business, we've got a big merchant lending business that is really good around keeping businesses sticky with us and helping them as well.

So financial services today is more than 20% of our transaction margin dollars and again, aligned to those product sets. But we think going forward, it can be an even bigger grower as part of that. And an important part, as you look at how we can really deepen our relationship with our consumers and leverage our brand and our position to take that further.

And then as we think about accelerating the growth there and the transition to financial services, would you consider M&A? And like where would that be?

Yes. From an M&A perspective, we've been pretty balanced so far with respect to capital allocation. We have a lot of money being returned to shareholders right now with buyback. We've implemented a small dividend. And when we look forward in the strategy, I think M&A will play a part. M&A, when we look at it, really has 3 screens for us. The first is strategic. And working with Enrique, I mean, we are very focused on how does this snap in, exactly what it would enable, how does it fit strategically? And that's got to be very clear.

I think the second piece of it is it has to make financial sense, both in terms of what it can bring, what it can return and how we're deploying capital. And the third is around real line of sight and clarity around operationalizing it and executing against it. And all 3 of those have to be in place. And I guess the simple thing to say would be we fully expect that it probably will be a part of our strategy and what we do, but we're also going to have a pretty high bar around what we select and how we do it.

And would it be like outside of the U.S.? Or like how are you thinking about geographies?

I think it could be any of that. I think that when you look at the strategy we want to run, we have real opportunity, let's take Venmo to drive different product set to drive different kind of attach. So you can imagine different partnerships or different things that could be Snap-in or bolt-on that could help that. When you look at PayPal, you see product sets, you see geographies, you see different consumer sets as well. So it really is going to come back to how do we look at the landscape, where are we seeing organic traction? Where are our organic opportunities to invest and where could inorganic help us accelerate faster.

Got it. So maybe we could talk about just historically, investors viewed PayPal primarily through the lens of branded checkout, as we've talked about ad nauseam. But as financial services, Venmo, PSP become larger contributors, how is the composition of TMD evolving? And what does that mean for the long-term growth and profitability of the business?

So branded checkout historically has been a large part of our transaction margin dollar growth. The last couple of years, what we've seen is Venmo and processing increasing their levels of growth and increasingly being a good contributor to transaction margin dollar growth as well. And what I really see over to drive durable transaction margin dollar growth over time is diversification in the sources of that.

So Venmo and processing still growing at very healthy clips, financial services now contributing even more. And branded checkout, I think the thing that we've really stared out in our strategy process is the idea that branded checkout doesn't have to get back to historical growth levels to really drive a healthy mid-single-digit durable transaction margin dollar growth kind of set over time. So that's kind of how we're thinking about branded checkout in our 3-year plan.

Okay. And I guess like you've outlined the path to faster TMD and EPS growth over time. Maybe you could walk through the building blocks underpinning that acceleration? And is it a conservative underpinning that you have? And like what kind of time frame should we think about it? Maybe just give us a whole run-through of that.

Yes. So when you look at what I'll call our medium-term growth algorithm, it really starts with what we were just talking about. So transaction margin dollar growth, durable, diversified sources, branded checkout, financial services, Venmo and processing, all 4 of those -- and in addition to that, having good operating leverage. And we talked about the cost-out programs we have, the reinvestment program we have against that, where we'll be reinvesting to drive that growth of margin dollars, but good leverage in the process and then good deployment of capital.

So coupled with that, a nice return to shareholders around the capital profiling, which gets us to a good double-digit earnings per share growth rate over time. And so that's really the algorithm we're building towards and that we've really anchored our strategy around.

One last one before I get to questions, if anyone in the audience has it, is just you guys have this bank charter application. Like maybe you could just talk about what you expect the bank to do for you because it would seem like it could be quite advantageous as you're building out financial services.

Yes, I think so over time. I think that the bank piece of it today is really designed around merchant lending and deposits. And if you look at the merchant lending that underpins our work, both processing, small businesses, and that ranges not just to support processing, but the micro sellers, the sole proprietors, that is all merchant lending when you look at it. That's a big piece of it. And the other side of it is to diversify our funding sources.

Financial services over time, we've been building out a variety of different funding sources for that. We fund a lot through our own free cash flow and our cash on balance sheet. But we've also begun taking books off balance sheet in Europe and in the U.S. to really just diversify where the cash and funding sources come from. And certainly, deposits are another cost-efficient way to do that.

And so like you expect to be more balance sheet intensive as you move forward because it would get you more of the TMD dollars?

It would. But I -- when you look at it, it's all a capital allocation equation. We continue to expect to be generally balance sheet light. We're going to make choices around what the right return profile will be around when we keep it on balance sheet versus when we take it off. But I think the reality, too, is that we want to keep a healthy form of shareholder return in the process. And so we'll continue to seek to diversify funding sources and leverage that as we go forward through this, too.

Perfect. Okay. I think we're out of time. My apologies. All right. Great. Well, thank you so much.

Thanks so much.

Good morning, and welcome to PayPal's Second (sic) [ Third ] Quarter 2026 Earnings Conference Call. My name is Alexandra, and I will be your conference operator today. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference. Steve Winoker, PayPal's Chief Investor Relations Officer. Please go ahead.

Thanks, Alexandra. Welcome to PayPal's Third Quarter 2026 Earnings Call. I'm joined by CEO, Enrique Lores and Chief Financial and Operating Officer Jamie Miller.

Our remarks today include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Our commentary is based on our best view of the world and our businesses as we see them today. As described in our earnings press release, SEC filings and on our website, those elements may change as the world changes. Over to you, Enrique.

Thank you, Steve, and good morning. Today, I will discuss our third quarter progress, our multiple growth engines across PayPal and how our work on cost, technology and AI is helping us move faster and deliver for our customers. We are building on PayPal's unique strength. The trust in our brands our global scale and the power of our two-sided network while expanding beyond Checkout into Financial Services. This is an increasingly important part of our value proposition and a larger driver of our growth.

Financial Services expand our total addressable market, deepen customer relationships, increase lifetime value and allow us to become a more relevant financial partner in consumers' everyday lives. Over the past several months, we have moved quickly to simplify PayPal, clarify accountability across 3 businesses and improve our cost structure and productivity. We now have greater clarity on where our biggest opportunities are and how we will capture them. This quarter, we are beginning to see our strategy translate into financial results. We delivered a solid quarter with Transaction Margin dollars growing approximately 2% and non-GAAP earnings per share growing 8%. We also delivered [ $2 billion ] of adjusted free cash [indiscernible] important contributions to Transaction Margin dollar growth.

Branded checkout TPV growth has remained relatively stable in the 1% to 2% range for 4 quarters despite various headwinds, while there is more work to do, we're encouraged by the improvement relative to the market, continued momentum in the U.S. and strength in BNPL and Pay with Venmo. These results show that our financial performance is increasingly coming on multiple parts of the business.

Last quarter, I outlined five changes we are making to build a stronger, more diversified PayPal. We have made good progress. And today, each of our businesses has a clear plan for how it will contribute to durable profitable growth. First, Financial Services are becoming a much more important part of our business. They already represent more than 20% of Transaction Margin Dollars in 2026 and are growing double digits. For example, we continue to see good momentum in Pay Later with broader distribution this quarter through leading merchants like Amazon in Germany and Austria, American Eagle, [indiscernible] and Dick's Sporting Goods, and the momentum extends beyond Pay Later with strong growth across consumer offerings like Credit, Debit and Tap to Pay as well as Merchant Lending.

Second, we continue to build momentum in Venmo and PSP. We are building on the strength of the Venmo brand to broaden adoption of Financial Services, deepen customer relationships and increase ARPA. The Venmo Debit Card reached 6.7 million monthly active accounts up more than 55% with a record 1.6 million first-time users in the third quarter. We also relaunched the Venmo Credit Card with a differentiated value proposition that rewards customers for splitting purchases with friends. In PSP, we are strengthening our position with large enterprises and leading commerce partners through unified processing and a broader portfolio of premium value-add services, such as Risk-as-a-Service, Payouts and Merchant Lending. PSP volume grew 8%, while value-added services attached increased to 6% from [ 5% ] a year ago.

Third, we remain convinced that a consumer-led approach is the right catalyst for durable profitable growth. We have done significant work to understand how highest value consumers are, what they need from PayPal and how we can deepen our relationships with them and become more relevant in the everyday lives. Transaction Margin Dollar growth is our North Star. To drive that growth, we are placing greater emphasis on monthly active accounts and ARPA among these consumers. That means increasing adoption of Financial Services and improving retention while also making PayPal easier to find and use at the merchants where these consumers shop. Over time, our opportunity is to serve more of their financial needs with Checkout increasingly just one part of our broader relationship. This consumer-led approach also informs how we work with merchants.

As you can see on Slide 5, across many of our largest U.S. merchants, we are improving the checkout experience, strengthening [ presentment ] and partnering on consumer marketing to drive PayPal selection. Where we have implemented multiple elements of this playbook, we are beginning to see improvement in our Checkout performance. We are scaling this approach merchant by merchant and country by country.

Fourth, we are changing how we operate to drive better execution. We have clear accountability, faster decision-making and simpler ways of working. We have reduced head count by more than 2,000 and removed three organizational layers across most areas of the company. We're also using AI and automation to drive productivity. For example, our AI chat agents now support customer service across 190 countries and 6 languages and have resolved more than 24 million [ contracts ] year-to-date. Actions like this are creating capacity to reinvest in our highest return opportunities.

We are on track to achieve our target of at least $1.5 billion in gross run rate cost savings over 2 to 3 years, including more than $700 million exiting the fourth quarter.

Fifth, we are modernizing our technology and leveraging AI to innovate faster and at scale for our customers. We are making solid progress. This quarter, we migrated 7.5 billion customer records to cloud infrastructure. Our new modular risk platform is using real-time data and AI to cut credit decision times [indiscernible] in half in Canada, Italy and Spain. Venmo has started processing select payments on PayPal rails, and Venmo authentication now runs entirely on PayPal's identity platform. These are important steps toward a more unified technology foundation. We completed the global rollout of our new PayPal Mobile App built on modern architecture that will enable faster data-driven innovation. And we are building for what comes next, collaborating with Meta and other AI companies to integrate PayPal through AI personal agents and bring our trusted value proposition to Agentic commerce. We are still early in these changes. This is a multiyear transformation, and there is much more work to do, but the progress we are seeing reinforces our conviction in the strategy.

As I look further ahead, I'm increasingly confident in PayPal's earnings growth potential. Over time, we believe the changes I have described can drive sustainable total company Transaction Margin Dollar growth in the mid-single-digit range. Combined with operating leverage and disciplined capital allocation, including share repurchases, this should enable us to deliver solid double-digit EPS growth. Importantly, we are building the business to make that growth durable. The key is a more diversified contribution across the business. We expect Financial Services, Venmo and Payment Services to contribute a significantly greater share of Transaction Margin Dollar growth over time with each growing double digits.

While we expect branded Checkout TPV to improve, this algorithm does not require it to return fully to historical growth rates. The increasing contribution from the rest of the business can drive total company Transaction Margin Dollar growth in the mid-single-digit range. We also have a significant cost opportunity. There are at least $1.5 billion in savings we have identified, gives us the capacity to both pre-invest and drive operating leverage over time. And PayPal remains a strong cash-generating business, giving us flexibility to invest where we see greatest potential while continuing to return capital to shareholders. Getting there will require investment. Our U.S. playbook is showing encouraging early results. And in 2027, we plan to scale what is working across more merchants in the U.S. and internationally. We plan to invest further in both Transaction Margin Dollars and operating expenses.

We are targeting 2027 non-GAAP EPS growth similar to this year as we position the business for faster, more [indiscernible] growth over time. What gives me confidence is that many of the changes we are making are structural. We have a clear strategy, a simpler operating model and we are improving execution, and we have started to see the results.

Thank you to the PayPal team for your hard work and continued focus. Jamie, over to you.

Thanks, Enrique. Let me start with the financial performance in the quarter. At a high level, Transaction Margin Dollars came in above our expectations while operating expenses were below our forecast resulting in non-GAAP EPS above our guidance. One point I'd highlight is the tangible progress we're seeing from our transformation. That's showing up not only in the cost structure, but also in technology modernization and in the growth areas Enrique discussed, including Financial Services and Venmo. Importantly, the savings are creating capacity to self-fund more of our growth investments, such as improving the consumer experience, strengthening merchant presentment and building and scaling our Financial Services products. And as we learn what's working, we're being deliberate about where we invest more and where we pull back.

With that context, turning to the next slide, let me give you some additional color across the business. Starting with Branded Checkout, TPV growth remained relatively stable with continued improvement in the U.S. for the third consecutive quarter and stabilization in Germany. As we communicated in September, the removal of the EU de minimis tax exemption impacted select merchants and created about 70 basis points of headwind in total. In U.S. Branded Checkout, we're seeing encouraging evidence that the work on experience presentment and selection focused largely on our high-value consumers and the merchants where they shop is having an impact. Over the last 4 quarters, we have seen a significant improvement in [ relative ] share of checkout at the cohorts of merchants where we have implemented our full playbook. We also maintained strong momentum in Buy Now, Pay Later and Pay with Venmo, which outpaced the market growing 25% and 43%, respectively. We're still early, but what we're learning is increasing our confidence in the playbook and helping us be more targeted about where we invest in 2027.

On Venmo, TPV sustained double-digit growth for our eighth consecutive quarter. More importantly, engagement and monetization continue to deepen with ARPA also growing double digits, driven by strong adoption of our monetized products. We're also seeing newer cohorts ramp their product usage faster with a record number of new users activating the Venmo Debit Card within their first 30 days. Monthly active accounts using both the Debit Card and Pay with Venmo nearly doubled year-over-year, building on similarly robust growth in this cohort last year. At the same time, we're also broadening the places where consumers can use Pay with Venmo, travel and college tuition to prediction markets while maintaining strong retention across our established merchant base. That combination of greater utility, deeper product adoption and higher engagement is the model we're building toward with Venmo.

In PSP, our focus is on profitable growth, not simply volume. Braintree's TPV grew 10%, supported by profitable front book wins, high retention and expansion with existing merchants. We're also driving higher attachment of value-added services to our [ pricing ] relationships, which we expect to support margin expansion over time. Third quarter revenue grew 2% on a spot basis and 1% currency neutral with growth in Braintree and Venmo growth as well as FX favorability contributing to performance, offset in part by higher contra revenue investments made in the quarter and the de minimis headwinds mentioned earlier.

We benefited from a lower transaction expense rate due largely to mix and partner [indiscernible], lower transaction loss, reflecting our team's ongoing work to improve and strengthen on-boarding, fraud prevention and risk management capabilities and lower credit loss driven by a reserve release related to expected credit externalization and supported by disciplined underwriting. Transaction margin dollars grew 2% or 3%, excluding interest on customer balances. What's important is that we're increasingly seeing contribution from multiple areas of the portfolio while continuing to fund both Transaction Margin and OpEx investments required to strengthen Branded Checkout and grow Financial Services, Venmo monetization and PSP value-added services attach. That's the more diversified growth model we're building.

Moving down the P&L operating expenses, we're beginning to see tangible benefits from the operating rigor we've put in place and faster progress on the transformation, including increasing spans of control, reducing management roles by more than a quarter and rightsizing procurement spend. Non-transaction operating expenses grew just 1% in the quarter and helped drive non-GAAP operating income growth of 3%. That said, I would not simply annualize the third quarter expense performance. We intend to remain disciplined on costs while investing where we are seeing results, in places such as Financial Services, product growth, consumer life cycle marketing and specialized sales teams. The combination of stronger transaction margin performance and lower operating expenses resulted in non-GAAP earnings per share growth of 8% to $1.45 above our guidance.

Our cash generation remains a strategic advantage. Adjusted free cash flow, which excludes the timing impact from the origination and sale of [ later ] receivables was $2 billion. We completed $1.5 billion in share repurchases, bringing the trailing 12-month total to $6 billion. More broadly, our strong liquidity and cash generation give us the flexibility to invest in the business without sacrificing our ability to return significant capital to shareholders. That's particularly important as we look towards 2027 and selectively increase investment behind the opportunities where we're building the greatest conviction.

Turning to guidance. For the fourth quarter and the full year 2026 our year-to-date performance demonstrates continued progress across PayPal even as we execute significant organizational change with increasing clarity and confidence in the growth plans for each of our 3 businesses. With that as a backdrop, we are raising guidance for the full year.

We now expect Transaction Margin Dollars to increase to approximately $15.7 billion or $14.6 billion, excluding interest on customer balances. Mid-single-digit growth in non-transaction operating expenses and non-GAAP EPS to increase to approximately $5.60. Our guidance now includes at least $6.5 billion of adjusted free cash flow and continues to incorporate approximately $6 billion in share repurchases. For Online Branded Checkout, we continue to explore single-digit TPV growth on a currency-neutral basis for the full year, in line with our prior expectations. This assumes that headwinds in Europe, including the impact from the removal of the de minimis exemption continue to persist and result in similar 1% to 2% online branded growth throughout the fourth quarter. We remain on track to achieve at least $1.5 million in gross run rate cost savings over the next 2 years to 3 years, and are increasing our expectations exiting the fourth quarter to a run rate of more than $700 million.

As we've shared, we intend to reinvest a significant portion of these savings into our highest priority growth initiatives while improving operating leverage over time. For the fourth quarter, we expect low single-digit revenue growth on a currency-neutral basis, slight positive growth in Transaction Margin Dollars. TM$ excluding interest on customer balance to be slightly positive and flat to low single-digit growth in non-transaction operating expenses and non-GAAP EPS of approximately $1.43.

In summary, we're seeing encouraging signs that the changes we're making are translating into better performance across the business. We have more work ahead of us, but we're operating with greater clarity and discipline, and we're building a stronger foundation for more durable growth and stronger financial performance over time. I'd like to wrap up by thanking the PayPal team for everything they've accomplished this quarter.

With that, Steve, let's go to Q&A.

[Operator Instructions]

[Operator Instructions] Your first question comes from the line of Andrew Schmidt of KeyBanc Capital Markets.

Maybe just start a little bit higher level, just given your prior comments about strategic alternatives, you and the Board obviously see more value than whatever offers were on the table. Could you just talk about what's driving your view of intrinsic value? And then, of course, the confidence in achieving that? That would be helpful.

Sure, Andrew. Thank you for the question. So let me share that we have strong conviction in our ability to execute the plan that we have outlined in our prepared remarks. And to achieve sustainable double-digit EPS growth in the midterm. And this will be driven by, first, sustainable mid-single-digit transaction margin growth, driven by Venmo, Processing and more modestly by Branded Checkout, all supported by the growth of Financial Services that we -- and we have highlighted how critical we think that part of the business is. We expect also to see operating leverage as we drive the cost reduction program. And of course, we will continue to utilize our strong free cash flow to drive share buybacks and, in some cases, selective M&A that will help us accelerate our plan.

But as you said, the Board and the management team have a clear objective to maximize shareholder value, and we have been and we will be open to analyze objectively any option that is presented to us, and we will always choose the alternative that will create more shareholder value. And at this point, that alternative is to execute our plan, and the team is fully focused on driving the [indiscernible] that we have outlined in the call.

Your next question comes from the line of Dan Dolev with Mizuho.

Really nice work here on the OpEx and the [indiscernible] congratulations. I wanted to talk about Venmo. It keeps growing and it looks strong, I think, in the double digits. I mean -- how can we make this a bigger part of their portfolio? And obviously, the usual question on monetization and great work again.

Sure. Thank you. I'll take the question. So our goal, as I briefly mentioned in the prepared remarks, is to make Venmo increasingly central to our customer's everyday financial life. And we are doing that by building from the strength that we see today in the business and expanding into Financial Services. The growth that we see today is driven by three things: new experiences. And for example, this quarter, we launched the ability for our customers to do P2P transfer by scanning and splitting [indiscernible] which is having very well reception by continuing to invest in Financial Services that help us to monetize better our customers. And just to mention, only 23% of our customers are using today some of the Financial Services we have today. And this quarter, we saw very strong growth of the Debit Card with more than 60% growth year on year.

And finally, we are seeing also very [indiscernible] progress on Pay with Venmo and Pay with Venmo or TPV grew more than 40% this quarter. So the growth in the future will be driven by continuing to drive these areas, and we expect to continue to see double-digit TPV growth for Venmo in the coming years. What is very exciting for us is that when we look at ARPA, that is going to become one of the key metrics of the business going forward. And we look at -- and we benchmark ourselves with other companies in our space, we have a 4x, 5x opportunity to increase ARPU, which gives us both the conviction about the opportunity and shows us where we need to invest and where we need to grow. So we expect Venmo to continue to grow, and the result just show the potential the business continues to have.

Your next question comes from the line of Tien-Tsin Huang with JPMorgan.

Just there was good color here on Financial Services. I was hoping maybe you can update us on the product road map here for Financial Services? How do you see Financial Services adding to transaction margin dollars in the near term or even the midterm and is the bias still to stay balance sheet [indiscernible].

Let me start and then maybe Jamie wants to complement some of the comments. So yes, we see -- we continue to see Financial Services as a key driver of future transaction margin dollar growth and this is why we highlighted it during the call. And this is true for all segments. So it's true for consumers and merchants, but also for the 3 businesses. Both for Braintree, for Venmo and for PayPal itself. And within Financial Services, we include things like Buy Now, Pay Later, Debit and Credit. Today and in the future, these businesses or these products offer attractive economics, they open a larger TAM and help us to complement our value proposition to customers.

In fact, as I was mentioning before, ARPA is going to become a key metric for us going forward. And we see that when consumers use Financial Services, there [indiscernible] between 2x and 5x bigger than for those consumers that don't.

[indiscernible] continued to invest in this space, for example, with Buy Now, Pay Later, we are going to be extending the portfolio of offerings that we have, both in terms of products and also in terms of geography, to continue to complement our offer in that space. We'll be offering cards that will have the flexibility of Buy Now, Pay Later, so we can extend the value proposition from online to stores. And you will see us expand the portfolio of different credits offerings that we have. So again, a very important business for us, where we see a lot of momentum and a lot of demand from our customers to offer.

Yes. And I just chime in on the funding question. We have had a balance sheet-light strategy towards credit funding over the last couple of years. And what I'd say about the next few years is we'll continue to take a balanced approach, between on balance sheet and off balance sheet growth. We have a lot of flexibility in our funding sources, and we've demonstrated that through the European Buy Now, Pay Later, the U.S. Revolve partnership we have. The U.S. [ Pay in 4 ] funding program that we have underway that we started last year. And I think what underpins that, which is really important is that we've got really strong credit underwriting and very attractive paper. So while we'll continue to use a balanced approach with both on and off in some case, retain the economics, in some cases, share those. I think what's important is we have the flexibility going forward to manage that and navigate that depending on what we're doing.

Your next question comes from the line of Timothy Chiodo with UBS.

I want to touch on the comments you made around collaborating with Meta and some of the other AI agents. I know from prior discussions, some of the advantages that PayPal might have would relate to the transaction history that you bring to the table. And then also back to PayPal does provide both consumer and merchant protections. I was hoping you could expand upon those or maybe other reasons why PayPal may be well positioned for Agentic Commerce?

Yes, I'll take that one. We really see Agentic commerce as a great opportunity in the company. So we really are -- make this a priority for us, both in terms of the internal work that we do and in terms of partnering with other companies such as Meta. The key advantage that is really driven by our core value proposition to consumers and merchants. When PayPal started, the key value proposition was around trust and security. This was needed in e-commerce. This will be even more -- needed more in agentic commerce. And what we are doing is translating that value proportion into the new world. If you think about consumer agents that we'll be buying from [indiscernible] from merchants, both will have to validate that this is a real consumer that can pay. This is a real merchant that has the product and that is the value that we see PayPal playing going forward. So it's really all about trust, and about the security that we will be providing both to merchants and to consumers.

And this is why we are working with all the key leaders in this space on the -- for personal agents to make sure that consumers can transact using PayPal and using AI us as kind of the key vehicle to make sure that these transactions are real. And we look at it at the beginning because what is true for commerce will be expanded to other types of the portfolio of of activities that we provide to customers like P2P or peer-to-peer transfers. All this is part of the value proposition we bring to customers. And this is why we are so excited about the opportunity that AI brings to PayPal.

Your next question comes from the line of Harshita Rawat with Bernstein.

Can you maybe expand about the market dynamics in Europe? You have the de minimis tracks and competitive pressures in certain markets. But you're also investing in the consumer value position, things like Buy Now, Pay Later. So what's your confidence level with respect to improving brand growth in Europe? And also, Jamie, what's the expectations on the de minimis for the fourth quarter? I know you said headwinds persist, but I just wanted to kind of double check that.

Sure. And maybe I'll start with the last part of that first. Our expectation on the EU de minimis tariff impacts is that [indiscernible] into the fourth quarter. When that happened in the U.S. last year, it tended to dissipate within a few months, actually. This, we're still seeing the impacts from the tariff policy change in October and we do expect that to last through the fourth quarter. If I pull back and really look at the market dynamics in Europe and maybe I'll talk through that. And Enrique, maybe you want to talk about the invest side of it.

The core European markets outside of de minimis, really are, I would say, relatively consistent this year and to a degree, stabilizing and in some cases, improving. You look at Germany, for example, that has been stable all year for us. And I would say, as we're moving through the third quarter, I would call it slightly improving. We launched Buy Now, Pay Later in Germany and Austria over the last couple of months, and that's off to -- with Amazon, and that's off to a really nice start. The U.K. continues to be challenging, but it's been consistent this year. And Italy, [ France ] are stable and good growers. So I think what's improving is exactly your question though. We've spent a lot of time in the last 6 months with Enrique, focusing on our country-to-country approach and really strengthening our consumer teams in Europe and are now actively positioning to take the playbook that we talked about on the call with merchants into Europe next year. And all of this is really important to our continued transition in Branded Checkout. But Enrique, you may want to comment a little bit more on the investment side of it.

Yes. I think what we have done in Europe is really to invest to create the right local infrastructure, especially to manage our consumer business. We didn't have teams, local teams that understood the local trends that were [indiscernible] drive progress and activities to drive consumer demand. And this is what we have been building during the last 2, 3, 4 months, and we are starting to see the results. As Jamie mentioned, our relative performance in Europe improved. This doesn't mean that we don't have more room for improvement, which we do, and we will continue to do. But we are positive about the progress that we have seen. And especially, as we see the progress that we have made in the U.S. and we highlighted in the call, the progress that we have made with some of our key merchants, applying that same playbook in Europe to help us to drive growth and to continue to improve the performance in those countries.

Your next question comes from the line of Bryan Keane with Citi.

I just also want to follow up on international. It looks like the TPV is relatively flat, the growth on FX neutral. But the revenue growth slipped to negative 4% growth on an FX-neutral basis. It sounds like there's a lot of stability in Germany and Italy and some of the European markets. What's driving, I guess, international down further? Is there Asia markets that are weakening? And then how long will it take to get back to normalized positive growth in international as we get into next year?

Yes. So the TPV side of things, we saw some translation minor impacts there. But when you start to look at revenue and in particular, international, that's where you're seeing the impact of the EU tariffs and Branded Checkout. And you have to remember that the number I gave you on impact from the tariffs is 70 bps to Branded Checkout, that's a global number. It's not the international specific numbers. So that number is bigger when you start to apply it just to international revenue. But that's not really the primary difference there.

And then when you start to look at international, going into next year, we've been encouraged by some of the growing -- growth that we've seen. And I mentioned before across Germany, Italy, France and a few other parts of Europe. But I think more importantly the playbook that we started rolling out really over a year ago around not only experience presentment and selection, but also around Buy Now, Pay Later and really reaching into the consumer and greater penetration. While we started that in the U.S. that is moving to Europe. And you're seeing some of that with the actions we talked about with expansion of the Buy Now, Pay Later portfolio across Europe and across other places and with respect to increasing levels of penetration around the [indiscernible] book as well.

Your next question comes from the line of Andrew Bauch with BMO Capital Markets.

I just wanted to hone-in on the '27 transaction margin dollar algorithm. I know you outlined the eventual path to mid-single digits growth. But then you also said that '27 was going to be an investment year. I guess what should we expect for the TM$ growth to look like in '27 specifically? And what are the -- like the biggest bridges between the 2% growth you're at today in the mid-single-digit target?

Okay. So let's first talk about the mid-single-digit point of view is really around our medium term, so over time point of view. And if I start with that, as Enrique talked about before, we [ expect ] Transaction Margin Dollar growth over the next coming years, a more balanced composition with Venmo, PSC and Financial Services increased growth over time. And I think importantly, it doesn't require Branded Checkout to get back to historical growth levels -- levels to really see that mid-single-digit growth. But when I look to '27, I think what I'd say first is it's a little too early for us to give '27 guidance. We'll do that at our next call in February.

But you've seen from us this year, nice performance across multiple areas. So we've seen Branded Checkout stabilization. We've seen Venmo, we've seen processing growth. And we do expect further Transaction Margin Dollar and OpEx investment in 2027 and if I level up, what we're really targeting as a profile is similar non-GAAP earnings per share growth next year what we are guiding to this year. So that's probably how I would talk about it, and '27 being relatively consistent with how we've operated in '26. We are making good progress. Our focus is on building momentum and looking at '28 and beyond.

And maybe, just let me emphasize these last two comments. We think we have an opportunity to continue to invest in the areas where we're seeing progress, whether it's transaction margin and [indiscernible]. This is what we are planning to do we think will be critical to drive stronger growth in '28 and beyond. And despite of that we expect and we are targeting to grow EPS at the same rate as we did this [indiscernible] will this year

Your next question comes from the line of Sanjay Sakhrani with KBW.

I guess when I look at Slide 5 and those cohorts that seemingly are headed in the right direction. When we look at the difference between like the first one and the last one, there seems to be a [ bifurcation ] between when you apply to a direct merchant versus a marketplace. right? So I'm just curious like what are the nuances because it seems like a lot of the technologies are implemented there. So I'm just curious, is it because the marketplace has other options for payment and that merchant doesn't. I'm just curious, as we think about the opportunity ahead and how you implement these changes, like where the opportunity is most significant?

And then just a quick follow-up, Jamie. Just as we think about the comparisons this year versus next year. It seems like the comps are much easier next year. So shouldn't we expect a little bit of an acceleration in TMD growth because the comps are easier. Or maybe you could explain sort of how we should think about it?

So let me take the first part of the question on North America. When we look at our playbook, the book has different elements. One element is to improve the experience and to get the merchants to use the latest checkout pages. Another element is to integrate in the offer Buy Now, Pay Later and some of the other Financial Services. Another element is to build co-marketing activities with the merchant. Within the graph, and we don't have the same -- exactly the same formula applied to every merchant. It depends on specific conditions of the merchant and what are the economic situation and the interest that we work with. And this is what is driving the valuation variation across the different customers that you have in the chart.

We thought it was important to share this chart because it shows the trend. And yes, there are different [indiscernible] merchant. But the important thing is how the overall TPV growth is growing and how we are also starting to grow our relative share in this [ account ]. And we have great examples of the progress that we are making, we don't specifically mention them in the call, but for example, with one of the leader U.S. sports entertainment platform where we drove and we renewed our partnership at the beginning of the year, we are seeing more than 40% growth in the last 6 months with Venmo as well growing more than 50%. With one of the leading U.S. omnichannel retailers, we expanded our Pay Later offering to them and growth of BNPL grew from 7% to 20% with significant growth of monthly active users. So we have many examples where we see that the impact of the playbook that we have invented is really starting to gain traction. And again, this is why we think continuing the investment and continuing the work is going to be [indiscernible] for us going forward.

Sanjay, when you look at, in particular, fourth quarter or 2027, I would just echo what Enrique is saying. We are really encouraged by the results we're seeing, but it's early. And we've got more work to do. And one of the things I would mention is that in the U.S., in particular, we saw nice sequential growth over the past few quarters in U.S. Branded Checkout TPV growth. So we're seeing good signs, but we also don't want to get ahead of ourselves. We are underwriting these investments generally in Branded Checkout to about a 2- to 3-year time horizon. And on the largest merchants, it really is like 3 years. So it's going to take some time for these to come through. And as we've said before, we're beginning that process in Europe, and we're excited to see where it goes and go from there.

Your next question comes from the line of Darrin Peller with Wolfe Research.

Just a quick two-part on investments in general. First, for Enrique, on M&A, just if you can give us an update again, you touched on it earlier, but your appetite for M&A in terms of size, timing and type, what you're seeing? And then really, Jamie, when we think about the investments you're talking about for next year, I mean, again, you came in strong [indiscernible] better at about 1% growth, I think, a little below what we had thought for OpEx expectations. But how should we think about margin the next year in terms of what you're building into that similar EPS profile?

So let me start on the M&A side. And I'm going to start by saying that -- our plan is to maintain our approach, significantly return capital to shareholders through share buybacks and dividend. But that over time, we believe that M&A should also play a role value creation. Any M&A action that we will do will have to go through what I call three filters. Filter#1 is strategy. It will have to support the strategies that we have outlined, for example, to drive growth of financial services or accelerate the growth of Vermo or processing. That's clearly aligned to the strategy that we have explained. Second, it needs to have strong financial case and a strong financial return. And given that share buybacks that we believe that our share is undervalued the minimum value, of course, will have to be -- provide more value than just buying shares, even [indiscernible] the model that we have.

And third and very important, we need to also have a very strong operational plan, and we'll have to have the conviction and the plan that we'll know how to impact the company and how to extract the value that the financial case will bring. So these are the three filters that we will apply in any case. We will remain very disciplined. But with M&A, we can accelerate the plan that we have been discussing today.

Great and then Darrin, with respect to 2027 investment, I guess what I'd say is we've had nice performance in the third quarter, and it was much better than we expected, and we expect to have a good profile in this -- in the fourth quarter as well. But I would not run rate the second half OpEx across '27. While we're off to a really strong start, we are ramping investments along the lines of a lot of the things that Enrique and I've talked about here product build, market build, marketing and other things of that. And I think one of the things you're going to see is it's hard to fully synchronize the pace of the cost out with the pace of the investment, and you are going to see some mismatch across the quarters. But overall, if I look at the '27 profile, when you look at transaction margin, when you look at OpEx, when you look at EPS, like I said before, we expect a roughly consistent profile, and we'll unpack that and get into more specifics on the call in February.

Your next question comes from the line of Dan Perlin with RBC Capital Markets.

I wanted to just hit on PSC for a second. It sounds like part of that strategy is to continue to drive higher attach rates for value-added services. So I guess the first part is just what does that sales motion look like as we sit here today happy to invest in that going forward? Or are you kind of where you want it. You just need to push it harder.

And then I thought I heard you say the percentage of that was high single digits. So if there's any clarification on that, that would be great.

So let me take the first part. So in PSP, what we need to do and [indiscernible] with the biggest opportunity is from one side to continue to drive growth or what I would call the basic processing capabilities and we've been making very good progress and making it profitable during the last few quarters, but also to improve attach of value-added services. Services like Payouts or Risk-as-a-services, our Risk-as-a-Service or Invoicing. These are all great services that provide a lot of value to our customers -- and either we have not been able to attach them properly or we have not been able to monetize them properly during the last quarter. And that's going to be a key priority for us going forward.

We are investing not only in the products themselves, but especially in a specialized sales force that will drive an attach that will have a unique code to improve attach and to help value-added services. I want to acknowledge that we have started to make progress. We grew our attach from 5% to 6%, so year-on-year, 1 point, but we have much more room for improvement, and this is where we're going to be focused.

Alexandera, we have time for one last question. Can we just put one more in, please.

You got it. Your last question comes from the line of Jason Kupferberg, Wells Fargo.

So nice to see some of the broad-based stabilization. Obviously, pockets have improved in the business. I did want to come back to the topic of branded growth. I know we're talking about Q4 being in this kind of steady 1% to 2% range, and you are assuming that the EU tariff headwinds continued, but you did also talk about some U.S. momentum. So just curious why Q4 wouldn't potentially accelerate? I know you've got a materially easier compare? And maybe if you can just quantify some of the U.S. acceleration and recent [indiscernible] that would be great.

Sure. I mean the short answer on the fourth quarter is that we expect the EU tariff headwind to continue. And we're really planning for consistency -- if I unpack that a little bit, the forecast is really based on our view of historical performance, and our view of the market. And the holiday season is more heavily retail, but we have a really good and strong depth in services, travel and some of the other verticals. And we've got really good growth rates in areas that we're deep.

But the EU de minimis, we assume that continues to impact us. As I mentioned before, Europe has been consistent year. But it's an area we're watching with some of the macro [indiscernible] and the EU de minimis that I mentioned. And we're really encouraged by the U.S. merchant playbook work we've done, and we do believe that we're entering the holiday season better position than we were last year at this time. But it's all still very early, and we've got more work to do ahead. And I would just say that as we take it all in, that's what's leading us to the guide around the 1% to 2% for fourth quarter.

Enrique, any final thoughts?

Yes. I want to close by first acknowledging the progress that we have made so far. Last quarter, we outlined five key priorities for the company, and we are making progress in all of them. We have talked about the progress we have made in Financial Services that are growing double digit, and especially around areas like BNPL is showing really our ability to expand and to grow in this area. Second, we have talked about the progress we're making with Venmo and PSP, significant growth, both on revenue and transaction margin and great plans to continue to drive that going forward. Around Branded Checkout, the business has stabilized. We have a clear view, work is a playbook that we need to apply to continue to drive growth and especially centered around high-value customers, we see the -- what we need to do, and we are going to continue to do that in the coming quarter. And finally, both from cost amplification and embracing AI, we have made tangible progress as the results show.

So good progress made in Q3 that show that we are in the right direction, more work, too. But thank you to the PayPal team and also thank all of you for participating with us today.

Thank you. This concludes today's conference. Thank you for participating. You may now disconnect.

All right. We're 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.

Thank you for having me here.

All right. Before we get started, I'm 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 uncertainties that could cause actual results to differ materially from these statements.

All right. Enrique, you are roughly 6 months in. It's been a busy first few months. So it's a 2-part question. What has genuinely surprised you positively or negatively since moving from the Board seat to the CEO seat. And then when you compare your day 1 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 seen, 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's strength and scale that we have, the number of customers, loyal customers that we had were really difficult to replicate. The global presence that we have and the ability to transact in multiple countries at that scale was really a very valuable asset. And as I start to dig into the company, I realized that there were some things that needed to be fixed.

First of all, and I have talked about this other times, if the company was operating. We had a fairly complex operating model with 4 dimensions product customers, regions and functions that really got in the way of executing and performing effectively. And then -- and one of the big learnings also as I started, was to realize that even if one the key strengths of PayPal as a company is the fact that it's a 2-sided network, the majority of the investment, the majority of the attention of the company for some time has been on the merchant side, not on the consumer side and changing that has been one of the key priorities that we have driven during the last month.

So as I think about what we have done during the last 6 months, I think they are aligned to 5 big changes that they think we need to drive in the company. Change number 1 is a change in the business model. We have been relying on branded checkout as the 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.

Second big change is the opportunity that we have to grow both Venmo and Braintree, 2 growing markets where we see opportunities to do better. And 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. Maybe 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 stand-alone performance, what are you measuring those alternatives against?

Sure. First of all, as we have said before, we -- management team and the Board have 1 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, have confidence in the strategy that we have and use this as a benchmark to compare any other alternatives. And as alternatives have come and may come in the future, this is going to be the benchmark that we will have, how that alternative compared to the value that we think we're going to be able to create and 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 feel 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? And then 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, that is 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 0.5 point and 1 point of impact on TPV growth. We have seen a bigger impact and probably happening for a longer period of time that 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% to 2% range, driven by this impact that we see happening in Europe.

Despite of 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. So it sounds like a 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 you're trying to check out that 1% to 2% range. Okay.

Very helpful. All right, 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 long-standing market share and 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 reacceleration in that market over the next 12 to 18 months?

Sure. I think 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 market and the focus that we are putting on the consumer side of the network, revitalizing that, focusing on high-value customers, it's happening everywhere, but especially in Germany given the relevance that we have. We're also very pleased in Germany with the growth that we see in the 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 going as we're expecting.

And then finally, from a consumer perspective, we are going to be launching also in Germany, our loyalty 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. And then maybe just talking about the broader dynamics in checkout. Growth has been hovering in that low single-digit range. It sounds like it's going to remain there in the third quarter. How is the execution on the checkout product changing going forward? And then 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 a shift to 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 and by understanding who they are, understanding what they need and offering them -- offering that in terms of products and programs is what we see the opportunity to really accelerate the growth on the transaction on the [ BXR ] side. These customers value mostly 3 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. And finally, they offer -- they value also the ability to maximize the value that they do with their transaction. And this is why launching a loyalty program that we will use to provide special offers to them is a key part of our strategy.

And 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 or in 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. So let's talk a little bit more about that. One of the most -- 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? And when you think about the investments in consumer value props this year, do you view this as a onetime step up in consumer value proposition? Or is this a start of a multiyear 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 presentment and selection is important, but it's as important, 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 what this consumer is. Also, there are some onetime 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.

But I think the key thing is that PayPal is a 2-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 for the -- of the company with these local consumers, for example.

Yes. And so you've talked a lot about those consumer investments 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 at Venmo and the opportunity that we have on that front are a more significant part of the marketing or consumer investment will be to the PayPal customers.

Got it. So sticking with this topic, I wanted to maybe talk through the increased focus on buy now, pay later. This has been an area where consumers have adopted rapidly around the world. PayPal is a large player in space, particularly in Europe where a lot of your buy now, pay later 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?

We -- 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, we also -- it's also much better for the company. The size of the ticket is bigger, the frequency of customers buying is bigger. So we really prefer customers buying BNPL than in the traditional way. So we are going to drive customers to buy this way, but 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 the teal line of business.

Yes. That makes sense. So I guess Venmo has now delivered 7 consecutive quarters of double-digit TPV growth. Revenue crossed $1.7 billion in 2025, growing roughly 20%. You've also seen momentum in products like Pay with Venmo, the Venmo debit card. How are you thinking about the growth algorithm in Venmo? And from a product perspective, are there any obvious areas where you would like to build out further to drive more engagement with the products?

Yes. I think we have a clear direction to grow Venmo, which is to make it more relevant to our consumers from a financial perspective. And the work that we have been doing with payments, the work we have been doing with some of the offerings in credit and debit card 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.

So I think we're really optimistic about opportunities we have in that business. And a lot of the products that we will be offering for them eventually will be offered also in PayPal. So we will be expanding both businesses in a similar direction.

Yes. From a product perspective, is there -- 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 is still a relative low connect rate is growing really fast. We grew in Q2 more than 70%, but the room for improvement is very significant. We're also very pleased with the progress we have made on Pay with Venmo, expanding that to more merchants. It's another great opportunity that we have. And these 2 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 was kind of coincided with improved economics. I think you've 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. So 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?

Yes. I think there are multiple questions in your question. So 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, services like payout, 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're doing to improve that is to create a specialized sales force that we'll be able to communicate to our customers the value of those services and make sure that we monetize them in the right way. And 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.

And then when you think about the time lines for seeing value-added services contributing a greater share of the incremental revenue or gross profit growth in that business. What's a reasonable expectation?

I think during the end of the year, but especially through '27, we need to start seeing tangible progress in that space, especially as the sales team starts to be active and start, kind of, communicating the value proposition to customers.

And 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.

Got it. 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 2 to 3 years. You've also been clear that a significant portion of that gets reinvested. $1.5 billion is 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 about -- around the best marginal return of those dollars?

Let me talk first a bit about where we see the saving opportunities, and then we will do -- we have identified 3 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 2 months. And by removing -- 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. And again, this is something that we have started will drive the next wave of savings. And third is automation and AI. There are many areas in the company, but that were by adopting AI in a more aggressive way, we can significantly reduce our cost structure. And we have started to do that in areas like support of co-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 buy now, pay later offerings that we have. We are going to be investing as we were talking before, in addressing better our high-value customers. It 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 2 years, we will have a fully new stack that will enable us to expand and to grow much faster.

So there are many areas where we think we need to invest. And these investments are really designed to drive sustainable growth for the company.

And then when you think about the other side of some of those investments in 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?

See 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 be -- 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's obviously been a big topic of conversation over the last couple of weeks as some of the new Agentic models have kind of come to market. we're just so early in that build out. It's hard to know where the focus should be at any given point. So 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 Agentic commerce grows. And today's difficult to know exactly what will be the model. But what we are certain is that trust will be critical in that model and trust from 2 different perspectives. Trust from the consumer perspective to know whether the merchants, they will be interacting are real merchants and trust from a merchant perspective to make sure that the consumers, they will be interacting on real consumers and that the agents on both sides are validated.

This -- validating that and creating that trust is the position that we want PayPal to take. And if you step back for a second, this has been the position that we took many years ago in e-commerce. So for us, it's kind of 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. And this is where our R&D investments and our innovation and focus, 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 really Agentic commerce to grow is not a technology is a 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, it's going to be critical for us to be able to copy the space that I mentioned before.

I guess with a different model or a different competitor in the Agentic space kind of 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 the trust layer and create a trust infrastructure, which we think is going to be what will help us to build a differentiated value proposition in the future.

Got it. So one of the major changes and 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's easier for investors to maybe just dismiss this as improving or a change of the disclosures, but I think you've talked about this much more from an operational standpoint. So 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 3 different businesses: checkout processing and Venmo and consumer financial services. And 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 investments decisions were made on where deals needed will be approved or where changes were required. We have made it very clear that the leaders of the 3 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 don't have 100% of the vote. Means if at the end, there is not alignment, they will make a call. But of course, we need to listen and interact with the functions and with the rest of the company because there is value in that exchange of ideas. And this has been a big change. And this is true as we are building out the plan for '27. 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. And having been running companies for a long time, accountability makes a big difference. It's 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 picking up 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 does that -- 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 with -- 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.

Yes. Makes sense. I look forward to seeing some of those new disclosures always fun to dig into. I had a couple of minutes left and I wanted to dig into maybe some of the specific product initiatives PayPal Everywhere and PayPal World were kind of 2 products that I think we're kind of reigniting that product engine within the PayPal business. And so either one or maybe both, I was wondering if you could give an update on how you're 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. And 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.

Yes, makes sense. Just on the PayPal Everywhere side?

I think it's 1 of the key financial services that we will continue to offer. We have made good progress with the debit card. It gives us also a presence in store. And we think there is something that we need to continue to emphasize and continue to drive next year..

Okay. Another one I wanted to hit on was just on the advertising strategy. I think obviously, PayPal has tremendously large data asset within the firm. When you think about that product, how is the scaling performing against the original expectations? And what would give you confidence to lean in more into that strategy?

I think one of the key components of our strategy to address and to maximize value for high-value customers. And especially as we connect the data, the information and data we have with them and the insights we have of them with the merchants, they will be buying. And that is one of the ways we are doing that. The business has been growing nicely. It's still relatively small. But as we look at how to continue to improve transaction margin for 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 on the 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 kind of broad-based capital return strategy. As you're 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, we'll be totally related to the growth strategy that we'll have defined. It will be managed in a very real 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 and -- but 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 leave the audience with.

I think more -- we are pleased with the progress that we have made during the last 6 months, 6 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. We look forward to following along. Thank you for joining us today. Appreciate it.

Thank you.

Good morning, and welcome to PayPal's Second Quarter 2026 Earnings Conference Call. My name is Sarah, and I will be your conference operator today. As a reminder, this conference is being recorded.

I would now like to turn the program over to your host for today's conference, Steve Winoker, PayPal's Chief Investor Relations Officer. Please go ahead.

Thanks, Sarah. Welcome to PayPal's Second Quarter 2026 Earnings Call. I'm joined by CEO, Enrique Lores; and Chief Financial and Operating Officer, Jamie Miller.

Our remarks today include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Our commentary is based on our best view of the world and our businesses as we see them today. As described in our earnings press release, SEC filings and on our website, those elements may change as the world changes. Over to you, Enrique.

Thank you, Steve. Good morning, everyone. I am encouraged by the progress we made over the past quarter. We moved quickly to simplify our organization, operate more efficiently, advance our strategies across our 3 businesses and improve our cost structure. We are making steady, tangible progress in our transformation and the actions we are taking are positioning us to accelerate and diversify growth across the company while improving profitability and cash flow over time.

In today's update, I will cover the highlights on the second quarter. Our strategy across our 3 businesses and progress on our cost savings and technology modernization initiatives. Let me begin with some highlights from a good second quarter. We delivered results that exceeded our expectations reflecting disciplined execution across the business. Revenue increased 5% and transaction margin dollars grew 1%. Excluding interest on customer balances, TM dollars grew 3%, driven by continued strength in Venmo, Credit and Braintree, while at the same time, increasing our growth investments this quarter.

Non-GAAP earnings per share exceeded our guidance, declining 1% year-over-year to $1.38. Branded checkout total payment volume continued to stabilize, increasing 2% on a currency-neutral basis, consistent with last quarter. Venmo and Braintree once again delivered strong momentum with total payment volume growing in the mid-teens. We also generated strong free cash flow, providing flexibility to continue investing in the business while returning capital to shareholders through our repurchase program and dividend.

Our performance in the quarter gives us confidence as we move into the second half of the year. As a result, we are raising our full year guidance for transaction margin dollars and non-GAAP EPS. We're also raising our expectation for online branded checkout to the low single-digit range for the year. We have embarked on a multiyear transformation. We are confident in our ability to create long-term shareholder value that builds on our trusted global brands with a matched customer scale, unique data and a 2-sided open payments network.

At the heart of our plan are 5 important changes. We are diversifying our business model beyond Checkout with financial services across PayPal and Venmo, becoming the largest driver of future transaction margin growth. Expanding into financial services meaningfully increases our addressable market and create new opportunities for long-term growth. We are accelerating the momentum of Venmo and our payment service provider businesses, both of which are already delivering strong growth. We are also rebuilding the consumer side of our network through investments in technology, data and local capabilities, allowing us to better serve our highest value consumers while creating more value for merchants.

At the same time, we have simplified our operating model around 3 businesses with clear accountability and priorities to improve execution. And our investments in AI and technology modernization has focused on clear business priorities and measurable outcomes that will help us accelerate innovation. Taken together, we believe these changes position PayPal for stronger execution, more diversified growth and greater long-term shareholder value.

So while there is still important work ahead, we have established a strong foundation. Our priorities are clear. Our investments are aligned with those priorities and we are executing with discipline to build a stronger, more competitive business.

Let me walk you through how we see our strategy unfolding over time. We have already begun strengthening the fundamentals across our business, focused on the changes I just outlined, and this work will continue into 2027. At the same time, we are laying the groundwork for our next phase of growth by investing to deepen customer engagement and increased lifetime value. These investments are already underway with momentum expecting to build in the second half of 2027 and continue throughout 2028 as new capabilities, scale across the platform.

Looking to 2028 and beyond, we expect our next generation innovations such as agentic payments and digital identity to become increasingly meaningful contributors to our business. We believe these are areas where the industry will be fundamentally reshaped and we're investing today to position PayPal to help define what comes next. Let me now turn to the strategy for each business.

Let me begin with Checkout Solutions and PayPal. We believe coaching the consumer at the center of our strategy will strengthen our network, improve our merchant value proposition and drive long-term growth. Over the past quarter, we have developed a much deeper understanding of how consumers engage across our platform. That work has given us greater conviction about where we can create the greatest value for consumers, merchants and PayPal.

We are sharpening our focus on our highest value consumer segments because they represent our greatest opportunity for long-term growth. This is a large and growing cohort of highly engaged consumers whose active accounts and average revenue per active account are growing faster than the rest of our customer base. They account for the majority of our payment volume and improving how we serve them is our first priority.

Our objective is to make PayPal a more valuable part of our customers' everyday financial life. The more value we create for consumers, the more value we create for merchants. Checkout remains foundational, but financial services, including buy now pay later, Credit and other capabilities allow us to deepen customer relationships well beyond the transaction. By retaining this customer longer, increasing our share of wallet and attracting more consumers like them, we can improve customer lifetime value, engagement and durable volume growth.

Over time, we'll extend this approach to adjacent consumer segments that value payment flexibility, security and savings, making PayPal an integral part of their everyday financial life. Executing this strategy requires a much deeper understanding of our customers. As we modernize our technology platform, improvements in our data and AI capabilities are enabling levels of segmentation and personalization that simply weren't possible before. Those capabilities help us deliver more relevant experiences, better match products to customer needs and invest where we see the greatest opportunity to create value.

We are putting this strategy into action by improving the end-to-end customer experience and investing behind the products capabilities and markets where we have the strongest competitive advantage. Buy now pay later is one example where we are expanding both distribution and presentment. This quarter, Temu introduced BNPL in Canada, expanding availability to 8 markets globally. And Home Depot Canada launched upstream presentment of our BNPL offerings.

PayPal Ads is another example of this strategy in action. By leveraging the test of our consumer purchase data, we can help merchants reach consumers who are ready to buy while delivering more relevant and personalized experiences. These are early examples of how we are making PayPal more relevant to consumers while delivering greater value for merchants. That's the virtuous cycle that strengthens our 2-sided network over time.

Longer term, we'll unlock new sources of profitable growth through initiatives like agentic payments while creating stronger network effects by better monetizing the wallet, identity and merchant infrastructure we have built over the past 2 decades.

Turning now to Consumer Financial Services and Venmo. We are evolving Venmo from a peer-to-peer payments app into a broader money management platform. As we expand the value we deliver to consumers, we expect to drive deeper engagement, increase monetization and accelerate the growth of Venmo. Our first priority is to strengthen Venmo's core peer-to-peer payments experience, which brings customers and funds into the ecosystem. This quarter, we rebuilt the Venmo app to create a more personalized peer-to-peer experience and the improved product discovery and engagement.

Once we have engaged new users and grown their Venmo balance, our next priority will drive broader adoption of our financial services offerings to expand average revenue per account. We know our customers value products like our Venmo debit card and they are using them more frequently with monthly active accounts, up more than 50% year-over-year. We also know that customers who use more products have significantly higher ARPA. In the second quarter, customers using both the Venmo debit and Pay with Venmo generated more than 9x higher ARPA than peer-to-peer only users. And this group has roughly doubled in size in the past year.

We recently launched a holistic marketing program to drive broader adoption of these monetized products, and we believe there is much more room to grow. Over time, we will launch new products that enable consumers to send, spend and borrow seamlessly. This is where PayPal's connected ecosystem gives us a differentiated right to win. By bringing Venmo into the PayPal architecture, we can move faster, extend proven PayPal financial services capabilities to Venmo and lean into share capabilities across identity, technology and risk to create an even better consumer value proposition. The momentum we are seeing today reinforces our confidence that this strategy will continue to deliver durable monetization.

Moving to Payment Services and Crypto. Braintree has delivered profitable growth for 9 consecutive quarters. We have won new deals, deepen our relationship with existing merchants and the improved overall margins with our suite of premium value-added services. Now we must win as a modern payment services provider. Our immediate focus is on driving adoption of our existing value-added services across our large enterprise merchants in the U.S. and Europe. Payouts, Risk as a Service, payment optimization and embedded finance solutions help merchants access increasingly complex global payments and commerce challenges. These differentiated capabilities are difficult to replicate, and we see substantial run rate for further adoption.

Next, we will double down on underpenetrated customer segments and geographies where we see the greatest potential for durable profitable growth. This includes marketplaces, platforms and large e-commerce enterprises. To better attract and serve merchants with increasingly sophisticated needs, we are expanding our technical sales capability and creating a team dedicated to selling value-added services. We are also accelerating our platform modernization work to deliver a better merchant experience by unifying Braintree, PayPal Complete Payments and Hyperwallet into a single foundation.

Our near-term priorities are improving interoperability and expanding sales processing capabilities, merchant lending and payouts. Over time, this work will make it faster and easier for to adopt integrate and scale, our full suite of capabilities. Over the long term, as this work matures, we will unlock new flexibility and reach, enabling growth across all merchant types. At the same time, we will launch more commercial offerings supported by differentiators by [ TY, UA ] and Agentic payments. These capabilities can support future growth by positioning paper to capture more transactions wherever they take place.

I want to close with an update on our cost savings and technology modernization initiatives. We are making good progress on our plan to deliver at least [indiscernible] savings over the next 2 to 3 years. This work will power our next chapter of growth by creating a more focused organization, modernizing our technology platform and improving our cost structure.

Over the last quarter, we have taken concrete steps to simplify our operations. We are on track to remove 3 organization and layers across the company, and increased spans of control this year. Our executive team has finalized the leaders structure in their organizations and teams are starting to operate with greater focus, clearer accountability and stronger alignment across our priorities.

At the same time, we are continuing to modernize our technology platform to create simpler, more unified customer experiences, accelerate innovation and improve our cost structure. Our priorities are clear: converging into a single platform to reduce complexity, continuing our migration from own data centers to the cloud, building a more modular and scalable architecture that strengthens our competitive advantage and enhancing the consistency resiliency and quality of every customer experience through stronger controls and fast standardized capabilities.

We are managing this program tightly. And as you can see, our technology modernization milestones are broadly on track. Combined, these efforts will make us faster, more efficient and better positioned to execute our strategy over the long term.

Before I conclude, I want to address the recent M&A speculation regarding the company. I'm sure you can understand as a matter of policy, we don't comment on market speculation or potential M&A discussion. As a Board and management team, our responsibility is to maximize long-term shareholder value. We believe that executing the transformation strategy I have outlined will create significant value for our shareholders. That remains our focus. While there is still significant work ahead, I have strong conviction in our direction and in our ability to execute.

At the same time, we remain open and objective in evaluating opportunities. If we see levers or a path that we believe would create superior value for our shareholders that executing our current strategy, we would, of course, carefully consider them.

And to close, I want to thank the PayPal team for the good results this quarter and for all the work you are doing for our customers, the company and our shareholders. Jamie, over to you.

Thanks, Enrique. Over the last quarter, the team has focused on sharpening our strategy across each of our 3 core businesses, while taking a rigorous approach to identifying the opportunities where we believe we can generate the highest and most durable return on our investments. Based on the progress to date, we are confident that greater strategic clarity underpinned by sharper execution and a leaner cost structure will enable us to deliver durable results over time.

Turning to the financials in more detail on Slide 9. PayPal delivered a good quarter with both transaction margin dollars and non-GAAP earnings per share coming in above our guide. Total payment volume was $486 billion, accelerating to 9% currency-neutral growth. On a currency-neutral basis, online branded checkout volume growth stabilized at 2% for a second consecutive quarter, while Braintree and Venmo continue to grow in the mid-teens.

Second quarter revenue grew 5% on a spot and 3% on a currency-neutral basis. Our financial services portfolio, including Credit and Buy Now Pay Later is showing good momentum on pace to grow revenue at least twice as fast as the total company this year. Transaction margin dollars excluding interest on customer balances grew 3%. The drivers of our year-over-year transaction margin dollar growth were broad-based.

From a product lens, drivers included Venmo monetization, continued strong credit performance and Braintree improvement. In addition, FX favorability and lower losses across PayPal and Venmo contributed to transaction margin dollar performance in the quarter. Growth in these areas more than offset investments to strengthen branded checkout and drive higher engagement over time.

Second quarter non-GAAP earnings per share came in better than our guidance, declining 1% to $1.38. We saw benefits from stronger transaction margin dollars growth and a lower effective tax rate with some offset from higher nontransaction operating expense, which I will discuss shortly.

Adjusted free cash flow, which excludes the timing impact from the origination and sale of Paylater receivables was $1.8 billion.

Turning to Slide 10. We continue to drive deeper, more active relationships with our customers. Monthly active accounts increased 1% to $228 million. Transactions per active account, excluding PSP, grew 7%, accelerating for a second consecutive quarter.

Moving to Slide 11. We continue to see more diversified sources of growth across our business. Branded experience is TPV, which includes online checkout, PayPal and Venmo debit as well as tap-to-pay grew 6% compared to 5% in the first quarter and 4% in the fourth quarter. While debit card and tap-to-pay spend represent a small portion of branded experiences volume today, growth remained strong at greater than 60% year-over-year. Venmo TPV continues to reach new highs, delivering 14% growth year-over-year in marking the seventh consecutive quarter of double-digit growth.

Online branded checkout volume growth further stabilized, up 2% on a currency-neutral basis, consistent with first quarter growth. This was slightly better than our expectations, primarily driven by accelerating buy now pay later and Pay with Venmo performance as well as faster growth in the U.S. Pay with Venmo and Buy Now Pay Later continue to outpace the market, taking share from other payment methods and growing 44% and 26%.

P2P and other consumer volume growth remains healthy, up 10% in the second quarter and reflecting the debit card and Venmo momentum I just mentioned.

Turning to PSP. Volume growth accelerated to 13% from 11% in the first quarter and from 7% in the second half of 2025. Braintree TPV continued to grow in the mid-teens from a combination of growth in profitable front book business, high retention and growth alongside our existing merchant base. We are driving higher attachment of value-added services, supporting margin expansion over time.

Moving to more financial detail on Slide 12. Transaction revenue grew 5% on a spot basis to $7.8 billion. Other value-added services revenue was approximately flat at $850 million driven by strong contribution from consumer and merchant credit offset primarily by lower interest rates on customer balances.

Transaction take rate declined by 7 basis points to 1.61%. Operationally, this was driven by a combination of factors, including branded co-marketing investments and mix dynamics, including faster Venmo growth. TM dollars ex interest on customer balances grew 3% within volume-based expenses, transaction expense as a percentage of TPV was 90 basis points increasing slightly year-over-year from mix shift to Braintree. Transaction loss as a percentage of TPV improved slightly year-over-year to 7 basis points. This reflects our team's ongoing work and OpEx investments to improve and strengthen onboarding, fraud prevention and risk management capabilities.

During the second quarter, we made meaningful progress on our reorganization and sharpened our view of the highest impact actions needed to accelerate our growth strategy. At the same time, we saw stronger-than-expected underlying business performance, including transaction margin trends. And against that backdrop, we have invested more heavily in a number of high priority areas, which helped drive higher nontransaction-related operating expense in the quarter and will continue in the third quarter.

These investments reflect our prioritization of operating spend in the areas where we see the greatest long-term value creation and position us to capitalize on the momentum we're seeing while advancing our transformation. It's important to note that part of the increase is timing, we're investing ahead of cost savings that we expect to become more material in the fourth quarter. These investments include platform and cloud modernization, risk capabilities that improve loss performance and targeted investments to support our highest priority growth initiatives. As a result of higher operating expenses, as well as the lapping of the nonrecurring partner benefit previously discussed, non-GAAP operating income was down 8% in the quarter to $1.5 billion.

Moving to capital allocation. In the second quarter, we completed $1.5 billion in share repurchases, bringing the trailing 12-month total to $6 billion. We ended the quarter with $15.3 billion in cash, cash equivalents and investments and $13.4 billion in debt.

Moving to guidance on Slide 13 for the third quarter and full year 2026. We are pleased with our first half performance, reflecting continued stabilization and the resilience of our business while driving significant organizational change. As Enrique highlighted, 2026 is a year where PayPal is strengthening its fundamentals and its execution muscle to position for greater momentum in the years ahead. The progress we've made to date gives us greater clarity on the path forward for each of our 3 main businesses.

With that as a backdrop, we are raising guidance for the full year. We now expect transaction margin dollars to increase to approximately $15.6 billion or $14.5 billion, excluding interest on customer balances. Approximately 7% to 8% growth in nontransaction operating expenses and non-GAAP EPS to increase to $5.38. Our guidance continues to assume at least $6 billion of adjusted free cash flow and approximately $6 billion in share repurchases. For online branded checkout, we now expect low single-digit TPV growth on a currency-neutral basis for the full year, reflecting a modest improvement from our prior expectations.

We are encouraged by the early progress of our targeted growth investments and remain disciplined in evaluating their performance, balancing near and longer-term value creation. We now expect these investments to represent a modestly lower headwind to transaction margin dollars in 2026 than the 3 points we previously anticipated. This primarily reflects the timing of investment activity during the year rather than any change to our conviction around these initiatives. Consistent with the investments we've already discussed, a portion of that benefit is offset by higher nontransaction OpEx as we continue investing in our transformation and other high priority opportunities.

On savings initiatives, we have simplified our operating model and are on track to remove 3 organizational layers. We have decreased end-to-end production time embedding AI within the full software delivery cycle, and we have prioritized geographies for investment and identified specific rationalization opportunities. We are on track to achieve at least $1.5 billion in gross run rate cost savings over the next 2 to 3 years. We have already identified actions to unlock approximately $400 million of new run rate gross savings by the end of this year, with a portion to be realized in the fourth quarter.

While we are still finalizing our plans, this first phase of actions could result in a transformation related charge of approximately $120 million to $140 million during the second half of 2026. Consistent with what we shared last quarter, we intend to reinvest a significant portion of these savings into our highest priority growth initiatives while improving operating leverage and our overall financial profile over time.

With that said, we are raising our full year guidance for non-GAAP transaction margin dollars and earnings per share, while also expecting higher nontransaction-related operating expense growth, reflecting the stronger business performance we're seeing and investments aligned with our strategy. We expect our cost savings initiatives to become more meaningful in the fourth quarter, which will benefit operating expense as the year progresses.

Now turning to more specifics for the third quarter. We expect low single-digit revenue growth on a currency-neutral basis, slightly positive growth in transaction margin dollars, transaction margin dollars excluding interest on customer balances to be slightly positive to growing low single digits, high single-digit growth in nontransaction operating expenses, and non-GAAP earnings per share to decline within a low single-digit range. As implied from our guidance for the third quarter and the full year, we also expect fourth quarter transaction margin dollar growth to be slightly positive.

I'd like to wrap up by thanking the PayPal team for everything they've accomplished this quarter. Our path to realizing the next phase of PayPal's growth is becoming clearer with substantive progress and we remain focused on building our momentum to drive durable long-term value creation. With that, Steve, let's go to Q&A.

Before we open the lines for Q&A, I'd like to ask everyone to limit themselves to 1 question so we can get to as many of your fellow analysts as possible. Sarah, please open the line.

[Operator Instructions] Your first question comes from Jason Kupferberg with Wells Fargo.

I wanted to start on the topic of the savings and the reinvestment. I know you're reinvesting most, if not all, of the $1.5 billion plus. How much of that reinvestment, I guess, over the next 2, 3 years is expected to be above the transaction profit line? And what's your sense as to how long these planned reinvestments will take to actually move the needle on transaction margin dollar growth?

Jason, and maybe I'll answer the first part of that. And Enrique, you might want to talk a little bit more about the strategy as we go forward. As you mentioned, we are well underway with our $1 billion -- at least $1.5 billion cost-out program. We're in the first phase of it, really focused right now on structure and alignment, removing duplication, spans and layers, really improving our execution speed and we'll move into the later phases over the next 12 to 18 months. We're seeing really good progress.

And in connection with that, we do expect to reinvest much of those savings over the next few years back into the areas that support our strategy. And some of that is around technology and risk, but a big portion of it is around really building out product in a deeper way, financial services, buy now pay later, the integration of that back into PayPal and into Venmo, and really making sure that we've got the right consumer platforms around that and the marketing dollars to really shift and deepen our consumer value prop over time and have that come through in the way of stronger operating leverage as we do it. But Enrique, you may want to talk a little bit more about the strategy piece of that.

Thank you. Our investments are going to be fully aligned to the areas that we described during the prepared remarks are the changes we are driving in the strategy. First of all, we see a big opportunity in changing and expanding into financial services. And we are going to be investing to expand our portfolio, to expand our geographical coverage and also to increase -- to expand from a distribution perspective, and we are working with multiple partners and companies to make that happen.

For example, PayPal will be soon launching an integrated consumer lending partnership with Amazon for Germany and Austria, and this is a good example of the type of investments we are going to be making.

Second, we also mentioned that we are going to be accelerating our growth, both in Venmo and in PSP in Braintree, and we're going to do that by investing both on the product side and on the go-to-market side. We said we are going to be reenergizing our consumer side of the PayPal network. And this means we will be investing in marketing, data capability -- data processing capabilities to really reinforce our position in that side of the network.

And we mentioned already last quarter that we have embarked in a big project to modernize our technology to improve our risk management capabilities. These will deserve investments as well. And we are going to continue to invest in long-term innovation related to agentic e-commerce, related to us, related to PayPal world. So we have a very clear definition of what the investment areas are going to be. And this is why the saving program is so important because the majority of this investments will be self-funded with the savings that Jamie described.

Your next question comes from Tien-Tsin Huang with JPMorgan.

Just if you don't mind, there was just 1 question, Steve. I appreciate that. Just one quickly for Enrique. I'm just curious, can you just give us an update on what you see in terms of maybe your conviction on the synergies between PayPal, Braintree and Venmo, -- has that changed over the last 90 days or so? Any examples of what you're excited about here as you -- as you try to execute against those synergies.

And I know the deal, you probably can't comment too much, but maybe just a little bit more color on what's happening on the ground. Is the risk of a potential change in control, create any tension with merchants and marketplaces and their willingness to work with PayPal and to promote PayPal and some of the plans that you have, especially on the new product side. Just trying to understand how you're -- you're balancing the deal activity with executing the turnaround?

Sure. And I will count this as 2 different questions. So let me start on the first one. We continue to believe that there are significant synergies across the 3 businesses. During the last 3 months, we have developed specific growth plans for the 3 areas for Venmo, for Braintree and for the core PayPal business. And we -- as we develop them, we see -- continue to see synergies at the customer level in terms of leveraging customers and customer presence. And as we have developed, for example, integrated plans for some of our large merchants. We have seen the opportunity and the drive and the expansion of growth that this creates for each of our businesses.

As we modernize our technology, we see clearly that we can leverage investments to support all businesses that make this more efficient.

And finally, there are key capabilities the company has, for example, in the areas of risk and identity that we manage across the full company that provide synergies across all of them. So where we are today is we are very confident in our ability to grow and expand each of our businesses. We have clear goals for each of them. But at the same time, as a public company, we are open to consider other ways to create [indiscernible] shareholder value, which is really the key goal that we have.

So let me now go to the second part of your question about the latest rumors of our market speculations. And as I said in the preprepared remarks, we don't comment on any of these specifics. What I can say is that our Board and management team are open and have a clear responsibility to objectively evaluate every opportunity that is presented to us, compared with our own plan and choose the option that creates more value. Today, because of all the work that we have done over the last 3 months and because of the status of the business, we have a very clear view of the value that we can create in the coming years. And at this point, while we remain open, our focus is on executing our own strategic plan, given the confidence that we have in creating value for shareholders.

Your next question comes from Dan Perlin with RBC Capital Markets.

I wanted to ask about branded checkout dynamics that you're seeing, clearly, the stabilization at the 2% level. But it also sounds like a lot of that benefit is potentially coming from what's happening in the United States. So I'm more interested in kind of the dynamics outside of the U.S. And I'm just wondering are there tensions associated with just geopolitical? Is it structural? Is it different in terms of the competitive landscape? So just any distinction between those 2 would be helpful.

Yes, Dan. When you look at branded checkout, we were really encouraged to see just further stabilization in the business as we move through second quarter. And we do expect that to continue when we get into the second half. And to your point, we saw a nice sequential growth in the U.S. in the second quarter with just continued strong buy-now-pay-later momentum. Pay with Venmo was very strong. We saw some early success with our investments and some benefit in June from the World Cup as well.

When you look across our European markets, those also improved to a slightly lesser extent than the U.S., but they were still very stable. We saw some pressure in the travel vertical. That was earlier in the quarter and that tended to moderate as we went through the quarter. I guess when I look across all of this, we had grown across, in particular Europe at very, very high rates for a long time. And so a lot of what we've seen in the last year really is a more normalization of that growth, but also as we look across the landscape, certainly, there's more competitive intensity as well.

What we've been very focused on, starting about 12 or 18 months ago is bringing our latest innovation and integrations to Europe, making sure that we're not only investing in loyalty. We're investing in upgrading the experience. We're investing in bringing buy now pay later and other elements of the consumer value prop that Enrique talked about to the European markets. And those are well underway. And I would say one other piece of this that has been really important as Enrique has come in, is he spent a lot of time on the country-by-country focus on execution, really reinforcing our local teams and in particular, around the consumer side of the network to improve execution.

I think just to complement, Jamie, when we look at our performance relative to market, in the U.S., our performance has been stable compared to Q1. We have seen a slight improvement in Europe as a consequence of all the work that Jamie was commenting. So that's also encouraging in terms of how are we performing in the market. And this is one of the reasons that gives us confidence for the second half. And one of the reasons why we decided to raise guidance based on what we see today happening in the market.

Your next question comes from Sanjay Sakhrani with KBW.

Enrique, I appreciate all the disclosures on the plan and how you're thinking about the path forward in the slides. Obviously, there's been strategies and investments before that haven't necessarily materialized. Maybe you could just talk about what gives you the confidence these investments will pan out and how this plan you're outlining will be different?

Yes. I think there are 5 big differences in the plan, and they are really supported by trends that we see happening in the market today and the opportunities that they open. The first big change is that we are really going to be focused on financial services and expanding into that market opportunity. Today, Financial Services is already a significant part of the transaction margin of the company close to 20% and is growing double digit. And what our strategy is going to do is to accelerate that growth. But this is already a real business for which we have -- we see significant demand in the market.

Second big change is doubling down on our growing businesses, Venmo and PSP. In both cases, we see opportunities to capture more value. In the case of Venmo by expanding ARPA, capturing more value per customer. And in the case of PSP, by expanding the portfolio of value-added services and increasing the attach rate, and we are making specific investments in both areas to make it happen.

The third big change is the incremental focus on the consumer side of the network, especially in what we consider our high-value customers. We have a significant portion of customers that drive the majority of the DVD, the majority of the value. And by understanding what they need, offering what they are demanding from us. We not only offer more value to them, but also to merchants because the more value we offer to those customers, more value to offer to merchants. And we see opportunities there to continue to improve the experience as we have been doing during the last month, accelerating the deployment of the new [indiscernible] increasing the portfolio of offerings we offer them, especially around BNPL and over time, making our loyalty programs more relevant. That's another big change in the strategy.

[ Third ] is the change that we are driving in how we run the company, improving execution, improving accountability, and I know that this may sound a bit theoretical, but I have seen how important having a clear operating model having a clear decision-making process and the impact this can have in execution and improving the performance of the company.

And finally, the last big change is related to the changes in technology that we are making. We are modernizing our technology platform, and this will help us to accelerate innovation over time. We are embracing AI in technology development and in other parts of the company that will make us a faster company and a more efficient company. So these are all the changes we are doing. And again, the savings program that we have will help us to self-fund these investments to continue to position the company in a stronger way going forward.

Yes. And Sanjay, what I would add as well is that the detailed work we've done, particularly over the last 2 to 3 months with Enrique has really given us a clear view that our plan will drive faster transaction margin dollar growth over time from diversified growth streams. So continuing with Venmo and PSP or real emphasis on credit and with branded checkout having a more modest contribution. So deeper focus on credit and financial services, significant cost out, reinvesting those savings back into growth initiatives really to self-fund, and all of that will drive an attractive double-digit earnings growth profile over time.

Your next question comes from Darrin Peller with Wolfe Research.

A little bit of a 2-part question combined. But for Enrique first, look, I understand you don't comment on potential M&A, but if you could just revisit with us the key strategic initiatives that you really want to see to inform you that your vision is succeeding. And just importantly -- just importantly, what's the time frame that we should be seeing tangible success assuming that would mean growth inflection across the business?

And then, Jamie, just thinking about branded on that note in terms of success on growth inflection, what are you expecting for the next couple of quarters, specifically, if you don't mind? Just looking at your incremental guidance. I know you said for the full year, but fourth quarter, I think, has easier comps.

Thank you. So let me -- to 2 parts of your question. First of all, in terms of how are we structuring the transformation, I said in the prepared remarks that we see this as a multiyear change. Our focus this year is in what I call strengthening the fundamentals, sharpening our portfolio, prioritizing clearly what products and markets we're going after, improving our operating model, simplifying our organization, increasing accountability and starting the cost-saving programs.

In [indiscernible], we will be building momentum, accelerating the BNPL and financial services, accelerating Venmo and Braintree. And then beyond that, we will continue the acceleration of those businesses, but we also see opportunities coming from investments we are doing today in new areas. New areas like Agentic, PayPal world, ads that we think can become significant businesses over time and where we are investing today to make it happen.

In terms of what are the key metrics to track. I think the key thing is to really understand they need to be related to their businesses and how and where we are investing. For example, as we invest in financial services, increasing the growth of the BNPL, increasing the attach of credit cards and debit cards to our offering will be key metrics that we need to track. When we talk about checkout and the focus that we're going to have in high-value customers, understanding and measuring the customer lifetime value, the growth and share of these customers, our share of wallet will become key metrics to track as well as the growth that we will have in the most relevant merchants.

For -- in the case of Venmo, clearly, growth and ARPA, what is the revenue per account will become key metrics to track. And in the case of PSP will be both growth and what is the attach of value-added services that, as I mentioned before, is going to be the way we will be differentiating, but also the way we will be improving the business profile of the business.

So I think we are excited about the opportunities we have. We have a clear plan for each of the segments. We are -- and during the next [indiscernible], we will be refining that for fiscal year '27, and really continued execution of the plan across the board.

Yes. And then, Darrin, with respect to the second part of your question, we expect branded checkout growth to be low single digits in the second half. As you've looked at our growth investments, they begin to ramp more in the second half. We are really starting to see some encouraging signs as we work with some of our largest merchants across, whether it's presentment, whether it's integrated buy now pay later, exclusive partnerships, all the way over to co-marketing, starting to see encouraging signs there. And I would also say that we've become even more focused with Enrique on redeployment of those funds if we're not hitting ROI hurdles. So I'd say that execution is going, I think, really well.

Fourth quarter, the holidays are always competitive. But I would say, I think we've been prudent in our guide, and that's reflected in our expectations.

Your next question comes from Bryan Keane with Citi.

I wanted to ask my one question on BNPL. Obviously, that's a major driver in Syntech these days. What caused the 3 points of growth acceleration to 26% this quarter. And maybe what are you guys kind of specifically doing in BNPL to drive faster growth there in the future?

Yes. Let me start, and maybe Jamie wants to complement. I think this is a combination of the work that we have been doing across the board. We have been expanding our portfolio of offerings across improving, expanding the geographical coverage that we have. And for example, in Europe, we expanded during the last months to multiple countries. And we are also expanding distribution and working with partners that will integrate that in their platforms.

And we clearly see these results in specific customer cases. For example, in a leading fashion retailer where we signed an exclusive BNPL agreement during the last month, we went from a TPV declining business to close to 10% growth in Q2. So we clearly see the positive impact that is offering hand in our portfolio. And going forward, we will continue to drive that expanding the portfolio, put more emphasis from a marketing and go-to-market perspective and continue to expand the capabilities. This is a very real business today that is creating significant contributions, and we expect that to only expand in the coming years.

Your next question comes from Timothy Chiodo with UBS.

So investment in branded checkout and also BNPL are definitely core themes of the call today. Part of that is conversations that you have with merchants and platforms and you've covered some of this, but some of the areas there are the positioning of the button in general, the placement. There is the upfront placement on product pages, and there's also the continued track towards getting PayPal, having more of those modern integrations over time and more upgrades to the most modern versions of PayPal. I was hoping you could talk a little bit about how the conversations with large merchants and platforms are going.

And if there are other examples of large platforms or merchants that we could look to, to see what this looks like once it's fully implemented. You mentioned Home Depot in Canada and a few others. But if there are any large U.S. merchants that we could check that will be appreciated.

Let me give a few examples. I would say that where we have seen that the chances to succeed growth is when we have an end-to-end integrated plan from the company. So when we have the product teams working with the marketing team, working with the service teams and really putting the whole company together at the service of our customers. And we have many examples when we see the [indiscernible] bringing great results. For example, we saw a large global leading social commerce platform. We follow the approach that I just described, and we saw 50% growth in volume and transaction margin, which has a fairly positive impact in the performance of the company.

We have expanded, for example, our offering to BNPL with another leading global marketplace to additional 7 markets, and we have seen TPV growth in Q2 of 9% and addition of 500 customers new monthly active. So we see the opportunities both in TPV, but also in adding new customers to the platform.

In terms of the modernization of our solution, this is something that we continue to do. [indiscernible] customers, we are now at 60% of merchants that have the new payment pages. So we continue executing the plan that was explained a few quarters ago, and we continue to make very solid progress.

Sarah, we have time for just 1 last question.

Our last question comes from the line of Ramsey El-Assal with Cantor Fitzgerald.

Your prior full year guidance assumed 2 rate cuts, I think, in June and September. June, obviously, came and went without a change in rates, which, I guess, presumably flowed back in the guidance, what is now assumed for -- in terms of rate movement and guidance, and also really quickly, if you could just comment on branded checkout volume and how that's trending in July versus the June exit rate. I think you're implying that you're leasing stability, but I was just curious how July is trending versus June?

Yes, Ramsey. With respect to interest rates, we're not expecting or not planning, I should say, anymore rate changes this year, we did have headwinds coming into this year with respect to the rate cuts that had happened late last year. That continues to be pretty consistent in terms of how it impacts our guidance. And then with respect to third quarter, we expect third quarter to be relatively consistent branded checkout growth at about 2%, pretty consistent with the first half, absent some monthly movement up or down.

Enrique, any final thoughts before we sign off.

Well, I want to, first of all, thank everybody for joining us today, and thank you for all the questions. And I really look forward to updating you on our progress and upcoming events when we -- especially when we report third quarter results in October. Thank you.

Thank you. This concludes today's conference. Thank you for participating. You may now disconnect.

Okay. Sounds like we're live. Yes. Okay. We're ready. Okay. So thanks, everyone, for joining us, both in the room and online. Super excited to have Srini here from PayPal, who is the Chief Technology Officer. Reason being, I have a little bit of a tech background having run a fintech platform before in the Pay By Bank space. So I think we have some really -- I'm really looking forward to getting some good insight from you. And really, there's so much of PayPal's turnaround story that revolves around the technology. So this is going to be a super topical conversation that not only I think, provides us with good information for now, but good perspective on how the next couple of years are going to go as well. So welcome, Srini. Thank you very much.

Thank you for having me, Adam.

Yes, our pleasure. Our pleasure. So you started at PayPal in 2024.

Yes, 2 years ago.

2 years ago. Does it seem more like more than 2 years or...

Time flies by.

Lots of change going on. Obviously. And so let's start from a 50,000-foot perspective. As CTO, you walked into PayPal what were some of your first impressions about strengths and some potential opportunities?

I think the -- even before I walked into PayPal, when I was intervened for the role, I wanted to make it clear that like we had put all technology under one roof. That had never happened at PayPal. We needed to streamline, right? So that was an important piece and having done this in my previous company, it made lot of sense to really have everything from the infrastructure to the data, all the way to the product engineering to be streamlined. So that was a conscious decision PayPal made, and that was something that was important for this to succeed. So that was the first piece.

Once I came in, I was kind of little bit seeing the multiple versions of identity risk and all these platforms, I felt like there were so many snowflakes within the company. So one of my key messages when I started was let's try to standardize. The standardize doesn't mean we need to depend on each other. We need to -- our terminology, which it all loosely decoupled highly aligned. So how do we standardize our systems? How do we build our platform capabilities that we can leverage across all of PayPal. So that's kind of the journey. That was my initial observation coming into PayPal.

Let's start -- let's dive in a little bit to those challenges, right? So I think the prevailing sentiment out there is that PayPal has a considerable amount of technical debt. Whether it's database integrity latency issues, prior acquisitions that weren't fully integrated, et cetera. Is this an accurate perception in your view? Or are there some clarity that you can offer on the internal tech deck, and then we can discuss the external.

Okay. So let me kind of split it into 2 pieces. The first one is what I call the standardization piece, which I mentioned, right? So our identity infrastructure was kind of fragmented or I would not say fragmented. We had multiple versions of identity. And what it meant was you onboard on one product and you try to onboard on a different product would create a lot of friction. You would have -- as if we had omnishare about the customer, and you have to do the same thing again.

So that was the same case with the rest and compliance platforms and so forth. So you can collect that debt like we had multiple versions of it, which means we had to build it 3x or we had to maintain it 3x.

Sounds familiar, sounds to me like PTSD.

PTSD, right? So what we did was, so we said let's take the consumer side first, right? And I wanted to prioritize and do it in a consistent way. You look at PayPal, you look at Venmo, right? They are pretty much a similar wallet that has shared underlying infrastructure. So we decided that let's converge identity, and we started on converging identity, between Venmo and PayPal. That took us about 6 to 9 months. And as we finished it, the beautiful benefit out of that was MFA came in, Multifactor Authentication and it was enforced. PayPal at MFA already built in. Venmo did not. If we had not merged it, Venmo when would have to build this complete then again, you could call it dead tech because you're now building it twice.

So we were able to just get it up and going really fast here. Now then we have now started doing the payments convergence, where we are bringing in the payment system between PayPal and Venmo to be the same rails. So the beauty of that would be Venmo would now get the better authorization rates. It can go internationally if it needs to go. It now give more credit products that are available on the payment platform. So that was kind of a tech debt that we felt. So I think that's been addressed that way.

The other form of tech debt is what you talked about, which is Oracle or databases, right? So -- and that was important because what happens is databases create a center of gravity because it's very chatty, and it cannot be changed very fast for really growing high-speed innovation. So we are now embarking on a journey to completely go cloud native on our PayPal platform. So that's the second way of how we are addressing the technical debt right now. Braintree and Venmo, we have already made it cloud native and they are already up and running in the platform. So now we are now tackling PayPal right now.

So if you get that database integrity solved, that unleashes a lot of flexibility built on top of that. That's the foundation of the house.

That's the foundation of the house, right? And if you are familiar with Oracle databases, you have to tune it, you have to cash it. You have to build a lot of things. 20 years ago when PayPal started, that was cutting-edge technology. We are one of the best users of Oracle. So no doubt about the technology that we use but that's table stakes right now like if you go to any hyperscaler, go to AWS, Microsoft, it's out of the box. So I call it running on the shoulder of the giants. So let's just reuse the platform as a service and let's see the weight on top.

And how long do you feel like the transformation on the database layer will take.

I see it at least it takes a couple of years. The reason is there is stored migration, and then we are also changing the engines on the fly, while we are operating this huge payment network across multiple countries. So the data migration is going to be the one. It takes a while.

That's the tricky part. You can't mess that up.

That's the tricky part. You can't mess that up.

While you're flying the plane. That's -- I feel for you, we went through the same thing and I got an education on that and it ain't easy. It sounds pretty easy when you throw out some technologies, it ain't that easy. Okay. So that kind of summarize -- and then we have -- I'm assuming you have like a bunch of tech debt in terms of the code and how it's inefficient and in some cases rewrite a lot of code.

In some cases, yes, we used to run on C++. It was highly efficient at that point in time because it was a very highly performance system. But now as more and more people move to Java, right? The interesting piece and I'll talk about it when we talk about more AI stuff, we are able to take about 300 of those applications in less than 6 months. In the last 6 months, we have migrated 150 out into Java, complete AI rewrite. So no humans touching it all the way from C++ to Java and putting it in production. So that's been a boon for us, and we see that retired pretty soon.

Let's take a quick detour on that because that's important. I don't want to leave that line of thought. So you take the Java -- sorry, the C++ code and you -- I'm going to talk like a layman here, but you plug it into AI and it comes out with Java code, right? And then do humans look at it to verify...

So we do a review. And then like an AI also actually does the validation dusting. So it's not even just codes. It's a complete SDLC. So we have testings that we have -- that we test our C++ code. So we feed it to AI. It converts it into Java, we run it in the functional test. And if the functional test fails, it goes back to the review cycle that the LLM learns and does it. So it's pretty autonomous. I was pretty -- it was a need then that our team did, like took 2 months for them to build that skills on the engine. And then it just lit a factory.

That's years of condensed work in 2 months. That's important. Okay. So let's switch to external challenges and focus on the merchants. And I think your -- for those of you who don't know, Srini was at a big merchant in Arkansas called Walmart for a while. So wanted to get your view from the merchant side, and that's another reason why I think you're great for this role because you know what it's like and how hard it is for merchants historically with PayPal. So talk about what you're doing on the merchant side to make it easier to integrate with PayPal?

Yes. So our story, like I used to be at StubHub and eBay and PayPal were like -- were part of the same company. And I was the first, I think, merchant implement PayPal as a third-party merchant, right? So I've done integration then and I did this with Walmart. I think the reason I say that is PayPal has had like 3 or 4 versions of our APIs that we have created over that time. We have been kind of benevolent in that like we have never deprecated those APIs, which kind of is good in some ways, but it's bad in some ways because you're really having tech debt from a merchant perspective. You're having merchants on multiple integrations.

And I think that was the biggest challenge that we faced. So we were trying to now get into this new checkout and new modernization as we talked about, we learned that. And it was very tough to get on the roadmaps of every merchant to go say, hey, you need to upgrade right now, right? So they have significant roadmaps and deliverables that they need. So I said, let's pivot how about irrespective of what the integration is, we give them the most modern experience. So we spent a lot of time thinking about it, and we've made it so seamless that irrespective of what the integration you are in, you will get the most modern checkout experience that we can give. So that alleviated a little bit pain from the merchant perspective and allowed us to move faster and give new benefits to the merchant.

How did you do that? Was it an embedded strategy in a sense where you're saying, here's one API to link to our system you're...

No, they were still using the old APIs. We were intercepting in the back end. So when it came to us, we took the pain on our side, and that's coming from Walmart customer first, you have to really look from a merchant-first perspective. Looking at it, we said, how do we alleviate the pain. So they will make the same API calls the way they make it, but we will intercept that on the back end. And be direct in the modern system.

It's in back through the existing...

Existing messaging layer to get it done. So that will give you the new pay sheet It will not unlock new capabilities because you're still on old integration. But we have now decoupled that where you can now at least get the new pay sheet without having to worry about that.

And the customer experience on the merchant side is still the same, because the APIs are the same, right?

Same. So seamless...

Have you ever thought of like an embedded strategy where it's a single API, you create a hosted web page on their app or website all of the sausage making is on your side. They don't see anything except a single API integration.

That's the future, right? But even if I had to do that, I have to get them to change it. So first is you don't have to change it, we will make it happen. The second thing that we are now doing is we are using AI, we call it Merchant AI Integration Agent. So what we have done is we have basically created an agent similar to like Claude Bot and this agent, which basically the merchant can download to their site, and they can turn into their LLM of choice, right? Are -- we can connect to our LLM factory. What it does is it goes through the code, it actually changes the code, fixes it, upgrades it to the newer integration, validates it and make sure that it works completely and kind of certifies it, right?

So the first few iterations when we tried out we tried out with merchants in Asia, right? It took 2 or 3 tries because it was reasoning itself out. But we built what is called a memory layer. So what happened was every single time, it saw something that it had to fix again, it put it under the memory. So what we are seeing now is as we go through more and more merchants, it's doing it in the first shot because it's now knows enough about it. So that alleviates us to move a lot of the long tail call it Ed, on tail. Ed, the top merchants you have to work with them, they're not going to trust like an automated agent, but torso and the tail we can now do this. And we are doing this to the SIs, Service Integrators to be able to go do the same. So that's the second part, which will allow us to migrate everybody faster.

The third part, which is what you referenced, Adam, is how do we build a future-proof integration where you embed something and it will evolve itself rather than having to upgrade over the period of time. So we are now making it more future-proof it will never be completely future-proof, but...

Everything you want to do you change on your end and it's automatically updated to them. They don't have to touch it yes, that's what we did on our platform too and merchants really didn't understand it at first, and then they understood it and then it was smoother. But it still takes a little time to disconnect the old and implement the new couple of agile cycles for sure, right?

That's why with this agent now, it automatically does that, right? So it will take any version of your old integration and move it to the most modern one. So the way we have created the agent is not only now it's integrating and changing your integration, it can also certify. So the idea is to constantly monitor our merchants for the certification and the performance in the future because we can now use the same agent to look at their integration to see, hey, is this working very well. That has been our challenge because...

That goes halfway like you said, right? So they get the latest from your side, still the UX that they have today for consumers . So it's not optimal, but it's getting some of the way getting some of the ways.

But if you really look at the payment interface experience.

Yes. So let's say, take me into the room where you're talking to a merchant. And I am a merchant that likes PayPal and wants to continue to use PayPal and want the updated -- I want to be updated, right? How many sprints is it taking me to do?

So again, what I would say is use this agent, right? So irrespective of the merchant, I would say, use the agent. It will code assist, nowadays code assist and code development is getting there. So use a code assist, it will get you. It will go through. It is in your environment, so you don't have to worry about it, right? What we have seen is when it does it by itself, it does it in less than 2 hours, okay? It goes to the code, it knows the integration pattern, it does that seamlessly. Obviously, then they have merchant as their own functional testing, their production testing and what not to do, that's something that we don't have a control on. But this is what actually -- like we have done it on multiple code bases, right?

So let me just make sure I fully understand you. I'm a merchant an an older version, you say use the agent assist and you can get me on the latest version in a couple of hours, again, not changing my UX for the consumer. Yes. I want to change the UX.

That is a fairly involved complication because it depends on the merchant style because they have to change the checkout. That's much more proprietary their own stuff. It's not our stuff, right? What we are doing is we are seamlessly changing into this. We can provide more stuff with this integration as we can help you personalize, where we can tell you, hey, this person has an affinity to PayPal, if you want to present them better. You want to say smart message in with Buy Now Pay Later stuff. Those kind of things that comes out of the bots with the latest integration, that they can choose to surface, but they still have to do that change that -- I mean there is a clear line between that the merchant property and our property.

That's a bigger lift. Yes. Okay. So what you're saying is we can get you to the updated version with the best identity and the best decisioning and all that kind of stuff and very -- but the UX would be more in the future, okay.

The UX of the merchant. The checkout will be our UX. As soon as you click buy with PayPal, it will be pretty much a single click experience. It will go to the pay sheet and then go back. That part is going to be very streamlined.

Important distinction. So the consumer UX would be the most updated on what you're talking about with the agent, that's important, okay, I misread you there.

So there is the merchant checkout that they have to make the changes. But you click on pay with PayPal or buy with PayPal, that experience that we used to go through, which was like 4, 5 pages long, now it's a single page. One click if we have already seen you. Okay.

That's huge. That's a huge change.

That's a huge change. And we are seeing conversion benefits out of that and merchants, and that's kind of the value proposition that we are -- I would tell the merchant when I go there.

Okay. That's a big change Yes, just leave it at that. Steve's nodding his head for those of you not in the room. Steve is very happy with that answer. Okay. We touched on AI for a second with the agent, but we got to delve into this a little bit more, right. So talk about how you've leveraged it in the prior 12 months, how you see it evolving over the next 12 to 24 months, and then we can get into maybe think about it from a cost reduction perspective, product generation perspective and how you think it can help you drive growth, right? Because I think those are the 3 sites we need to tackle.

So let me start with I'm very proud of the PayPal technology team, right? We were one of the first teams to add up MCP. I'll start with that, right? MCP, as you know, is Model Context Protocol that basically allows to connect to any tools. So if you think about LLM as a brain, it can resend and it can do a lot of things, but then it needs tools to do it. Tools as in I need to connect and update this record. I need to do this API call. So that's what MCP protocol was used for. The reason we were the first to jump in. We were the first remote MCP server, where we put our invoicing out to the public. So that like you could go into Claude and say, hey, invoice this plumber for me for $30 for this. And it will know how to call the PayPal API and like do the invoice and send it out. So that's how we started on actually implementing MCP.

So then what I said was this is so powerful. So we set an enterprise standard. We are going to MCP everything internally, whether it's Salesforce, whether it's Workday, whether it's all our tools, that will be an MCP server in front of it. So that the brain, the LLMs can actually do the actions. So that was our first foray. By doing that, people could do workloads that they could not do before, right? So that's how we started on the journey. Then I talked about the C++ migration. We are planning on running checkout across multiple countries.

We wanted to run buy now pay later into multiple countries. These are what I call compressible problems. These are rinse and repeat problems. There are some changes that you have to do, but it's predominantly rinse and repeat. So we just said that state code assist and just run through it. That's why we are able to go to 154 countries and check out pretty quickly. That is what I call code assist, where we basically use the code, assist technology to make it happen. Now we are getting to this layer where we can do Jira to code. Basically, our product manager basically use a Jira story and it automatically writes the code. We were able to do it for small task.

But recently, what my team has done is we have taken the payments on the checkout infrastructure, and we have created our knowledge layer. It is not just reading core. We have had architects, put knowledge into it to really make it to understand the full flow. And it took us like 3 weeks. Now, you -- with that knowledge layer, you can pretty much implement feature, triage your problem, ask any kind of questions, and it will answer to you that a human being cannot do. So that I see as the future. And so when we go on the cloud modernization journey, I'm expecting the team to basically say, you know this, convert it to Google, span up and move to the dual interface, and we'll give you the cloud blueprint and will be done.

So that's kind of our journey right now. We are at AI STLC like our code assist PR ratio is growing 50% month-over-month, right?

Code Assist is growing 50% month over month, right? Can I ask you where it is on the spectrum from 0 to 100 or is it...

So I would say the number of PRs that we are doing right now, it will be around 2,000-plus PRs a week. AI-assisted PRs, no human involved in it. right? So that's -- if you really look at it, like that's a significant amount of -- right? And so that's kind of how we are really thinking about this.

Okay. You got to the edge of my understanding of all that stuff. Let's pull it back a little bit into what some investors -- is most important to investors, right? So a big debate with investors is whether PayPal can reaccelerate branded growth and checkout. What are the most important technical levers behind that? We just talked about stuff, you got to get on the most recent API. You got to make sure you're on the best UX and all that kind of stuff. But like talk to us about how you -- what's your plan to reaccelerate branded from a technical perspective.

So let's start with this. It's all about consumer experience. It has to be simple, right? When it is simple, it makes it a lot cleaner. So the first and the foremost trend is once you get into the funnel, our friction rate, our authorization like lagging friction rate, what we call, is at the lowest ever, right? So what we've done with that is with the MFA, passkeys, right? We're rolling out passkeys. We are getting millions and millions of passkeys generated, which what it means is for the customer, they don't have to really use a password. They don't have to input anything. If they use their biometrics, it signs you in, you're ultimately launching, right? That was one of our biggest friction points right? So we have removed that friction point, we get there.

And then we also -- we historically had a billing agreement product where you can vault your payment with PayPal. When you do that, that's a 0 click you're not even going to PayPal. You're just like checkout, and it automatically is doing that. So we are now with the conversion improvements that we are doing in the flow of sell it in the instrument and so forth, now billing agreements are doing now, which then gets you vaulted and moves faster. So that has been the one biggest win that we've gotten. The second thing that we are doing from a technical perspective is, we are making, remember like I told you, we are not waiting for the merchant integration. We are upgrading everybody. That was with the consumer mindset because the consumer, irrespective of which merchant they are checking out on they're going to see the same experience.

Familiarity is actually good because it makes you checkout faster. So those are 2 things. It is after the fact that you clicked on PayPal, but then now let's go into technically out and we influence merchants to adopt PayPal better. We call it presentment, like we want PayPal to be the choice that was shown. We have something called payment-ready APIs that we say, hey, merchant, this person because we know from the device and the sign-in from past merchants is a PayPal user, has a propensity to use PayPal. So what that helps the merchant is when you present PayPal as an option, their conversion rate is much higher there because now they know safe credentials are there, this payment is something that will flow through seamlessly and sort of a credit card, which might decline, like a lot of those things. So this is what I call presentment taken to the next level with technology.

And last but not the least, is we have inverted the payment experience to be, you don't checkout and you pay we call it one-click storefront at that we launched with Meta. So in this scenario, a merchant is created an advertisement, it says by with PayPal. You click on it, you just pay and the orders dropped to the merchant, right? In that scenario, you're taking away the presentment. You're taking away the conversion, no choices, right? The merchant sees absolute high conversion. So those are the 4 ways. From a technology perspective, we are empowering the merchants to a better conversion, better customer reach and being able to deliver on their demand generation.

At what point do you think merchants collectively will say, PayPal was a pain in the a** in the past to use, conversion rates were low, and now PayPal is actually really good. When do you think we see that narrative emerging in aggregate. You're always going to have merchants that say you're terrible, but they're going to say that about anybody. But in general, when do we see that narrative emerge collectively?

I would slightly rather than -- I'll tell you a condition which creates that scenario. Right now, the merchants are facing so much fragmentation on the demand generation. They have social search, which has historically been there. They have seen social, they have seen Agentic. What is happening is in all of these scenarios, they have to revamp their system to be able to checkout and pay what we are hoping with PayPal similar to what we did 25 years ago is one connection too many with this checkout, I'm able to present you in any of these services and we're taking the friction out. That, to me, is the higher value, and we have agented services covered now, we have social services covered now, and we can improve their own website experience. I think that combined -- what I call is compounding benefits when they see that, that's -- and that's where -- when some merchants started seeing that, they are now moving more aggressively towards PayPal.

Then they start promoting you moving you up the fold.

Yes. And it becomes a flywheel now because the consumer now wants PayPal, and we are now going back to the same flywheel strategy.

So it sounds like you're laser-focused on conversion rates.

On demand. Generating demand as well. From your user base and also making it seamless for the merchants to be on any surface, whether it's LLM or social, right? So now like if you're integrated with our PayPal Checkout, you could go and put an ad on Meta, and you can have a single click purchase. You don't even have to checkout on the site.

Okay. Great. Let's switch gears a little bit. You've had a broad array of assets. There's a big debate on whether they're really linked and it's hard to separate them. And some people say, yes, they share services, but it's really not hard if you were to sell one piece or whatever. I won't mention that it does matter. But if you were to sell one component of the overall it could still survive on its own. So I've heard both sides. I've heard it's really hard to separate and I've heard it's really easy to separate, and you just have some kind of shared services agreement in your vibe. How do you feel the businesses are connected from a technical perspective.

So that's why I went back to my original statement, right? Standardized loosely coupled, highly aligned, right? There are a lot of capabilities. And the way I see technology strategy is not to think about like, okay, how do we get the best value, overall? Why decoupling the system so that like they can operate independently. So what we have done is we have been very laser focused on like there are SITs capabilities that are fundamental to everything that we do, right? Identity payments, risk servicing, right, credit and be BNPL. When you have the SIT systems, irrespective of what is the merchant or the customer offering, you have to build a best-in-class, so we are building that.

We are standardizing so that all properties leverage the same platform underneath. They are decoupled, they are not tightly dependent on each other. They're abstracted out. So that's the best way to really build for a full future, while trying to keep the independence effect because I want each team to move faster. But that doesn't mean they have to do the same thing multiple times. So that's why I -- from day 1, the mantra is being loosely decouple highly aligned.

Loosely decoupled, I think, is the term just to take forward, right? So this is my interpretation of what you're saying. You let me know if you think it's right. it sounds like you're trying to solve for optionality and efficiency at the same time. Build the capabilities where it's more efficient, where they can all -- the different components can leverage things that they need, they'll do it once for all. But if there is optionality in the future and you need to separate, they can survive, you can separate it out. It would require connectivity and multiyear service agreements and stuff like that to draw on the services. But it can be done. Is that the right way to think about it?

I would say not only optionality, it's also the speed of innovation, right? It's also economics. One, when you see all the payments going through the same layer, you are learning from each other, right? I think if I see an instrument in Braintree per se, when I'm processing it with the same payment system, then I see that on the PayPal side. I have a better understanding of it rather than like -- so I would not just call it just optionality. It's a better way of doing business, better economics, better speed of innovation, while preserving the optionality.

Makes a lot of sense. And I think that's pretty consistent with what Enrique has said at different points. Okay. Let's talk about Venmo Yes, just looking at the time here. We've got a boogie. We're not at the speed round phase yet, but we're getting there. Venmo has incredible consumer engagement. Monetization has taken a little bit longer maybe than some we're hoping for. From a product and technology standpoint, what needs to happen for Venmo to become more meaningful commerce and financial services engine.

So we talked about identity, I will not repeat it. But what I wanted to say is like that basically gave the oxygen for Venmo last year to do the user-facing innovation stuff, right? They launched in Venmo Stash loyalty platform. They launched Venmo Debit Cards and Credit Cards and so forth, right? If they were focused on blocking and tackling the identity do not have moved fast. So that was the first on lot that we got out of the identity win. We are now converging payments. As soon as we converge payments, now everything that we did with PayPal Checkout, we are going to take the same set checkout subsystem and now make Venmo provide that functionality. You might say, what does that get you...

Talk about what do you mean by being able to pay with Venmo anywhere where PayPal is accepted kind of -- Venmo Debit Cards or whatever.

So there are 2 pieces, pay with Venmo is a product by itself. Right now, it's using stored value and credit cards cuts, right? But they don't have a buy now pay later offering. Now when the payment systems are turned this year, right, what happens is now Venmo will be able to offer buy now pay later instantly. That is the demography that really is very attractive to BNPL. So the fact that we can light up the BNPL pretty quickly becomes a meaningful point. The other point is Venmo debit card penetration still ways to go, it's about 8% of our total Venmo. And that came from our common financial services, right?

So now we are able to issue a debit card like we do for PayPal debit card. So that's where as they leverage the same underlying stuff, they can now do credit, they can do buy now pay later, and they can do the pay with Venmo and move faster.

Common functionality and Venmo.

The third thing that we did, which is we launched we call PayPal World, we had made PayPal, Venmo interoperable. You could would actually send money from Venmo to PayPal and PayPal to Venmo, seamlessly, you just have to put a phone number, and we can look it up, right? By doing that, we basically now made Venmo to be able to send money to anybody in PayPal, internationally, right? That has been a huge offering where people are now leveraging that very much. Why I'm bringing this interoperability is with this interoperability when we get the payments and the pay sheet integration done, with the interoperability, any merchant who's already offering PayPal, we can actually do pay with Venmo seamlessly, right?

When you click on the PayPal button, any wallet that is PayPal World wallet will automatically show. It would be UPI, it would be WeChat, it could be Venmo. So now what we are doing is we are basically plugging the Venmo into the PayPal flywheel. So any merchant, you don't have to integrate separately for Venmo.

When that was first presented I was like, wow, that's a really interesting idea. But the UX was kind of -- if I'm a consumer in a foreign country that doesn't know PayPal, right, and all of a sudden like checkout with PayPal. My first reaction is, I don't have PayPal I'm not going to use that. Is it more going to be whatever the local scheme is powered by PayPal.

So there are 2 pieces to it. The first piece is the local country will promote it. That's one piece they see PayPal you will be accepted, that will be number one. Number two, remember, the payment ready API that I said, when you -- and the merchant starts using the payment-ready, right, with the new integration. Now even the PayPal button can be rendered in the local thing because we already know this person has a UPI account or a WeChat account. So we are trying to be backward compatible, while we are trying to -- so that's where you might have seen it as you clicked on PayPal before I see the wallet. And with payment ready, we can actually move it one step ahead in the game, right.

And I want to -- it's a challenge for a lot of merchants because they do not know where people are coming from. They usually have a master of all the payment methods, you've seen that like APMs, multiple APMs, that is usually very detrimental to the conversion. So if somebody can tell you the propensity to buy on this payment method is the best, it actually will help the merchant.

Okay. Let's hit Braintree for a quick sec and I got a summary question for you. Braintree is strategically important for some, some people think it is not, difference of opinion, fair. How do you think of Braintree's role in the technology stack and the opportunity to leverage Braintree, which is a merchant solution with the PayPal and Venmo Consumer Solutions.

So for me, first, it's the foot in the door, right? If you have a payment service, everybody needs a payment service partner.

Braintree is a foot in the door.

Foot in the door for merchant? So whether you're doing branded processing or unbranded processing or any APMs that you want I want merchant to adopt Braintree. So by doing that, number one, we have an integration in which we can now upsell branded PayPal, Venmo and so forth with a single click of button to enable those payment methods in the merchant side. That's number one. Number two, with the volume of transactions we do, payment is all about auth rate. Payment is all about like how well we do economy of scale, right, whether it's routing, whether it is knowing what is the low trust provider to go to. Knowing everything about the back-end interchange rates, right? Those knowledge that we deliver with more and more volume it helps us on the economics.

So it helps us on the risk. It helps us in the fraud. It also the economics, right? So that's why debt tech is very important because it gives us a holistic view of the consumer. And then I can go on about like the data play, which we see is even more valuable.

Yes. Okay. In the last few minutes we have, I wanted to ask you, the investment community is so focused on growth rates and margins and that kind of stuff. Some people who have a technical background totally followed what you said. Fewer would probably say that was a very basic conversation because not many are -- and some will say, it was over my head. So from your perspective, I will be able to say this conversation and what you've set out as your vision, it's showing up in the numbers. How will we as an investment community know that what you're doing is impacting results? Where will we see it?

I think you will see it when the merchant I talked about the multiple surfaces on which they want to be treated. You would see when the merchant now says, my catalog is available for demand generation on Agentic surfaces, on social surfaces...

As it relates to PayPal.

As it relates to PayPal or Venmo either way, right? And it's a buy with Venmo or buy with PayPal, and it's a single click checkout. That's when you know. But like we basically are helping the merchant drive demand, which is what matters most for them.

Yes. So we'll see it in revenue, we'll see it in margins. And I'm assuming maybe at that point when things are at an advanced stage, maybe Steve and his crew are going to offer some different KPIs about showing where the progress is. Steve is nodding his head for those of you online. So okay. The last thing I want to ask about is the company saying there's $1.5 billion of cost savings. Some of that will be reallocated. Not asking you to quantify how much is going to be reallocated at Steve and the management team's job. But the way you see it, the efficiencies on the cost saves, where do you want to reinvest what your -- do you see the IT budget or what you supervise the spend actually going up and realization of much, much more efficiencies from that spend? Or do you see it as, no, we are a driver of cost reduction and efficiencies across the board, while still facilitating growth.

So there are -- I would answer it in 2 parts, right? We want to be the best architecture. I'm not wanting to be evolving architecture. I want to have the best platform out there 3 years from now. So that's the goal. So the idea is if we modernize and if you cut down the tech debt, we should have significant savings, but I want to reinvest in actually delivering the best platform out there, right? And we do not know where the AI will take it. But what I would say is we would reinvest to be the best-in-class technology platform out there. So that's something that I would, as a CTO would push for how do we be the leading platform play in there.

I do not want to sacrifice on auth rates. I do not want to sacrifice on risk, fraud. I want us to be the best identity provider out there. I want us to be the best checkout instrument out there. I think with the amount of automation, cloud and tech debt and all that kind of stuff, I think we can reinvest and we can be more efficient is how I see it, but it will be a 2- to 3-year cycle. And I think there's definitely efficiencies there.

Yes. I always used to press my CIO. This has got to go faster in his response and knew what he was going to say every time, it's like you can't put 9 women in a room and have a baby in a month. Things take time to build, which was his version of saying, we're moving as fast as we can, but shut up. We think we're doing our job. How do you -- you're getting pressure, I'm sure, to go faster and faster and faster. Do you feel like there is -- what's kind of like the vibe inside, like, look, you got a big job to clean up and build and do everything all at once, while you're running a multinational platform that's processing hundreds of millions of transactions all the time, right? So how do you balance speed versus doing it right?

I have a technology, which I call [ S and ], okay? So we have to balance, right? And the thing is out have said the same thing like your CIO said, you can't do that. But now with software factories and agents, it's becoming a little bit more of a reality that we can do four things parallel. So I think what you're going to see is significant velocity improvements in the coding innovation piece of stuff, where I would be very cautious and we'll be thoughtful is on the migration piece, right, as we move from this Oracle to the cloud, it's going to take a year, 2 years to really migrate, okay? We do not want -- we can't rush that. So -- and that is an important part. So we are now balancing the art of the possible, which is how I push my team. There are things -- we do not rush. We plan it and we execute it systematically. But there are other things we should just be innovating faster if it's a user innovation, if it's a front-end innovation, right? Like and Venmo, like, for example, the user innovation, 50% of it is auto coded by right now. How can we innovate faster on the user experience is how we're pushing right now?

This is the last question because we're down in 5 seconds. But what is the leverage ratio for AI agents versus human programmers? Let's say, a human program cost $200,000. If you allocated that same $200,000 to agents and using the best tokens or whatever. How much -- what's the ratio there? Or $200,000 in tokens, you get 10 programmers, you get 20?

So I would say it slightly differently. It depends on the work that you're doing. Yes. Okay. If you are a vibe coding, it's not maybe the most efficient form. If you're lifting and shifting complex applications, it's worth its pound like maybe 10x more 20x more than what it is. So I think what is happening is people are using it a class and diverse nature of it and your target seeing people talk and match out right now. So without seeing value, right? So what we have been trying to -- at least I'm trying to push is been a judicious use of the tokens, right?

We are focusing on the big lift of shift, which is why I'm doing AI STLC, where hey, if we can fully be autonomous, that's worth while spending the tokens on, and if we can understand the knowledge layer and all that kind of stuff. Everything else is just a speed to the market right now because of the trust a tokens. Summer, when the economy goes down, are we start putting AI machines at the desktop of our developer, then maybe we don't have to pay the tokens now, it's all free. It's all your open source LLMs, and then it's CapEx. So it's an evolving story, Adam. I would say right now, it's a hybrid. But if you -- for modernization or major platform rewrite, you can't find a better solve. It's not about cost, it's about efficiency, accuracy, speed and consistency.

That's great. Okay. We are a minute over, but thank you very much. This is a great conversation. And again, I think it sets the stage for some more narrative coming out of you. So Steve, all my questions coming up on earnings calls are going to be about Srini.

Good. On it.

Thank you.

Thanks, Srini.

Nice meeting you.

Good morning, everyone. Welcome to 46th Annual Strategic Decisions Conference by Bernstein. I am delighted to be here with me today, Enrique Lores, PayPal's President and CEO. Enrique, thank you so much for joining us.

Thank you for having me.

Enrique, I know you have some prepared remarks before we get into the questions. So why don't we get started with that?

Okay. Perfect. So again, thank you for having me here, and thank you, everybody, for joining us. What I wanted to do at the beginning is to share a few thoughts of what have been my learnings about the company during the last 90 days and about the direction that we are starting to take. And as all of you know, it is still not my 90th day as the CEO of the company, but it has been an intense period of time, both where we have been learning about where the company is, and we have also started to take some decisions to reposition and to accelerate growth of the company.

There have been a few key learnings that I wanted to share. First of all is, and this is one of the reasons why I joined the company, it has clearly a very unique and differentiated set of assets. The scale that the company has, the technology assets that we have, some of the skills and capabilities in terms of risk management are very unique. And especially when we look at these things being done globally, it makes and sets PayPal apart from any other competitor in the industry.

We also operate in significantly growing businesses and markets which -- that are going under transformation, which is always a good recipe to drive and accelerate performance. And there are also some things that we have realized that we need to change. First of all, when we look at our technology assets, they need to be modernized. In some areas, we have to both change how data is managed and overall, adopting AI and becoming an AI native company is something that is needed.

I have also seen and learned that we have a strong opportunity reinforcing the consumer side of our two-sided network. The two-sided network is one of our key competitive advantages. And over the last years, our focus has been much more on the merchant side than on the consumer side. And reinforcing that is going to be one of the key drivers that we will have for growth.

And we also have a strong -- a significant opportunity to simplify how we work. We have had a complex organization. And by aligning the organization around the businesses where we think we can win, we think we can significantly increase the chances to succeed and make the overall company more efficient. And we have also an opportunity to reduce our cost structure and make the overall company more efficient. And with those savings, we can reinvest and accelerate growth. So that's kind of the first view of the company.

As I was mentioning before, one of the key advantages that we have is that we operate in 3 large and growing markets. And each of these segments -- for each of these segments, we have differentiated assets, and we have a clear right to win, but they need also differentiated strategies and differentiated plans. Our largest market today is our checkout business, is the source of the majority of the profit of the company. And the scale that we have, the loyalty we have with customers and the technology assets that we have make this an opportunity -- an area where we can continue to win and continue to succeed.

An area of incremental opportunity for us is what we call consumer financial services. We have been extending both PayPal and Venmo into this space, but the opportunity to capture more value by building on the momentum that we have in both businesses is clearly there. The growth that we have seen on Buy Now, Pay Later is one example of the type of things we can do, but there are many other opportunities in this space that I'm sure we will be talking -- that we'll be talking later.

And finally, our third opportunity is in payment processing. We have differentiated assets there, especially with Braintree, where we have been growing in large corporations, and we have a significant opportunity to continue to drive that growth and also improve profitability by adding incremental services. So these are the segments that we have. And we have realigned the company to be able to have clear line of sight and clear definition of what are the strategies that we need to execute for each of the businesses. And we have simplified decision-making and alignment in the company to be able to do it faster and better.

And by realigning, we think this will give us the opportunity both of having more clear strategies, but also to significantly improve execution. As you will hear me talking during the next few minutes, you will see that improving execution is going to be one of the key themes that will help us to manage the performance of the company and to improve the performance of the company in the coming months.

I mentioned before that we have a significant opportunity also to improve the cost -- to reduce the cost structure of the company. We have declared that we see at least an opportunity to reduce $1.5 billion of gross run rate cost during the next 2 to 3 years. And we have identified 3 areas that will allow us to make that happen. One, is the overall simplification of the company that we are going through now, which is driven by realigning around the different businesses, but also by significantly reducing the management structure, improving -- increasing span of consoles and reducing layers.

And this is a process that we already started a few weeks ago that will continue to drive results and that will continue to execute in the coming months. The second big opportunity is to improve operational efficiencies and optimize our portfolio. And when I talk about optimizing our portfolio, I mean both in terms of what businesses we are, what businesses we double down, what businesses we decide that is not aligned to the strategies that we are going to execute and also to optimize our geographical footprint.

PayPal operates in multiple countries around the globe, and we need to make sure that we optimize the investment in every country for the opportunity that we see in the different countries.

And last but definitely not least, is the opportunity to reduce cost by embracing artificial intelligence across every process of the company. We have started to make some progress around customer support, around technology development, but the opportunity is very significant, and this will be close to around 40% of the total savings of the program based on what we see today. But as all of you know, AI is evolving very fast, and we think that the opportunity could be even larger as AI continues to evolve and the opportunities continue to grow.

One of the announcements that we made also in our last Q -- earnings report was the fact that we see an opportunity and the need to modernize our technology platform to make sure that we design and redesign the technology platform to maximize the value that we can get from the cloud, our technology platform was designed -- for the cloud, so this gives you an idea of why modernizing it is a key priority.

We also have for, in many cases, multiple platforms that are doing the same activity. So we are integrating all that to make sure that we can leverage and we can maximize our returns from the investments. And we have also done it in a way that for every module, we will be defining and achieving a significant competitive advantage. So this is not just about modernizing, it's about modernizing and defining how do we want to differentiate in the different areas.

And one of the key things that will allow us to do that is the fact that with AI, we can drive this transformation much faster than it was possible before. And this was one of the reasons why we decided that it was important to do it now, leverage the power of AI to make sure that we can complete that in a 2-year window that before would have taken much, much longer, and we can do it with highest level of quality.

And this is just a chart. I don't expect anybody to read it in detail, but this gives you an idea of the different modules that we are redesigning and the milestones that we have for each, which is what the team is going to execute and I think will be driving the results that we are looking for.

And just to close, most of the savings that we will be generating, we think we need to use to reinvest for growth in the company, growth -- investments in technology to modernize, I just explained, investments to drive consumer demand, investments to really rebuild the equilibrium of our two-sided network to make sure that we can drive growth on the consumer side, while at the same time, we maintain the focus on merchants where we have been seeing progress during the last year. So this is, in a nutshell, the plan that we are starting to put in place. I'm going to stop now and open for your questions.

You had a busy several months, Enrique.

And I'm sure this year, months coming.

So I have so much follow-up on this. But before we get there, PayPal processed $1.8 trillion in volume last year. And at this scale, we have unique insights on how e-commerce is performing. So to kick off our conversation, can you talk about the current spending trends you're seeing across PayPal?

Yes. I'm going to make very similar comments to what we made in our last earnings report, and the trends continue to be similar. From a vertical perspective, we have seen a slowdown in the travel space, especially in Europe. And also from a regional perspective, Europe is a region where we have seen a slowdown of overall activity. When we look at monthly evolution, May was stronger than April, but in line to the expectations that we were having.

In terms of our own guide, and I know investors care a lot about our branded checkout forecast and what are we expecting. So as we said in our last report, we expect Q2 to be on the low side of the guide that we provided for the year, but we expect the guide for the full year to be in line to what we said at the beginning of the year to be -- and no change versus what we communicated 4, 5 months ago.

So Enrique, you have been a public company CEO for almost 7 years. You were on PayPal's Board since 2021. Tell us about both your and the Board's decision to have you lead PayPal?

Yes. So let me start from my side, and I will talk later about the Board. The reasons why I decided to join PayPal are several. First of all, I am absolutely convinced about the opportunity that the company has. And I mentioned that before, what the combination of assets that we have, the market where we operate, the value that customers continue to see on our brand makes me confident that we have a strong opportunity to do better.

I think also when I look at how the company has operated and the opportunities that we have to improve that are very significant. And this is why I was talking before about improving operational execution and driving operational excellence and as one of the short-term opportunities that we have. And at the same time, if we -- as we drive the cost structure reduction program that we have, which I have a lot of experience, and we invest in innovation and innovation at scale, which is what I think will help the company to grow. I think that will help to reinforce the opportunity that we have.

And these are all things that I have done along my career. I have managed technology businesses. I have transformed technology businesses and I have done this at scale. So this made me think this was a good opportunity and that I could really have an impact in improving the performance of the company. And I think this is what the Board considered as well. We were seeing that even if we were making some progress on the innovation side from an operational perspective, the company needed a change, and this is why the Board made the decision in January.

So I now have some follow-ups on your prepared remarks. So you talked about the opportunity to significantly reduce your cost structure. Tell us more about how you assess the more than $1.5 billion in run rate cost savings. I know you talked about the 3 different areas, but any more color on that?

Yes. I think we -- as I started -- as I became the CEO, we look at what were the opportunities that we had to reduce cost. And we assembled an internal team with some external help to really identify them in a very careful and methodical way. And this is how we came with this list. When I look at, for example, the organization that we have, every large company like PayPal needs to be a matrix because you always need to have businesses and some functions to drive efficiency.

PayPal was a 4-dimensional matrix. It's impossible to manage a company with 4 dimensions. Not even with AI, you can achieve that. So by simplifying the structure, aligning around 3 businesses, of course, we still have some functions. We see a lot of opportunity to simplify. When I look at management layers, in some areas, we have 8, 9 management layers. We are a big company, but relatively small company. We can operate with 7 as an exception. It will help us to reduce management layers.

When I look at the opportunity that we have across our portfolio, we have a lot of innovation in many different ideas, but we are not maximizing the value of many of them. So by simplifying, reducing the investment and then double down in the areas where we see opportunity, I think we can reduce cost structure and be more efficient. And the same from a regional perspective. And then there is the whole opportunity around AI.

If I think about things like support, things like technology development, but almost every other process of the company is going to be reinvented. And this is the approach that we are taking. We have identified one person that will report to me that is very going process by process in the company and assessing how the process should be redesigned and how technology and AI can use to drive that. So when we put all these things together, we come with the savings that we have declared, which as I have said before, we have said is at least $1.5 billion because we see a lot of opportunity to reduce cost in the company.

I want to follow up on the technology transformation, which could be fascinating. But before we get there, you talked about reinvesting the 1.5 -- more than $1.5 billion of savings back into the business. Maybe elaborate on the key areas you will be investing in? And how do you evaluate the decision between reinvestments and shareholder returns?

Yes. Maybe before that, let me share where are we in the process because we are still kind of defining the detailed business plans for each of the 3 verticals that we have identified. And we still need some time to totally define what are the areas where we need to invest and what are the businesses where we are going to reinvest. So we are in the middle of that process.

But at a very high level, just reminding what I was talking before, technology needs to be an area where we reinvest. We need to be -- go back to be a technology company that leads by innovation. And this is going to require investment across the company. We need to reinvest on the consumer side. One of the key advantages the company has is that we are a two-sided network. What this means is we are talking and working with merchants, and we are integrated in the solutions and in the checkout process for merchants. And at the same time, we have a direct connection with consumers. We know what consumers are buying. We know what they are doing.

And we need to get value from that connection. Over the last years, the company has been much more focused on the merchant side, achieving the right level of presentment, driving selection, which are all very important things but are not are necessary, but not sufficient. We need to reinvest on the consumer side, understanding what consumers are doing, influencing what consumers are doing. And this is going to be requiring investment on the -- both from a people perspective and from a dollar perspective. That will be another area.

And then finally, we have in the company many areas that are growing, areas where we need to double down because are growing and are driving profitable growth. So by investing on those, we also can accelerate and can return to drive growth for the company.

And I think it's fascinating investing on the consumer side because on the merchant side, you already have penetration at all the merchants. You already have presentment. So you have incredible leverage, I think, on the consumer side, if you, I think on the...

Especially when we think about the value we can create with data and whether it is data we capture from PayPal, data we capture from Venmo or from many of other apps, we have a unique set of assets, then with that data, we can really help merchants to achieve and to improve their business.

Let me give you a couple of examples. I work with a leading retailer of Europe a few weeks ago. And he was telling me that, yes, they are very pleased with the work that we do with them, but that there is something where they need a lot of help that they think we could help. And it's an area which for them is critical, which is returns. They spend a lot of money in their business just by -- customers that buy a product and then they return and they buy again and they return. And since they offer free shipments, this for them is a super expensive big area of cost.

They will really benefit if we could give them some insights on what are the consumers that have a higher propensity of buying and returning, buying and returning because this can help them to really make their business more efficient. By providing these insights, of course, in a way where we respect privacy and that we respect all the necessary rules, we can really add significant value and very differentiated value. And this is just an example, almost for many other merchants that are similar cases.

It's fascinating. I want to talk about the tech transformation. And there are portions of your technology stack, which require modernization. And it's been a multiyear journey. How can -- and I think you alluded to that in your prepared remarks, how can AI help you accelerate that process?

I think it's going to be a major help and we really need to -- and are starting to take advantage of the benefit that AI is going to be providing. We can generate code much faster, modernize and change applications much faster. And we are starting to see the benefit of that. For example, in several countries in Europe, we launched our new BNPL solution. And the main reason why we're able to do it at the same time in many countries is because we leverage AI to drive these changes. This is just an example of the capabilities and the value that AI is going to be bringing us and helping us to modernize our platform.

So Enrique, let's switch gears and talk about checkout. A key area of focus for investors. There's a lot going on here as you modernize experiences, grow your buy now, pay later business. And then you also talked about some of the new value that you're bringing. You talked about the returns example. But at the same time, competition is also quite intense. Taking a step back, how do you see the growth opportunity with checkout?

Yes. I think the work that we are doing is to really understand what should be the redefined strategy for Checkout. I mentioned in the earnings call a few weeks ago that we really need to focus on the most valuable customers and in the most valuable verticals. And that our goal is going to be much more focused on improving and growing transaction margin just than on driving volume and gaining share for the sake of gaining share.

And when we look at customer cohort, the difference between the cohort where we make more -- where customers are more profitable or less profitable for us is very significant. So we clearly need to focus on those cohorts where the profit is higher, and the verticals where we have an opportunity to bring more value and therefore also to retain more value. And this is the shift in strategy that we are working on.

And as we complete the strategy, we will be communicating what the new KPIs are and what should be the areas that investors should be paying attention. Our plan is to build a business that will have sustainable profit growth in the long term. That's the goal that we are working with. And based on what we see, we have confidence that we can build it.

And so you alluded to focusing on verticals, which are more profitable. Can you elaborate on that?

Sure. I think -- if we think about what are the key differentiators today of PayPal and again, with data, we will bring -- we will be building more. But things like required cross-border are complex or areas where require financing those are verticals where we see opportunities to win opportunities to retain more value and therefore, an area where we are going to be investing more than just traditional verticals where the value is lower and therefore, will not be so attractive for us.

And then similarly, you also talked about some consumer cohorts kind of being more attractive versus others. Maybe also elaborate on that as well.

Yes. I think all this goes back to understanding who our customers are and building the right programs to reward and to retain those customers. And this is an area where the company has not done a lot of work during the last year. But thats -- this is going to be

[Audio Gap]

a going forward, i.e., in some of the meetings with investors during the last week, I was using an example. PayPal is a consumer company that has distribution through merchants.

A very simple analogy will be to compare us with any CPG company. Let's take Procter & Gamble. The way we were a company managing the business until now, it was like if Procter & Gamble were only concerned about having their products in the stores, in the aisles of the supermarket, and there was zero effort to drive demand from a consumer perspective. If you think about a CPG company, we'll say it's impossible. This is not unthinkable. This is what we were doing.

Good news is this is the opportunity that we have. So as we change our focus as we increase our focus on consumers as we understand what customers are buying in Germany through us and which ones are not. And by doing activities for them, we can improve the business in the U.S. in all the areas. That's the big change that we are driving on the network side.

I like that analogy. So there is a lot of focus on branded Checkout volume growth and investors often use it as a proxy to assess competitive and other market dynamics. And you alluded to that a little bit in terms of your comments on transaction margin dollars. But as you look at branded, what are the key KPIs you are focused on?

This is part of the work that we need to do. So we are still working on this. But clearly, this needs to be the success of the company and the value of the company will be driven by being able to sustain and drive growth on the transaction margin level. This is what really will have an impact on the value of the company long term, and this is what we are -- what we are using to align and to define what are the KPIs that we'll be doing that.

As I said before, customers are not equal. There are customers that bring much more value than others. There are verticals that bring much more value than others, and this is where we are going to be focused and what we are going to be driving the company into.

I want to switch gears, Enrique and talk about capital allocation. So PayPal has several attractive assets and waterfront properties, including Venmo and Braintree. As you look at the business with fresh eyes as CEO, how do you think about the industrial logic of having these businesses together?

So first of all, I think good news is that we have these assets that are so attractive and where we see growth and very, very attractive growth. I think, first of all, my key priority as a CEO is to maximize shareholder value. And this is what is driving all the actions and that will continue to drive every action that we will take. And any option is valid under that umbrella. When I look at the situation today and I look at the opportunities that we have to drive shareholder value, I think that the best approach that we have is to continue to drive and accelerate organic growth for both Venmo and Braintree.

Both businesses have significant opportunities to grow. Venmo by improving and increasing the portfolio of financial services that we offer. Our growth is very solid. Our ARPU has been improved. We have an opportunity to maintain growth and drive ARPU up. And that's something that can be done easier by leveraging the investments and the capabilities that we have in PayPal.

Same thing with Braintree. We are seeing significant growth. We have an opportunity to improve the profitability of the business by increasing the connect rate to value-added services where our connect rate is improving, but needs to improve significantly. We can drive that in a more efficient way and effective way under the PayPal umbrella. And that's the logic that we are using. It's all about creating shareholder value, and we see opportunities to drive these businesses and grow these 2 businesses faster by leveraging across and whether it's capabilities, leveraging customers, whether it's leveraging technology investments, whether it's leveraging capabilities, we can do that in a more efficient and faster way.

And how does the reorganization that you did across kind of Checkout, consumer finance and payments processing impact how you're running the business? How is it different from before?

I think it is very important to really be able to maximize the value for each of the businesses. I think that focus will help both in defining the right strategies, in making sure that we have the right ambition in the teams because each of them is going to be measured on the goals that we have and also is simplifying decision-making across the company. If I think about PayPal, there were always 4 or 5 different groups that needed to be involved to make a single decision. Now it is clear that the leader of the business has decision power across the board, and that person is both empowered, but is also responsible and accountable for the results. And usually, when you make these things, magic happens and you see significant improvements of the business because at the end, it's about having and driving the right level of accountability inside the company.

And you talked about there was used to be this matrix, right, like within the organization.

And still, we have a matrix. But what has changed is it is very clear who the final decision-maker is because you need a matrix to leverage assets. You cannot replicate everything 3 times. But what needs to be clear is who makes the call, who makes the decision and who will live with the consequences of the decision as well.

So I want to follow up on Venmo and consumer financial services. Venmo is undermonetized. It's been undermonetized for a very long time. And during the first quarter earnings call, you alluded to consumer awareness and adoption lagging the actual products you have. What is the path to addressing that, monetizing Venmo and becoming a bigger part of the consumers' financial lives?

Yes. I think, first of all, we -- I won't talk about it, but there has been progress, and this is an area where the team has been making progress during the last quarters, both accelerating growth and also improving profitability per customer. So there is a lot of opportunity, but momentum and progress has already started to happen. And I think the recipe we are going to be applying is a combination of the different things I was saying before. We need to continue to expand the portfolio of services that we offer. And we need to look in a more focused way, identifying what are the key segments where we see the biggest opportunity because there might not be getting full coverage of the financial needs that they have. That's one avenue.

And second, we need to reenergize our marketing programs and our marketing activities. We have -- this is another area where compared to the opportunity, we have been underinvesting. And as we drive savings, we see an opportunity to accelerate and drive growth. I think the opportunity on Venmo is very exciting, both in maintaining the growth, but also improving and continue to increase ARPU per customer and profitability per customer.

And there is a perception that Venmo customers tend to be a little bit more affluent. So that limits some of the opportunity in financial services. Do you see that differently?

I think it's -- we need to go one level low and one level below and understand the different segments and the different type of customers that we offer. For example, we see an opportunity in terms of customers that are using Venmo as a way to be paid. If you are repairing something or you are working a lot, these type of customers are typical Venmo customers. These type of customers are not getting their financial needs very well covered. So below the statement of, Is young customers that are very affluent? There are many other opportunities that we are identifying and we're going to be targeting.

And now you -- as you mentioned earlier, you do have the product that you've been investing in over the past years.

I think it's all about segmenting, understanding our customers and defining the right products for them and the right end-to-end program for them. It's not only about launching the product. It's about launching the product, having the right marketing, the right sales and building -- making sure that we have the full program behind each of the activities we will do.

I also want to ask about Braintree and payment services. So in the last couple of years, there have been some strategy shifts with respect to Braintree and the prior management teams at PayPal. What kinds of investments and go-to-market changes? You alluded to that a little bit earlier, but I want to follow up on that. Do you envision making within Braintree to capture the payment volume and also the value-added services opportunity, which is huge and some of your competitors are benefiting from that growth?

I think it is several things. One is Braintree. Braintree is another business where we see growth and where we see significant opportunity to accelerate growth and to improve profitability. Braintree is very differentiated, especially for large companies in complex environments. And this, by being very selective and being very focused, we see an opportunity to maintain the momentum. And then the key thing that we need to improve is to increase the connect rate with value-added services.

Compared to our competitors in the industry, our connect rate is low. Our offering is starting to be at par and in other areas differentiated. And we just need to create the momentum in our side to make sure that from a sales perspective, this is #1 priority. From a marketing perspective, this is #1 priority, are things that have not been done yet, but that are clear areas where we have everything under our control to make happen.

And historically, a large part of Braintree's growth came from bundling and optimizations related to PayPal Checkout. How do you think about -- how do you think Braintree's value proposition evolves from here?

I think the fact that we are declaring that processing is an independent business means that Braintree needs to sustain its growth and its profitability as a stand-alone opportunity. Now of course, we need to maximize the opportunity to cross-sell. Many customers are buying the full portfolio of PayPal, Braintree. These are very important customers for us, and we need to make sure that we maintain and we expand that. But the leader of Braintree of payment processing is going to be measured on the overall growth of the category because we see an opportunity to significantly improve where we are.

It's almost 50 minutes -- 40 minutes into the conversation, and we haven't talked about stablecoins. So I want to ask you about stablecoins. So Pay USD now has $3.5 billion of market cap is now available in 17 markets globally. What role can Pay USD play in the fintech ecosystem? And how can you accelerate the growth from here?

Yes. I think there are 2 roles where that stablecoins can play in the fintech space and in the company. One is to drive growth in specific use cases. And we are experimenting and seeing growth in some areas already. For example, in large international payments across companies or in the consumer space, in countries where there is a lot of inflation that want to get their own currency or their own savings protected, consumers can now with the expansion that we have done, use stablecoins as a way to protect their savings from local currency fluctuations. That's happening now, and we are starting to see growth and probably more growth in the coming years.

I think the biggest opportunity is more in the long-term transformation that could happen in driving and building a very low-cost network. This is one of the reasons why we continue to invest. It could go in many different ways. So we need to experiment and learn how the environment evolves. But it's an important asset for us to explore that could be very differentiated in the future.

And I guess you have the consumer distribution, you have the consumer network, you have the merchant. So you do have some of the biggest kind of, I think, you've overcome some of the biggest chicken and egg problem, right, like in terms of utilizing.

And this is why I was emphasizing before that having the 2-sided network and making sure that we explore and explode the value from that is so relevant for us because really, it's a very unique asset that we need to improve how we manage and maximize the value from it.

I also want to switch gears and ask about Agentic. So Agentic commerce, very early days, but there's a lot happening across the commerce and fintech ecosystem. What evolving role does PayPal play in a world where agents are shopping on our behalf?

We see ourselves playing 2 different roles. One is from an infrastructure perspective, given the connections and the relationship we have with merchants, we are working with them to expose their portfolio and make sure it's connected to the different LLMs and the different agentic portals that are starting to grow. And we bought a company called Cymbio that we are in the process of integrating, and this is enabling us to build some of these capabilities.

The second effort that we are driving is participating in the different groups that are defining the standards to make sure that we influence them in the direction that we think would be more beneficial to our customers and that we integrate them into our solutions. As you said, it's early, but it is important to start investing to be present and to participate. And I think what is hard to say today is how this is going to evolve exactly. There are many different potential options, but we need to be there and we need to be one of the leading companies in providing infrastructure and in connecting our customers, both merchants and consumers.

And Checkout is at an interesting point with respect to Agentic because on one hand, you have a 2-sided network, which could be very valuable in terms of, I think, when trust is low, which could be in Agentic commerce, right, you're also looking at like many different dimensions of a transaction. But on the flip side, digital wallets, the agents can abstract away the digital wallet value proposition. So how do you kind of think about the branded positioning within Agentic?

I think what Agentic is going to be -- is going to make more relevant than ever is the need to have -- the need for -- and the relevance for identity. And this is one of the key assets that we have as a company and an area where in terms of investing, we need to continue to invest and continue to differentiate because no matter what type of entity model you have, identity from both consumer perspective and to a certain extent from a merchant perspective is going to be critical, and this could be an area for us to differentiate.

So you're saying KYCs, customers, knowing that the merchant is actually a right merchant or a fraudulent merchant and knowing the agent is the right agent.

Exactly. And the merchant knowing that this is a real customer and that the agent is a real agent on the other side.

And then you also add kind of value-added services, I think, buy now, making flexible payment options.

Exactly.

I have a question that came in from the audience on AI. So how does PayPal govern customer and transactional data in AI risk systems, including limits on non-core data use, bias testing, mitigation, and KPIs or audits?

I mean, we are very rigorous in terms of how we manage customer data. And of course, we support and we respect the different laws that we see across countries. And we tend to go to lean into leverage those that are more restrictive to make sure that we manage and we follow all the restrictions.

We only have a couple of minutes left, Enrique. So my last question for you. So we talked a number of new initiatives, a number of new focus areas. We talked about the technology transformation, OpEx savings. There's a lot going on. What are your biggest priorities in the next 6 months?

I think first is to complete the changes that we are doing from a structural perspective to make sure that we get the company to operate more efficiently. That's a big area of focus. Second is to continue to build the plans for each of the businesses, so we can define specifically the areas for growth and what we need to do to maintain to accelerate the momentum of the company. And third is to start building now the plan that will help us to differentiate beyond '27, so we can drive the sustainable profit growth that I was mentioning before.

We know that this is one of the key concerns investors have, which is what is the terminal value of the company? Is the profitability of the company sustainable? And this is why we are defining transaction margin and achieving sustainable growth in transaction margin as our key priority because we know this is what investors care about.

You have a busy year ahead. Thank you so much.

Thank you.

Good morning, and welcome to PayPal's First Quarter 2026 Earnings Conference Call. My name is Sarah, and I will be your conference operator today. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Steve Winoker, PayPal's Chief Investor Relations Officer. Please go ahead.

Thanks, Sarah. Welcome to PayPal's First Quarter 2026 Earnings Call. I'm joined by CEO, Enrique Lores and Chief Financial and Operating Officer, Jamie Miller. Our remarks today include forward-looking statements that involve risks and uncertainties. Aactual results may differ materially from these statements. Our commentary is based on our best view of the world and our businesses as we see them today. As described in our earnings press release SEC filings and on our website, those elements may change as the world changes. Over to you, Enrique. .

Thank you, Steve, and thank you to everybody for joining us this morning. I'm stepping into this role at an important moment for PayPal. I appreciate the opportunity to serve as CEO and I'm confident we will accelerate the growth of the company while improving profitability and cash flow. That is why I'm here. At the same time, I'm also realistic that we need to make significant changes to improve the strategic and operational issues the company has faced. Today, I will share what I have observed since joining the company. However, shaping our strategic direction and the actions we are taking to move forward with focus and discipline.

During my time on the Board, I developed a good understanding of PayPal's strengths, opportunities and areas for improvement. Over the past 2 months, I have listened to and learn from our customers, our team and our investors. This has helped to deepen my view of where we are, where we need to go and how we get there. I will begin with a few initial observations. First, our foundation is strong. The company has valuable assets in our brands, our risk and underwriting capabilities, our technology and most importantly, our team. Our scale and global reach set us apart and are difficult to replicate. And the hard earned trust our customers place in us every day is a critical advantage. Second, we operate in market defined by growth and traffic change. It is still in this period that leading companies trying ways to differentiate themselves by innovating, delivering new and superior solutions and driving to growth. These PayPal needs to focus.

Third, One of our core strengths is our 2-sided network, serving both consumers and merchants. In recent years, PayPal has put more energy into the merchant side of the network. Strengthening. The value we offer to the hundreds of millions of consumers who choose PayPal and Venmo is a key priority. Doing that, we increased the value of our platform for merchants and create a stronger foundation for sustainable growth. Fourth, due to years of underinvestment, we need to accelerate the modernization of our technology platform. Moving faster to become cloud native and aggressively adopting AI in our development processes will help us significantly increase developer productivity and short-term time to market. Fifth, we need to simplify how we operate, streamline decision-making and clearly define accountability to strengthen execution.

Finally, there is potential to significantly reduce the company cost structure, simplifying the organization and accelerating the adoption of AI across the company will generate significant savings that can be reinvested in growth and used to respond to business headwinds, improving our overall financial profile over time. With this as context, we need to recommit to the fundamentals. That includes becoming a technology company again, sharpening our focus on consumers, aligning the company around 3 strong businesses and simply how we work with clear accountability and a stronger emphasis on execution. I expect that it will take a few months to completely define our new plan. But I think it is important to start sharing the direction we have taken and some of the actions we have underway.

Let me start by sharing the framework we are using to define our strategy. We see 3 distinct attractive and in many ways, complementary market opportunities where focused investment and sharper execution can meaningfully improve our growth trajectory, checkout, consumer financial services and payment services. Each has clear near-term levers to improve the performance of our existing assets as well as conveys medium-term growth opportunities. And in every case, we have a strong right to win. I will take each in turn. Let me start with checkout. This is a large and growing market where we deliver meaningful value to consumers and merchants. With in checkout, we also see strong consumer demand for flexible payment options, including by now pay later solutions.

This is becoming an important driver of consumer acquisition we are also delivering clear benefits to merchants through higher basket sizes. The second opportunity is in consumer financial services. Consumers are increasingly turning to digital platforms to handle everyday financial activities. This is also our large market opportunity or more than $200 billion annually in just our top 6 markets, and it is growing low double digits. What is most attractive about this market is not only size and growth but also the customer lifetime value opportunity we can tap into. The third opportunity is in payment processing and value-added services. The PSP space represents significant untapped value for us, driven by the continued shift to digital channels and the increasing complexity of global payments.

We're aligning the organization to unlock this growth opportunities. Previously, our teams were organized primarily around the customers we serve, consumers, small businesses and large enterprises. That structure resulted in organizational complexity with multiple dependencies and handoffs that slow decision-making and weakened execution. Check out for example, test on customer groups and markets, creating a multidimensional matrix for road map prioritization. The changes we announced last week will organize the company into 3 times of business, each with a single leader. Checkout solutions and PayPal consumer financial services and Venmo and payment services and clip. And importantly, we are bringing together the 2 sides of the network to maximize our competitive advantage.

Simplifying our operating model and clarifying accountability means that each leader will earn clear outcomes, and our teams will be able to focus on our most important growth priority. We're also using these changes to simplify and delayer our organization. And we have formed a new AI transformation and simplification team that will help us work more effectively and drive our enterprise-wide AI agent. Let me now outline how we are thinking about the path forward across each of our businesses. Checkout Solutions and PayPal is primarily a checkout focus business and is the highest priority for the company and me. It brings together our consumer and merchant ecosystems under 1 unified strategy.

This structure will enable us to fully leverage our 2-sided network and accelerate innovation across both sides of the platform. Our intent is not to change transitory share in any given quarter, but rather to focus on segments and verticals where we can deliver differentiated value to our customers. I have also emphasized that strengthening the consumer side of the network is key to increasing the value we deliver to merchants. Driving habituation through the adoption of our financial services offerings is an important step toward enhancing the consumer value proposition and reinforcing the power of our 2-sided network. On our PayPal Plus loyalty program, which we introduced in the U.K. and will expand traditional market is another important step.

Over the medium to long term, we have a number of compelling innovative initiatives underway. We will take a disciplined approach to prioritization focusing resources scenarios with a greater potential to drive durable growth and shareholder value. Within this portfolio, we will be highly selective as we evaluate our growth set of initiatives, including digital wallet interoperability, biometric functionality and additional programs under consideration. Within Consumer Financial Services and Venmo, we have been making good progress in the last few years and have built a strong portfolio of related products. but awareness and adoption remained well below their full potential.

Our focus is on becoming more central to our customers' financial lives. And our goal is to enable consumers to spend, save, invest and borrow seamlessly. Venmo will be a key component of our growth plans moving forward. supported by a strong brand and younger demographic. We are in a strong position to expand in this space, deeper engagement and increase customer lifetime value. Payment Services and Quito unifies our processing and platform capability into a single scalable offering for merchants. We will bring together the company's unbranded processing capabilities, including Braintree, and value-added services, such as fraud management, authorization, optimization and global payment infrastructure.

They are designed to support businesses of all sizes with flexible high-performance payment solutions. We are also well positioned to capture and monetize this growth. Stablecoin is also part of the enabling faster, lower cost transactions. We have made good progress with TY USD, which became the largest federally regulated stablecoin in December, and we recently expanded its availability to 70 markets globally. At the same time, we have much more opportunity to scale our offerings and accelerate growth in this space. Across the company, we need to modernize our technology platform to enable greater speed and interoperability across our offerings. As I said earlier, leveraging AI more extensively in our development processes will significantly help us with this effort.

Supporting our growth plans is the opportunity to realize cost savings. First, we will remove to application and layers from our organizational structure. Second, we will accelerate our AI adoption and automation across our operations. Combined, the savings will be significant. We expect to see at least $1.5 billion of gross translate savings over the next 2 to 3 years. Jamie will discuss more on this point later in the quarter. Let me touch briefly on some highlights from the quarter before Jamie takes you through our results in more detail. Our first quarter results show an improvement in branded checkout. Branded checkout TPV growth was 2% on a currency-neutral basis, up from 1% last quarter. We continue to see spend in key parts of the business. with Venmo and PSP delivering mid-teens TPV growth.

Transaction margin dollars, excluding interest on customer balances grew 3% with contributions from credit, Venmo and PFT. Non-GAAP earnings per share grew 1%. We also continue to generate robust free cash flow giving us ample room to invest and return capital to shareholders through buybacks and our dividend. On the operational side, our team accomplished a lot in the first quarter from securing apps in presentment on key merchants to enabling interoperability for peer-to-peer payments between PayPal and Venmo. To close, I am confident in our ability to put this company on a more durable path to long-term growth and shareholder value creation. We have a strong foundation, and we are now organized to move with greater urgency. We have a well-defined framework. I will continue to define our strategy and prioritize our plan in line with it. I look forward to sharing more progress as we move ahead. And finally, I want to thank our teams for their continued focus and execution and our customers and shareholders for their trust. I will now turn it over to Jamie.

Thanks, Enrique. The team and I are energized by the focus, clarity and disciplined prioritization you are already bringing to PayPal. We have a strong market position and a solid foundation and I'm confident we're set up to move faster from here. Turning to the financials in more detail on Slide 7. PayPal delivered a solid quarter with both transaction margin dollars and non-GAAP earnings per share coming in moderately better than our guide. Total payment volume accelerated to 11% at spot and 8% currency neutral in the first quarter reaching over $460 billion. Online branded checkout volume growth improved slightly from the fourth quarter, while enterprise payments and Venmo both accelerated into the mid-teens. First quarter revenue grew 7% on a spot and 5% on a currency-neutral basis.

TM dollars, excluding interest on customer balance, grew 3% in the first quarter. The drivers of our TM dollar growth were broad-based, led by credit performance, Venmo monetization, PSP profitability and loss improvement across multiple products. Growth in these areas more than offset the headwind from investments we are making to strengthen our branded checkout position and drive higher engagement, habituation and incremental activity over time. First quarter non-GAAP earnings per share increased 1% to $1.34. And compared to our guidance, non-GAAP EPS benefited from stronger transaction margin dollar growth with some offset from higher nontransaction operating expense. We expect the second quarter to reflect more pressure on a year-over-year basis, driven by the nonrecurrence of certain prior year items and the timing of anticipated cost savings and investment, both of which I'll walk through in more detail shortly.

Importantly, these are factors we anticipated, and we remain confident in our full year 2026 guidance. Adjusted free cash flow, which excludes the timing impact from the origination and sale of Paylater receivables was $1.7 billion or nearly $6.8 billion on a trailing 12-month basis. Turning to Slide 8. We continue to drive deeper, more active relationships with our customers. Monthly active accounts increased 1% to $225 million. Transactions per active account, excluding PSP, improved sequentially to 6% growth. Moving to Slide 9. Total payment volume in the first quarter grew 11% at spot and 8% on a currency-neutral basis to $464 billion. Working our way down the page, branded experience is TPV, which includes online checkout, PayPal and Venmo debit as well as tap to pay grew 5% compared to 4% in the fourth quarter.

While debit card and tap-to-pay spend represent a small portion of branded experience in volume today, they continue to grow rapidly, up 60% year-over-year. Venmo TPV continues to reach new highs, accelerating sequentially to 14% growth year-over-year and marking the sixth consecutive quarter of double-digit growth. Online branded checkout volume growth improved slightly compared to last quarter, up 2% on a currency-neutral basis. Compared to the fourth quarter, we saw a slight improvement in the U.S. with softer performance continuing in Europe. Pay with Venmo and buy now pay later continue to outpace the market, taking share from other payment methods and growing 34% and 23%, respectively. P2P and other consumer volume growth remains healthy, up 10% in the first quarter and reflecting the debit card and Venmo momentum I just mentioned.

Turning to PSP. Volume growth accelerated to 11% from 7% in the second half of 2025. Within PSP, enterprise payments again showed notable strength with volume growth accelerating to the mid-teens from a combination of growth in profitable front book business, high retention and growth alongside our existing merchant base. Driving higher attachment of value-added services continues to be a key focus to improving yield and monetization as we move through 2026. Moving to more financial detail on Slide 10. Transaction revenue grew 7% on a spot basis to $7.5 billion. Other value-added services revenue grew 10% to $852 million, driven by strong contribution from consumer and merchant credits, partially offset by lower interest rates.

Transaction take rate declined by 6 basis points to 1.62%. Excluding the impact of foreign exchange hedges, transaction take rate declined about 4 basis points. This output was driven by a combination of factors, including branded co-marketing investments and rewards as well as higher growth in Venmo and enterprise payments. TM dollars ex interest on customer balances grew 3%. Within volume-based expenses, transaction expense as a percentage of TPV was 90 basis points increasing slightly year-over-year from a mix shift to enterprise payments. Transaction loss as a percentage of TPV improved slightly year-over-year to 6 basis points, this reflects our team's ongoing work to continue to improve and strengthen onboarding, fraud prevention and risk management capabilities.

Nontransaction-related OpEx increased 8% and this higher increase relative to our guide was driven by our decision to pull forward a combination of technologies, marketing and product investments, which will continue into the second quarter making our OpEx profile more first half weighted this year. As a result of higher investments, non-GAAP operating income was down 5% in the quarter to $1.5 billion. Moving to capital allocation. In the first quarter, we completed $1.5 billion in share repurchases, bringing our trailing 12-month total to $6 billion. We ended the quarter with $13.5 billion in cash and cash equivalents and investments and $11.6 billion in debt.

Moving to guidance on Slide 11 for the second quarter and for the full year 2026. While first quarter was a solid start to the year, it's early. The macro and geopolitical environment remains complex and we operate in a dynamic, highly competitive industry. The company is also in the midst of a significant multiyear transformation during which we are taking steps including the business realignment discussed today to better organize around our key market opportunities and drive stronger execution. With that as a backdrop, we are reiterating our guidance for the full year.

We see a significant opportunity to enhance customer lifetime value by driving consumer engagement through a combination of scaling new experiences, improving presentment and increasing consumer selection with rewards and loyalty. We continue to expect our targeted growth investments to represent approximately a 3-point headwind to transaction margin dollars growth in 2026, while driving durable long-term benefits in the years ahead. We have conviction in the impact these initiatives can drive in the future, but it will take time to keep scaling our programs and experiences.

For online branded checkout specifically, our guidance continues to reflect slightly positive to low single-digit branded checkout TPV growth for the full year. Quarter-to-date, we are seeing trends at the low end of our full year guidance, and these are reflected in our second quarter guide. Compared to the first quarter, we have seen slower growth in the travel vertical as well as more muted growth in Europe. As Enrique discussed, we see significant opportunity to further improve productivity and reallocate resources to our highest returning initiatives. And while we've made real progress over the past few years, there is meaningfully more we can do.

We are realigning the organization to sharpen strategic focus, eliminate duplication and remove layers, enabling faster decision-making and clearer accountability. In parallel, we will be accelerating efforts to deploy AI and automation across our operations and technology platform, which we expect will both improve the customer experience and drive meaningful internal efficiencies. These efficiencies will come from organizational realignment, process redesign through AI and automation, procurement and vendor rationalization and optimizing our local footprint. Together, these represent 2 distinct waves of savings, the first from structural realignment and the second from accelerating AI adoption and automation to comprise the vast majority of the more than $1.5 billion cost savings program we will execute over the next 2 to 3 years.

A portion of this opportunity was already contemplated in the 2026 guidance we provided last quarter. Looking ahead, we expect to deploy these cost savings to reinvest in growth and respond to business headwinds and improving our overall financial profile over time. During 2026 and into 2027, we will be transitioning teams, establishing new ways of working and building systems and processes to run the business aligned with the structure we have announced. In the coming months, as we launch the full scope of this program, we plan to share more details on the expected cadence of savings and our reinvestment framework for the years ahead. We intend to follow that up with external reporting, including segments sometime next year.

Turning to more specifics for the second quarter. Let me start by noting that the second quarter has the most demanding year-over-year comparison this year. You may recall that last year second quarter had 1.5 point of transaction margin dollar benefit from the renewal and expansion of a relationship with a key payment partner as well as very strong credit performance. This year, our transaction margin dollar investments also ramped through the year and pressure will be more pronounced in the second quarter compared to the first. In 2Q of last year, nontransaction OpEx also benefited from discrete items within general and administrative expense, including a nonrecurring decline in indirect tax expense.

The 2Q tax rate was below the full year average. Pulling all this together, for the second quarter, we expect low single-digit revenue growth on a currency-neutral basis, a low single-digit or approximately 3% decline in transaction margin dollars. Transaction margin dollars excluding interest to decline low single digits or approximately 2% and mid-single-digit growth in nontransaction operating expenses and non-GAAP earnings per share to decline by high single digits or approximately 9%. For the full year, we are reiterating our guidance, and we continue to expect transaction margin dollars to decline slightly or be roughly flat, excluding interest on customer balances, approximately 3% growth in nontransaction operating expenses and non-GAAP earnings per share ranging from down low single digits to slightly positive.

Our guidance continues to assume approximately $6 billion in share repurchase and at least $6 billion of adjusted free cash flow. I'd like to wrap up by thanking the PayPal team for their continued focus and dedication. We have a solid foundation to keep building on as we drive value creation by executing on PayPal transformation. With that, Steve, let's go to Q&A.

Before we open the lines for Q&A, I'd like to ask everyone to limit themselves to 1 question so we can get to as many of your fellow analysts as possible. Sarah, please open the line. .

[Operator Instructions] Your first question comes from Harshita Rawat with Bernstein.

I want to ask about branded checkout, Enrique, Jamie, can you maybe talk about the market dynamics in Europe, and also over time, what can we expect to see as execution improves and kind of like the realistic growth versus e-commerce we should expect?

I'll talk a little bit about the market dynamics in Europe and then Enrique, perhaps you want to talk about over time, execution focus we have. When you look at branded checkout, I would say that we're operating in a dynamic environment. When you look at the consumer generally, while it's remained strong, we are seeing some skewing in the middle income, which, candidly in the U.S., that was 1 of our bigger improvement points in that cohort. When you look internationally, what we are really seeing is a little bit more pressure from high oil prices, certainly, gas prices, but more importantly, travel in Europe was something that we saw slightly at the end of the quarter, but really more this quarter. And when you look across Europe, I would say, generally speaking, we've got areas growing quite well, but we're still under pressure in places like the U.K.

With respect to Germany, I would say the quarter we continue to see moderation there like we had seen in the fourth quarter, still growing, but at a slower rate. And generally, pretty consistent combination of macro softness, competitive intensity, some natural normalization is a long-time market leader. But having said that, I think what's important, and this is where I'll maybe hand off to Enrique, we began investing, taking all of the things we were doing with respect to branded checkout over the past couple of years and really bringing those to Europe midyear last year and leaning into those investments. And as Enrique has come in, I think his country to country level focus has been really important and I think will be a real acceleration for that. But Enrique, maybe you want to unpack that a little bit.

Yes. I think in Europe, we have an opportunity to improve execution by improving our focus in the countries. During the last 8 weeks, I have been twice in the U.K., 1 in Germany to understand that what is the situation and to work with the team to see what the improvements we need to make. And as Jamie was saying, there is a combination of macro effects but also local competition. But we have enough tools in our side to be able to compete and to be able to grow. And this is what we are going to be doing Overall, answering your other question about branded checkout, we are taking a lot of actions to change the trajectory of the business.

Of course, we need to continue with investments we did a quarter ago to -- we started a quarter ago to improve [indiscernible] to improve selection. And we have especially focused on the top 50 customers, we are starting to see progress there. We also need to continue to improve the experience of our customers so they get a better experience when they check out with PayPal. And we have other opportunities that we started to mention in the prepared remarks that I think in the future are going to be very meaningful. We have been more focused on the merchant side of the network than on the consumer side. And we need to rebalance those that focus and rebalance that investment. For example, the loyalty program, which was launched in the U.K. is going to be an element of that. There are other things that we need to do in that space.

There are also specific verticals, high-value verticals where we can have a more differentiated value proposition, especially we combine with financial services. And this combined with an improvement in execution that by really understanding what our priorities are and simplifying how we make decisions, we think the combination of all that will have a significant impact in the business going forward.

Your next question comes from Timothy Chiodo with UBS.

Great. I want to see if we could talk a little bit more about $1.5 billion of gross run rate cost savings that you outlined today. And Jamie, I appreciate that you mentioned over the coming months, you'll be giving more detail around the cadence and reporting around the progress there. But 1 area of the expense base that often comes up in investor discussions is the customer support line item, it's roughly $1.7 billion or so, and I fully appreciate and I think investors do as well. that there's many countries, there's lots of compliance, there's lot of support. There's people answering the phone and local language. There's a lot of complexity there. But I was hoping you could maybe bring to life a little bit more of some of the tasks or roles or some of the activities within that bucket that might be more applicable to this cost savings initiative.

And in general, any other broader thoughts around kind of areas of low-hanging fruit that you see for the $1.5 billion.

Yes. So maybe I'll talk a little bit about the cost, some of the components of how we're tackling it. and a little bit around the AI benefit. And then Enrique, you might want to chime in as well. When we look at the 1 -- the at least $1.5 billion in cost, we really see this coming in a couple of different phases. The first is really around structural realignment. And you've heard us announce our organization last week, but this is about duplication. It is about layers, it is about org structure, but really focusing and aligning our teams for top to bottom execution and improving our execution speed, candidly. But with that also comes a lot of opportunity for cost and remixing there.

The second piece, which I think is really a little bit more along the lines of your question on CSO is aggressive deployment of AI. With respect to customer experience, how we touch customers and service and support and operations. And equally with respect to risk and the modernization of our risk platform and how we deploy AI as we do that. AI has really across-the-board opportunity, particularly in CSO, but candidly, across the company, I think we've made really good inroads. We're seeing good engineering productivity. We're seeing different elements of acceleration in different functions. But I think the full top to bottom acceleration is going to be really important. And to your point, as we really lay this out, I think there's 2 things to note.

Number one, we do plan to reinvest savings for growth. So a lot of what Enrique has talked about with respect to the company's strategy and not just branded checkout where we're leaning into the consumer value prop more but really building out financial services with Venmo, really leading into PSP and deeper ways to grow. That reinvestment piece is an important element of this. But as you said, we'll lay out more of this in the coming weeks.

And I think the changes that AI will enable us to do to drive are going to be very significant. And this is why we created a group last week reporting to me, that is going to be in charge of driving function by function, process by process, this AI transformation. And this is not about adopting AI as a technology we have done many pilots in the company, and we have seen what is possible. It's really about understanding how can we redesign the key processes. Once the edition [indiscernible] adopt AI. And this is what we have seen that really will drive savings. But under early savings, it will help us to move faster, and it will help us to bring and to deliver a better customer experience.

The 2 key areas where we see the biggest opportunity in the short term, 1 is technology development. And as I mentioned before, this is going to really help us to accelerate some of the improvements and modernization we need to do in our platform. And the second is customer support as you were saying, Tim, this is a large cost for us today. And with AI, we believe we can both reduce cost but also improve the experience that we will provide to customers. And the fact that we have multiple language and that we need to support multiple languages, multiple businesses, just highlights the opportunity of really reducing the cost by automating and driving it and doing it in an even better way for our customers.

Your next question comes from James Faucette with Morgan Stanley.

I wanted to follow up on that question and not only how we should think about reinvestment and the other side of a capital return? And how you're going to decide how to apportion savings to 1 or the other -- and in particular, what are the proof points that you're going to be looking at whether it be ongoing engagement growth in customers? Just help us think through the KPIs and how you're going to make sure that you allocate capital most efficiently. I know you have big ambitions for both, but nuance there is, I think, important this morning. .

This is a great question, and you will see us doing much more work and been reviewing that with all of you in the coming quarters. What we have designed so far is what is the strategic framework that we see for the company. We have outlined that we see 3 big growth opportunities, where we think we can both grow revenue and operating profit, and we are aligning the company and the strategies of the company to make that happen. As we do that, we will identify what are the best opportunities, opportunities that will drive the best return. And also, we are going to be very rigorous, I would even ruthless in the prioritization we are going to apply because the company has today multiple attractive initiatives.

We have also several small businesses. And in the coming quarters, we need to decide in which ones we double down, and we increased investment to increase our ability to execute and our chances to be successful. And in which ones we are going to be investing, stopping or doing something different. And this is the process that between now and the next quarter we will be doing. And we will be -- as we do that, we also will identify what are the key KPIs per business, so you can track the progress that we are making.

We are just starting the -- what we call the transformation process. This is going to take some time. So it's not something that immediately will happen. But the combination of the assets that we have the ability that we have to invest and the rigor we are going to apply make us confident that we will be able to really improve the performance of the company over time.

Your next question comes from Darrin Peller with Wolfe Research.

Thanks. Enrique, can you just walk through your thought process on your review of your assets in the company in a sense of which assets you actually absolutely feel like you must keep as part of the go-forward entity. If there are assets you do -- you've identified that you would consider selling where you stand on Venmo. Is that potentially something that we should consider that the company would consider wanting sell for the right price? And then your thought process on synergies or dissynergies of keeping assets together, whether it's Venmo with the rest of the business or Braintree with the rest of the business? If you could just walk through your thought process on that, that would be great. .

So let me start by saying that our #1 priority, my #1 priority is to maximize shareholder value. And at this point, I believe that the best approach is to invest in our 3 core businesses, PayPal, Venmo and Braintree, to drive profitable growth. Because in each of them, we see the opportunity of making it happen. To do that, as we explained before, we are going to be simplifying the priorities for each of them, identifying what are the core areas where we need to invest. At the same time, we need to modernize the technology platform that will be helping the 3 of them. and we need to simplify how we work and drive cost reductions to drive these investments. I think what is important is that we believe that there are significant synergies across the 3 businesses that make them stronger together. For example, we see customer synergies in driving cross-selling and helping each business to penetrate and to grow with different customers.

We also see synergies in the technology and offering space. And as we develop some of the financial services options that we have been discussing before, they will be benefiting the, for example, PayPal and Venmo, and we also see strong synergies in key capabilities as risk management and identity. So at this point, our plan is to grow profitably the 3 businesses because this is what we think will create the maximum value for shareholders. On top of these 3 business, I just mentioned before, there are many other initiatives in the company. that we are going to be rigorously prioritizing to make sure that we leave those in the plan where we see we have the highest opportunities to success and that we use this to fund those activities that we will stay focused on.

Your next question comes from Sanjay Sakhrani with KBW.

Enrique, thank you for all your commentary. Obviously, you've had a very unique window as the new CEO, having been on the board. I'm just wondering if you could just drill down specifically on how you intend to do things differently from sort of the previous administrations to affect the change. And then, Jamie, just 1 question because I'm getting a lot of these questions on the trend line that you saw that you mentioned trending at the low end of the range and some of the choppiness. I guess if the higher fuel prices persist, do you feel like there's risk to the second half relative to what you've incorporated in the second quarter?

Sure. Let me start with the first part of your question, and then Jamie will take the second part. I think what we're going to do start from the development and the analysis that we have done and where the company is today what is working and what areas need to be changed. From a strength perspective, I would say that the company has very unique and high-quality assets. the combination of the scale that we have, the technologies that we have, some of the key capabilities around risk management, underwriting value of the brands and the global presence are very unique assets that are difficult to replicate. At the same time, we operate in markets with high growth, and we have very relevant presence in this market. But we also have seen that there are some areas where we need to make some changes. We need to accelerate the modernization of our technology stack, so we can continue to deliver compelling solutions to our customers.

We need to rebalance the focus we have in our dual side -- in the 2-sided network between merchants and consumers. During the last year, we have paid much more attention to merchants, and we need to rebalance that and increase our investment in consumers. We also need to simplify how the company works and we used the complexity that the core model brings. And on top of that, we clearly have an opportunity to reduce our cost structure, and this is what we are doing. So based on that, we have built a transformation plan that we are going to be executing, and the plan starts by identifying what are the highest opportunities in the 3 markets where we operate and investing significantly -- investing behind them and and aligning the priorities towards that.

Second is we identified these priorities. They are going to be different for each of the market opportunities. in the PayPal side is by continuing to grow and improve the performance of the checkout business. And I mentioned before, the combination of continuing some of the work that we have done until now by also rebalancing the focus on consumer, combining with some of the financial services that have shown us that we can improve the value proposition and identifying the vertical categories where we can offer a more differentiated solution. This will help us to grow. In the case of Venmo, it's about growing our attach rate to financial services and improving ARPU. And in the case of our processing business, it's all about maintaining the growth that we have and continuing to add value-added services.

Third point is really the process to simplify the priorities and define in what areas we're going to focus and what areas we're going to reduce our focus, which I mentioned before, we will be doing in the coming quarters. Fourth, it is about accelerating the process to modernize our technology stack module by module to make sure that in the coming quarters, we really address some of the gaps that we have identified from a technology perspective. Fifth is to complete the reorganization of the company that we have started simplifying how we work and aligning the work and aligning the priorities to the segments that we have identified.

And finally, is to complete the execution of the cost program that we have announced today. So it's a very aggressive transformation plan. We think that by executing that, we will be able to improve significantly the performance of the company, and we have started the process now as we have been mentioned in the call today.

Great. And then, Sanjay, with respect to your question on what we're seeing with consumer and some of the impact on growth, I guess, first, what I would say is we are reiterating our full year guidance. And so we continue to expect slightly positive to low single-digit branded checkout TPV growth. And that's what we've seen so far this year. Compared to first quarter, as I mentioned, we are seeing some impacts on the travel vertical, but we are very focused on execution as we get into deeper into the second quarter, comps get easier and candidly, in the second half as well. But also, we're laser-focused on our initiatives and really driving improvement there. And we've been prudent, I think, in how we've set our branded checkout guide and our expectation for lower growth this year than last year, and we're confident with where we are today.

Your next question comes from Jason Kupferberg with Wells Fargo.

Enrique, I wanted to talk about just current product strategy in checkout. I mean you guys have the fully optimized button now. Wondering if you are planning on any big changes there? Do you just feel like there's room to improve the execution of the rollout of the current product? And if we can get an update on the progress of the rollout that would be great. And I would just love your take on how long it might take to actually fully roll out that fully optimized version of the new checkout button because it seems like that's that's key to ultimately getting some structural reacceleration in branded volume.

Thank you. In the short term, it's all about continued execution of the plans that we had until now. And we have continued to make progress using the same metric we reported in the last couple of quarters. Today, we have the customers, 45% of the nonvoltage customers are already experiencing the new simplified version. So we have continued to make progress quarter-over-quarter and the plan is to continue to that in the coming quarters. But it's not only about that. It's also -- what we have learned is -- this is 1 element of the many that we need to do. We need to -- when we combine our new checkout process with financial services and BNPL, we see also significant improvement and significant acceleration of growth. When we see better marketing and more, and the customers are more attractive to use our bottom, we see also improvement.

So we need to continue to build end-to-end plants to make sure that we improve across the board. And this is what you're going to see us doing. And this is why execution is going to be so critical for us. It's not only about what we bring to market. It's about how do we maximize the value from it by having all the different functions and groups of the company focused on it.

Your next question comes from Tien-Tsin Huang with JPMorgan.

I want to ask about modernizing the tech platform and becoming a tech company again. Does this include platform consolidation, specifically? I'm asking because modernizing the tech stack brings with it, obviously, a lot of risks. I don't know you appreciate that, Enrique, given where you're coming from. So what's your assessment on the risk of modernizing, why it hasn't been done already and how integrated or distinct the technology stacks across the 3 businesses if you can detail that as well that would be great. Thank you.

So the prices, we have started to go and modernize the tech platform module by module. And as we do that, right integration or complete integration in some cases across the 3 businesses. As you said, all these changes have some risk. But on the other side, we have a very competent team, and this is a process that has already started. I think one of the key differences will be that we are going to be investing in making that happen. And this is why the cost structure savings that we have announced today are going to be so critical. They will be helping us to make these investments possible because we think it's critical for us to do that for the company to continue to succeed for the company to continue to grow.

Your next question comes from Darrin Peller with RBC Capital Markets.

Enrique, I wanted to kind of turn back a minute to the commentary on the consumer side, kind of in multiple parts of the prepared remarks then even through kind of answering some questions. It sounds like there was a deficiency relative to the merchant side of the network to being focused on this consumer side. And what I'm wondering is, as you were on your listening tour really talking with merchants, do you feel like they were telling you that they didn't have the conviction that maybe you had that level of engagement with the consumer, and therefore, you feel like you need to make bigger investments there? Or is there another angle to that.

I think it's a combination of what I heard from merchants, but also what I saw happening in in the countries and what I saw happening in the front line. And I think it's not so much that we will focus less on merchants. It's about how do we to improve the value proposition we have, we offer to consumers and how we improve, how we communicate that and how do we make it more visible. And I show that as we because if I think about what has happened during the last few quarters, we have launched a lot of great innovation to market, but we haven't had enough effort, enough investment in the countries to make it real. And we have moved to launch the [indiscernible] before really maximizing the value that we got from what we were launching. And let me use an example.

In Germany, a few months ago, we launched a fantastic solution, leveraging NFC. We launched the solution. It had great initial reception. And then we didn't invest enough to -- for it to be adopted broadly by consumers. And by consumers adopting us, the impact on merchants would have been very positive, but we just didn't have the effort, the focus the team, the investment to make it happen. So this is an example of the type of things you will see us doing. And this is what we mean by rebalancing the focus we put on the 2-sided network because if consumers perceive a stronger value proposition, they will transact with PayPal when they do -- when we buy something from merchants.

Sarah, We have time for 1 last question.

Our last question will come from Bryan Keane with Citi.

Enrique, when you think about the merchant specifically in your conversations, do you think -- how aggressive will you guys be in sunsetting platforms, enforcing them onto the new technology in order to help reduce friction. Kind of that's question one. And then the second part of that is, what about A lot of investors are asking about the price. Is the price too high? Can you lower price for PayPal in order to drive faster branded volumes?

Yes. So in the last 2 months, I have had many, many conversations with merchants, and 1 of the key things I have learned is with all of them, we have opportunities to improve our solution and to complete our solution addressing specific needs, and whether this is a merchant in the travel space that needs help in close-border selling and cross-border activities or a merchant in the retail side that needs help with customers that buy and return and that we can help to reduce the return because of the data that we have, we have a lot of opportunities to improve the value of our products and do it in a way that we can replicate it across multiple merchants.

So the opportunity is clearly there. And again, in every conversation, I have seen it. To do that, we need to complete the modernization of our technology platform as we have been saying. And to do that, merchants will have to move to the new platforms. And we will do that in a way that we minimize the work and the effort that it will take with them from them whenever it will be possible. But to continue to improve the solution, we will have to drive and move to the new platforms. But I think the key message is really the opportunity that we see, the opportunity that merchants are telling us we have and the fact that we really -- by doing that, we will have an opportunity to also offering additional services that will help us from a margin perspective and to compensate potential price pressure that we will have in the more commoditized business. The answer is about adding these incremental value added services, which is what we are going to be doing during the coming quarters.

Enrique, any final thoughts? .

Well, first of all, thank you, everybody, for your questions. And as we have today discussed today, we have both strong assets, a clear opportunity and a path forward that is grounded in improving our execution. Our focus now is to deliver, and I really look forward to continue to update all of you in the coming quarters, especially as we report our second quarter results in late July. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

All right. Everybody, thank you joining us this morning on day 1 of the Wolfe Fintech Forum. I'm Darrin Peller, covering Payments Processors and IT services at Wolfe Research. Really happy to have Jamie with us, who many of you probably know is the CFO of PayPal. I think this is the second time we've been together on stage, right, at least at this conference. And so thank you so much for joining us. Really appreciate you being here today.

Happy to be here. Thank you.

A lot going on, obviously, actually CEO -- CFO and CEO, I should have said, sorry about that. But a lot going on. And so maybe just, Jamie, kick us off with what you saw as some of the main takeaways from 2025, some of the key changes the company made over the past year, and then we'll go into how you look at the remainder of '26 and what are your key priorities? I think would be a great place to start.

Sure. So first, thanks for having me. We appreciate that. So with respect to 2025, we had a good year in 2025. We had good results. We also had some good learnings. But when you look across, I would say 2025 was a year where we really leaned into engagement in a different way with our consumers and our merchants.

And when you just look across our results, we have really good diversified sources of margin growth. We had Venmo better monetizing, growing at 20%. We also reaccelerated our processing business margin as well. And we've just seen really nice acceleration across a number of different parts of the portfolio. I think one real highlight we had was initiating a dividend in October, which, from our perspective, when we really focus on capital return reflects our strong balance sheet, but also our confidence in our free cash flow.

And then when you look at putting it all together, 2025, we had mid-teens earnings per share growth. We had 6% transaction margin dollar growth and really on the backs of diversifying sources of margin growth. And so I know there's a lot of focus in the company on branded checkout, but I think it's really important to note that between Venmo, PSP and value-added services, small business, buy now, pay later; we had a really nice diversification in terms of how we grew profit in the company, which was great.

You look at 2025, we also had a lot of learnings. Branded checkout, our growth decelerated in the second half of the year. And I think that a lot of what we really learned was we've been very focused on scaling across the whole portfolio, our new experiences and a lot of other different things and we need to take a much more targeted and approach to be able to scale that, and that's really part of our pivot. But when you look at 2026, I'd say the biggest thing is focus in execution. And as Enrique comes in, looking across that, I think breaking that down into the different components of what we need to execute, that is really what we're staring straight at.

Okay. Just so really execution and moving faster and more intensely on some of your areas. I mean, on that note, obviously, that change in the new CEO, and Enrique coming in, I mean, help us understand what you think the key focus will be for him? What he brings from his prior experiences that are really going to be applicable this year and going forward for PayPal?

Yes. So Enrique started last Monday. He's out doing his listening tour with investors right now. I think you met with him yesterday, yes. So Enrique has a track record of not only being an innovator but really importantly, being just a disciplined operating leader. And coming into PayPal, he's going to bring three key things to us that are going to be really important. The first is faster decision-making, the second is a greater focus on prioritization, and the third is really bringing that discipline around our execution. And he's been on our Board for 5 years. He was the Board Chairman for the last year. So when you look at that, he's got a really good base. And I can tell you just sitting side by side with him over the last 8 or 9 days, he's already -- he's hitting the ground running. He's seeing things very clearly. He's very clearly bringing it back to a structured and methodical approach. And I think that's exactly what we need right now. We have a lot of innovation in flight. What we've got to do is really capture that, bring it down, prioritize it and really execute it.

Okay. Jamie, we're going to go into growth in the underlying drivers of the business. But first, I want to talk about this sort of strategic overview of the company for a moment. If you think about PayPal Open and -- really One PayPal, right, the ability to cross-sell all the different offerings and have a single integration, that was a big theme at your Investor Day, right? And so first, just help us understand how that's going and really what you see as the opportunity of all the assets staying together and how it's benefiting your customers?

Sure. So PayPal Open is our view that bringing a very level of services across the commerce space to our merchants, really makes us an invaluable partner. And so you look at where we play around processing, around value-added services, around branded checkout, around buy now, pay later. Bringing a very large consumer base to tens of millions of merchants, having that be a single integration point and a single access point for our merchants, really makes us a very, very important partner at the table with them. And when we do that, when we become indispensable like that, we grow ARPA, we grow monetization and it's just a really good win-win equation for us.

And so PayPal Open is really us pulling that all together and having one way we talk about it, one way people access it, which I think has been really important. But when you talk about the businesses and how they work together, so I really believe that the most important way to drive value creation is to focus on organic growth. And that's exactly how we think about the integration across between processing with Venmo and branded checkout, and that's how we run the business. When you look at each of those, they've had really strong, like notable points of success. But you also look at each of them, and they also have a really strong ample opportunity for growth. And so when you drill down into those, whether it's the continued growth internationally for PSP or with value-added services, when you look at Venmo, we are just getting started with respect to Venmo ARPA and penetration and monetization.

And when you look at comps out there, ways we can do that in a much bigger way. All the way across to branded checkout, which, in many ways, branded checkout, I think we really understand the equation right now around experience, presentment and selection in the integration back with Venmo or with buy now, pay later, but it's really about running the play. So we have thought about this, and we're investing at this as an integrated platform. And when you look at it, it does have some levels of shared infrastructure. But by and large, when we work with merchants, they want to work across all of it.

Well, I guess, so conversely, it seems like there is an opportunity to cross-sell appropriately. And obviously, a benefit of having synergies between the businesses. But obviously, we always get a lot of questions over the potential to divest certain assets, separate assets where the market probably is under appreciating the value of your assets. And so maybe you could just talk to that comp conceptually for a minute. Do Braintree and PSP more broadly need to be connected to the branded business? Or do you think they could operate separately?

Listen, I think that -- we think about it as an integrated platform. We go to market with merchants and have the full suite of conversations. You can look at competitors outside of us and see that they have done that very successfully in terms of being solely focused on PSP and VAS. So I think you could look at it either way. But from our perspective, the richness and the depth of the conversation with merchants right now is what we're focused on.

Okay. So it sounds like you still appreciate the assets being able to be applied both together for merchants. Is that what you're trying to say? Or...

Yes. And right now, we think that we've got ample opportunity in front of us to invest organically and grow these and create value over time. And our Board, of course, looks at different ways to maximize value, but our strategy is to run this as an integrated play.

Okay. Okay. All right. Let's touch on guidance. I mean '26, you're guiding to roughly flat transaction margin dollar growth rates, excluding interest on customer balances. Just frame the puts and takes for the top line for a moment in terms of growth this year? I know you discussed some of the growth investments you're making in the business offsetting what otherwise would be probably slightly faster transaction profit growth, but help us frame the outlook, please.

Yes. So transaction margin dollar growth in total, slightly negative ex interest on customer balances roughly flat. And the real puts and takes in that are first interest rates, they have declined in 2025. We expect them to go down a bit in 2026. And so we've got 1 to 2 points of deceleration just purely from interest rate reduction.

The second piece is the investment bucket you mentioned, about 3 points of investments in 2026. And we talked about this in February on our earnings call. We plan to invest about $400 million this year, really across branded checkout, that's about 2/3 of it, and about 1/3 across agentic and Venmo Loyalty. And so that's about 3 points of reduction of transaction margin dollar growth. We expect credit to be a little bit lower in terms of its contribution this year versus last year. And then we've talked also about branded checkout just in terms of pure volume growth this year, we expect that to be lower than last year as well. So that also fits in there to bring you back to where I talked about that slightly negative or ex interest roughly flat.

With respect to the investments, one thing that is important to note is that we expect -- we've looked at ROI on this over a 2- to 3-year time frame. And so when we've planned for this, we really have not baked in the benefit of any of that into the 2026 guide. And so when you look at that, that's another element there. But when you look at the investments, what they're for, how we're focused on them, it's really about investing in the foundation, investing with our merchants and really bringing more durability to branded checkout over time.

Right. Usually, you would have more operating leverage in this year, right? You'd have more faster transactions...

Absolutely, this one in 2025, yes.

Right. So in this case, you're really spending time to invest in the underlying business, which is going into your gross profit or transaction profit growth and your operating expenses, right?

That's right, yes.

How do we think about your normal run rate of investments though? I think that's a question we're all trying to figure out is does PayPal have to invest at this level to keep its growth up at all? Or can it -- is this more of a onetime reboost for the year, and then we're going to be off to more operating leverage again in '27?

I think the reality is we will have some level of investment likely around this level going into the next few years/multiyear. The competitive intensity has grown over the last couple of years. We know that to win with our merchants, we really need to co-invest with them, and we see that in a lot of different ways, whether it's really integrating buy now, pay later for them upstream, whether it is codeveloping with them in different ways around onboarding. There's lots of different ways, especially with the mega and large merchants that to really win. It's a different game with them, and each of them want different things. And so the investment really goes across a number of different areas. But I think the reality is this is something that will continue over time to really reinforce the durability in the partnership...

Okay. But can we get back to operating leverage again?

Absolutely. Because once we absorb this, we will start to grow off of these investments over the next couple of years. And you saw that -- you take 2025 as an example. We had nice contribution to transaction margin dollar growth from branded checkout. And when we are holding OpEx constant and just sort of harvesting and remixing what we're using it for, we get really nice leverage across the stack.

All right. Jamie, you probably have underappreciated assets in Braintree and other PSP and Venmo. But well, Venmo is in branded. But I want to touch on branded, even though it's one aspect of the business, it still drives, we estimate over 50% of gross profit, right? And so -- if we just start there. I mean, the business or the branded volume growth rate was about 1% in Q4. And you noted impacts from U.S. retail weakness or international headwinds. Maybe just touch on how you see them progressing and these factors progressing throughout '26? And if you could just highlight any geographic variances you're seeing in branded performance now as well?

Sure. So as you mentioned, fourth quarter, we had branded checkout growth of 1%, which was a deceleration from the third quarter. And there were three main factors that contributed to that. The first is U.S. retail. And there's a couple of elements there. One is just pure macro. We've talked a lot about macro deceleration and really a K-shaped economy sort of effect. PayPal consumers tend to be middle income, mainstream America, some skew lower income. And when you start to look at the disparity in terms of where people are spending less and where people are spending more, we are feeling that come through. And globally, we're still 50% retail, and that percentage is about the same in the U.S. So that was certainly a factor.

The second was slowing international and in Germany, slowing growth across different geographic elements of our portfolio. Some of that is also macro. Some of it is also just deeper competitive intensity. And a lot of the things we're investing in, in the U.S. and have been are things we've been bringing to Europe over the past 6 months and are leaning in even more so as we get into 2026. And the third factor was tougher comps.

So fourth quarter last year, we had a real strength in travel and ticketing, in crypto, in gaming, and those just didn't repeat at the same levels this year. But the other thing I would say underpinned it was just our execution. We had some notable highlights. But we also, in many places where we didn't execute the way we needed to across branded in the fourth quarter. And so when you get into 2026, all of these are focus areas. But maybe I'd start with quarter-to-date, I mentioned on the earnings call that we were seeing branded checkout be slightly better in January. And I would say it's been pretty consistent since then a little bit better, not hugely better, but...

Just slightly better than the 1%...

Slightly better than the 1%. And then when you get into 2026, we're really focused around bringing the latest merchant experience, really making sure our consumers have frictionless experience as they go, getting to buy now, pay later having that be upstream with presentment and then investing in things like loyalty and other areas like co-marketing to make sure that we're bringing the whole equation back to branded checkout.

Okay. So those are the areas you're hoping to see that's going to hopefully play out with some element of acceleration maybe later in the year to next year. But for this year, you're still calling for that lower single-digit type profile, right?

Yes.

Okay. Maybe we shift gears a little bit to agentic commerce. PayPal has been vocal around opportunity seeing both in agentic commerce and then utilizing AI, but well, let's start with agentic commerce. If you could just discuss the role that PayPal has been playing here first.

Yes. So agentic is a real fundamental shift and -- or will be over time in terms of how merchants and consumers can interact with each other with respect to commerce. And it's really important to us that we're a first mover that we really are in the middle of the action as we do it. We've been focused on two main areas. The first is being the trusted orchestration layer for merchants as they link into LLMs.

The second is bringing commerce infrastructure to bear. PayPal brings some really important strengths to the table here and really notable differentiators. One is identity, authentication, fraud and then also a really seamless ability to transact cross-border with all of the regulatory, all of the foreign exchange, all the different compliance elements of what you have to do there. So when you're in LLM, all of these things, you don't have to build those capabilities, the single orchestration layer means you can seamlessly connect to tens of millions of merchants almost overnight, and they take away the real scaling problem and the build problem. And you can go from a cold start to something that you can really work with very, very quickly. And I think that is very appealing, and we're working across a number of different players right now, whether that's Microsoft, Perplexity, Google, OAI. And then we bring 400 million consumers as well. So the whole equation is what we're really focused on making sure that we can not only get in and invest and demonstrate the examples of what we're doing, but the building that out at a more scaled level and as we move through the next year or 2, having that be something we can build upon.

Okay. What kind of time line do you see on any of the implications on both you guys and the industry more broadly?

I think it's really hard to say, if I'm honest. It's changing a lot even month-to-month in terms of how LLMs and merchants think about how they want to play, what's important to them as they play, how they want to do it. What are their monetization strategies for their company today versus commerce, and you see some of that playing out. But I will tell you, all the big players are squarely focused on commerce. They know it is an integral part of not only sort of ads and offers on how you reach consumers and then convert consumers with them. And they're all super focused on subscriptions and making sure they get the stickiness with consumers too. And so when you bring it back to kind of what we bring, not only the scaled capability, but the tens of millions of merchants and the hundreds of millions of consumers, we're a really attractive partner for them, and that's what we're really building on.

Okay. Let me shift to buy now, pay later, which is obviously an area that's been a source of growth for you guys. I think it was up 20% in 2025 to over $40 billion in volume. So help us understand the changes that you're making over the last few years to drive these kinds of results? And what you intend to do in that business to maybe keep it going at those rates?

Yes. Buy now, pay later has been really exciting. We entered buy now, pay later several years ago, but it was really just a business that wasn't highly integrated yet into branded checkout. And one of the really important things that Michelle Gill, who leads financial services for us, when she came in a couple of years ago was, number one, she really rebuilt and evaluated the team talked about them. The second thing she did is she really, really pushed into the integration of that with branded checkout and the importance of that linkage. And that's what we've been focused on.

When you see buy now, pay later, when we bring customers in, they not only transact more with us through buy now, pay later, but also through branded checkout, and they also buy with larger AOV and really have just a much richer habituation around all of our products. So it's a really important cornerstone of it.

What is different now is we're very focused on upstream presentment and capture. And we're also very focused on really underwriting a longer-term ROI around customer acquisition and using it as a customer acquisition tool. And I will tell you that is not something we were doing a couple of years ago. And so while this is something where we've got really good starts with merchants around doing this, it's also something where we have a lot of work to do. And so part of this investment that we're making in 2026 and as we move deeper into it is to -- in addition to a lot of other things, a part of this is to really focus with merchants. And I talked before about building integrated buy now, pay later product. In some places it will be co-branded product. But really taking it upstream and helping merchants not only capture new consumers and help them be sticky, but also bring that into the PayPal ecosystem and using it as a way to say, with merchants who have different demographics than the PayPal demographics, capture customers that we wouldn't have been able to capture before.

So again, just timing-wise, when do you expect us to see the benefits of these investments? I mean it's already been growing 20%. But -- is this going to accelerate it? Or is this going to keep it growing at a healthy rate?

It will do both. You mentioned we had $40 billion of TPV and buy now, pay later in 2025. We have consistently been growing buy now, pay later at 20%, more than 20%. As you go forward, we fully expect to see at least that growth. But what I'm more excited about is how that sort of builds and accretes over time with the customer acquisition element.

Okay. Let's shift to Venmo monetization. Another very strong asset for you guys that's been growing well. Also, revenues growing 20% in 2025, I think it was $1.7 billion. And so -- and you also have active accounts that are approaching -- I mean, I thought they were over 60 million, but they're approaching...

Monthly actives are 67 million, yes.

Yes. And I think annual actives over 100 million.

Over 100 million, yes.

So maybe just touch on the key drivers for improved monetization of Venmo. It's an area that I know you've talked about for some time. But what's going to help accelerate that forward from here?

Yes. So I love talking about the Venmo product. So it's an amazing demographic, young affluent. You mentioned 67 million monthly actives, a little over 100 million active accounts, which is really awesome. But when you look at monetization, again here, I would say 2 years ago, it was something where it was -- the product is largely peer-to-peer transfer, right? And what we've done over the last couple of years is really expanded deeply into a couple of areas outside of the core changes to the app, making it more usable and bringing more features and functions that sort of bring people in and keep them in the app. We've also invested deeply in Venmo Debit. So that now you can use your Venmo balance at point of sale and online in different ways. We've also invested in Pay with Venmo, and you've seen us talk about that in connection with branded checkout growth.

And with respect to debit, it's been really fun because this is a fun demographic to lean into. You've seen our programs across the Big Ten, the Big 12, where we're not only leaning in to bring in new customers in our cohort and keep them with us for a long time, but we're also then giving them co-branded debit cards. So if you go to Ohio State University, you'll have an Ohio State branded debit card. You can use it at the bookstore, and we really start to habituate people around this idea that your parents can send you the money or you can get it peer-to-peer, you can go pay for your pizza, you can go pay for your books, whatever it is you want to do, but then that habituates and keeps them with us for a longer period of time.

And we've had nice success there. But those programs have really just launched last summer. And you're going to see another splash with the Final 4 and some of the basketball stuff here in March as we continue to work that. And the Pay with Venmo has been a fun one, too, because that's something that's been growing at about 30%, a little over 30% quarter-over-quarter, year-over-year. But Pay with Venmo brings to our merchants this demographic they want, which is something they haven't been able to have access before. But when you bring it to a mobile-first merchant, when you bring it to a quick-serve restaurant, it also mirrors really nicely with what our consumers want to do with the product. And so the growth there has been really strong, and we expect -- we're excited about where that can go to.

When you look at opportunity outside of us, though, I think it's pretty clear when you look at comps that there's a lot you can do with Venmo. We are just getting started. While we've made really good strides in monetization and ARPA, lots of opportunity to continue to penetrate there.

You mentioned execution at the outset in terms of what we really want to see this year. So are those the areas? Is it Venmo? Is it buy now, pay later? What else? Is it modernization of checkout? Help us understand the key areas, and if it is modernization of checkout, we can go there next. But are those the key pillars?

It is. It's really the same strategic pillars we talked about, which is growing branded checkout, really investing in Venmo growth, really focusing on processing and VAS and is in growing omni. And when you look across all of that, Venmo, certainly a key part of that, and it's the play that I was just talking about and continuing that. But honestly, our focus -- our really significant focus is branded checkout. And it really goes across experience, presentment and selection and making sure that across all of that, it really works.

And I mentioned a minute ago that when we think about experience, it's our latest experience with merchants, but it's also consumers use of biometrics and having frictionless authentication and having that work with the merchants. It's about upstream messaging, it's about upstream presentment, whether that's buy now, pay later or the button and it's also getting into loyalty programs in a bigger way and making sure we're also co-marketing with our merchants to bring customers in, grab them and then make sure we're growing with them.

Jamie, I mean when we take a step back, your Venmo business and your buy now, pay later business, which is embedded in branded has gone well. So it's really the non-BNPL, non-Venmo area that's decelerated, right? And so I want to understand what you're doing that's actually incremental and new this year versus what we've heard from the company over the past year to help accelerate it really. I mean modernization of checkout is an area we were hopeful on, and it's still happening, but it's been going on for a while.

That's true. And I think that one of the things I talked about earlier is the fact that when we focus on modernization of the checkout experience, we were focusing on -- we were -- I shouldn't use the word focus. We were executing across everything as opposed to being focused in terms of being able to scale it and choosing the top merchants, getting the launch scaling, and then moving to the next cohort and the next cohort after that. And I would also say with respect to consumers, bringing them in. If you don't have ways to habituate them with respect to having the deeper co-marketing, having loyalty programs. So then once they're here, keeping them with you because they've got a deeper, more rewarding way around the flywheel to engage with us and our merchants. We haven't had those things. And so when you look at 2026, what -- you're right, buy now, pay later, Venmo, those things are things we're going to continue running the play on, although I would argue that buy now, pay later coupled with the consumer elements of this should make it even richer in terms of the customer acquisition piece of it. But loyalty launching that midyear is going to be very significant for us.

Merchant co-marketing, we started that last year, but we've got plans for that, that are bigger and deeper this year. And then sort of the frictionless piece of this, combined with merchant experience is really important. The thing I would just say, when you look at fourth quarter, what was really interesting about our performance is where we had all three of those things working together, where we had merchants on latest experience, where we had upstream, where we had co-marketing, those -- the merchant performance for us was markedly better than where we didn't. And so...

Even on the button, even branded.

On the branded button. The branded checkout TPV was more than 10 points better. So we know the equation works. It's just not deployed across everything.

Right. And you think you can get there by later this year in terms of at least getting more and more customers.

It's still next couple of years, and we've been very consistent on that time line, but the acceleration of that across these different pillars will make meaningful progress.

Okay. Let's talk about Braintree and just enterprise for a moment, just because it is, I think, an underappreciated. It's growing double digits, right, from a TPV standpoint. Came up a lot recently in chatter over whether it deserves or needs to be with the whole company or -- but putting that aside for a moment, it sounds like you want to operate integrated for at least for the near future and see how it goes. When we look at Braintree, I mean help us understand for us just what the differentiation of that business is because I think it's kind of underappreciated that it's growing double digits, and it has really, to some degree, level the playing field on things like auth rates. So what are you seeing there?

Yes. This is a business that is on par with its peers in terms of its core underlying performance. You talked about auth rates, but when you look at uptime, authorization, all of that, its performance is very strong. But what was different about it is we had been using this as a way -- in an integrated way to really bring the full suite of products to merchants, but we hadn't been pricing it in a way that was sort of the right value prop.

And so what we've really been focused on is profitable growth in Braintree and really working through a renegotiation process with some of our largest merchants. We've also been really focused on bringing value-added services, and that's really significant, pricing and value-added services because -- those are two things that we hadn't been focused on before. We've been focused almost solely on performance and working across. Where we are today is we have turned the business and we had dips in revenue as we did this into a profitable margin grower, and it's a grower. The second is value-added services. We have, I think, 16 value-added services today. A couple of years ago, we had just a handful. And so that, scaling those, bringing those to bear, having those be something that are win-wins with our merchants and priced accordingly has been a nice way to grow. Going forward with Braintree, we have tons of opportunity internationally. This has been largely a U.S. business. And so taking kind of the pillars that we've built now and now scaling that internationally and continuing to improve, I think, is a really exciting next stage for them.

Okay. That makes sense. Shifting to debit for a minute. Again, an area that you've been doing pretty well with actually. And talk about a little more on -- I mean, it grew 60% in 2025. Just what are the trends you're seeing there? What's driving such strong consumer adoption on the debit business for you guys? And where do you see that going?

Yes. So 60% growth year-over-year in debit. And when we started this in September of 2024, we've actually brought in 8 million -- or over 8 million consumers into the debit product. And it's really on the backs of rewards and offers and different ways that we've brought consumers into habituate them around the brand. And what we find is when we bring them in as a debit consumer, not only do they transact with us as a debit consumer, but they also bring in a halo effect across branded transaction. And the their online transaction growth goes up 20% or 30% as well.

Interestingly, the debit transactions themselves are as profitable from a margin perspective or more than branded checkout, so it's a really healthy equation for us. But importantly, for us, it's the use and keeping them habituated around the PayPal brand and in the app and with branded checkout, which is why we're very focused on it. You've seen our welfare campaigns. You've seen the different ways that we've really brought the top of funnel in, but this is a way of grabbing, engaging and acquiring in a way that we hadn't had before.

Okay. Just to wrap it up from questions from my side, and then we'll open it up maybe to one or two if we have time. Just capital allocation. I mean you obviously kicked in with a -- you started a dividend last year, which was lower received by some investors, and you had $6 billion share repurchases planned for this year. Just touch on your capital allocation framework a bit and maybe a little more on just even beyond capital return, anything on M&A or anything else you're seeing?

Sure. So I mentioned before that we believe that organic investment first is the way we think about the business, that growing the businesses organically give us even more optionality from a capital allocation perspective. So it starts with investing back into product, marketing and tech. And we're at a point where more than 60% of our OpEx is in product marketing and tech, and we have really remixed our OpEx profile to be able to do that, and we'll continue to do that. But when you get beyond that, we've had a very healthy buyback program. We have a very strong balance sheet with more than $15 billion of cash, more than $6 billion of free cash flow every year. Our buyback represents about 100% of our free cash flow. And in addition to that, we launched a dividend in October, like you mentioned, where we targeted around 10% of non-GAAP net earnings, in terms of the payout ratio. So I think really strong from that perspective.

When you look at M&A, I think over time, absolutely, M&A needs to play a part of this. I'm really excited about Enrique coming in because I think as we get settled in the seat around our execution. We'll have more degrees of freedom to really look at how we can then execute well across different kinds of capital allocation plans.

Right. Because you're trying to take somewhat of a pause on M&A for a little while, right?

To make sure we have the ability to do it well.

Right. Okay. Okay. All right, guys. Any questions? Maybe we have time for one or maybe two.

Okay. Well, Jamie, thank you for joining us. That was great. Appreciate you being here guys.

Good morning, and welcome to PayPal's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Sarah, and I will be your conference operator today. As a reminder, this conference is being recorded.

I would now like to turn the program over to your host for today's conference, Steve Winoker, PayPal's Chief Investor Relations Officer. Please go ahead.

Thanks, Sarah. Welcome to PayPal's Fourth Quarter and Full Year 2025 Earnings Call. Our remarks today include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Our commentary is based on our best view of the world and our businesses as we see them today. As described in our earnings press release, SEC filings and on our website, those elements may change as the world changes.

Over to you, Jamie.

Thank you, Steve. Good morning, everyone, and thank you for joining the call. Before we turn to our full year and fourth quarter, I want to address the leadership announcement we made earlier this morning. The Board has appointed Enrique Lores, who was most recently our Board Chair, as the next President and CEO of PayPal effective March 1 to accelerate execution and bring greater discipline to how we implement our strategic priorities as we enter our next phase of growth.

I want to thank Alex Chriss for his leadership and his many contributions to the company. It has been a pleasure working with him, and we wish him the very best.

At the same time, we recognize as a company that our execution has not been what it needs to be. We have not moved fast enough or with the level of focus required, and we are taking immediate steps to address that reality. The Board's appointment of Enrique reflects a clear commitment to strengthening performance. He is a seasoned chief executive who brings deep experience driving customer-centric innovation and disciplined execution, simplifying complex businesses and leading large-scale transformations. We are fully aligned on the path ahead.

During the brief transition period through early March, as Enrique steps away from his role at HP, I will serve as interim CEO, and Steve will partner with me leading our finance function to ensure continuity and maintaining momentum. Effective immediately, Board member, David Dorman, will take on the position of Board Chair.

With that context, let's turn to our full year and fourth quarter 2025 performance. PayPal delivered solid 2025 performance across multiple dimensions, and I'm confident about our path forward. Last February, we held an Investor Day outlining our transformation strategy. One year later, there are elements working very well, but there are also areas pacing below our expectations, primarily within branded checkout, which I will spend much of my time discussing today.

First, let me address the areas performing well. In 2025, Venmo revenue grew approximately 20% to $1.7 billion excluding interest income. Total active accounts surpassed 100 million, accompanied by 14% growth in ARPA for our monthly actives. We've turned around our Enterprise Payments business, delivering 7 consecutive quarters of profitable growth and a return to double-digit volume growth in the fourth quarter.

These two businesses were once small contributors to profitability. In 2025, they drove nearly half of our 6% transaction margin dollar growth. In buy now, pay later, we delivered over $40 billion in TPV in 2025, growing more than 20% year-over-year. Additionally, we've made progress building new long-term growth drivers: omnichannel, agentic commerce, crypto and wallet interoperability.

Where we haven't made the same progress is in online branded checkout. We've reimagined a product that had been stagnant and underinvested in for years, creating a new value proposition for merchants and consumers, but we were too optimistic about how quickly we could drive change and customer adoption across a massive global user base. The results are not yet where we expected them or want them to be. Let me update you on where we are, what is working and the steps we're taking to get back on track.

For the past few years, we have delivered consistent mid-single-digit TPV growth. However, in the fourth quarter, online branded checkout TPV grew 1% on a currency-neutral basis, down from 5% in the third quarter. The 4-point deceleration was more than we expected and was concentrated in three main areas, each contributing roughly 1 point or so to the slowdown.

First, U.S. retail weakness. We saw pressure across our retail merchant portfolio, particularly among lower and middle income consumers. While part of this can be attributed to macro factors and a K-shaped economy, it's also clear that we need to do more to win with key merchants, particularly during high-volume shopping periods.

Second, international headwinds particularly in Germany, which is one of our largest markets. Our German growth has moderated due to macroeconomic softness, normalization of our long-standing market leadership position and competition from alternative payment methods.

Third, deceleration in several high-growth verticals, specifically in travel, ticketing, crypto and gaming, categories that had strong growth in the fourth quarter of '24 and continuing through much of '25.

Cutting across all of these, we had operational and deployment issues that amplified the pressure. To date, our delivery process has started with building a better product and expecting merchants to adopt at scale because of conversion benefits. The reality is our merchants, especially the largest ones, have many competing priorities and require much more hands-on integration support than we anticipated, which has slowed our progress. Additionally, the combination of biometric adoption and competitive presentment have proven critical to branded checkout performance.

So while challenges in the macro environment are real, we haven't executed as well as we need to, and our product deployment in the second half of the year was slower than we planned.

Our analysis of our merchant base, competitive dynamics and where we are seeing the strongest traction has sharpened our view of resource allocation for 2026. This work in branded checkout has brought three priorities into clear focus: experience, presentment and selection. These are the areas where we see the greatest opportunity to restore momentum. We know that consumers engage more deeply and frequently when they have a frictionless experience. They choose us more often when our products are featured upstream at the point of purchase and they habituate when rewarded through loyalty, marketing and other programs.

On experience, our focus needs to be on both ensuring a frictionless consumer experience through biometric and pass key adoption and that merchants have upgraded to our target experiences. On presentment, we need competitive placement, including upstream buy now, pay later messaging and second buttons. And on selection, we must deliver loyalty benefits using rewards and co-marketing agreements with compelling consumer incentives.

On experience, we've created a great product experience that performs well across desktop and mobile. When a consumer vaults PayPal as their default payment method, it's seamless. No password or authentication is required. The wallet typically has multiple funding sources ready, and we deliver 95% or greater conversion on average, which is second to none in the foundational strength we are building upon. We need to make vaulting available with more merchants and take friction out of the initial sign-up and onetime checkout flow.

For non-vaulted transactions, we're continuing to scale our redesigned paysheet experience globally, now covering more than 30% of global checkout transactions. Fully optimized cohorts show nearly 1 point conversion improvement, though adoption across our back book remains incomplete with the target experience implemented on only a subset of our global transactions.

2026 will be about continuing to scale with strategic merchants and partners at the same time that we drive biometric enrollment. As discussed before, biometric authentication amplifies the impact of our paysheet redesign and makes vaulted sign-up easier, driving 2 to 5 points of conversion improvement in testing with some of our largest and most complex merchants.

On presentment, we're making good progress, including adding upstream BNPL messaging at more major merchants in the fourth quarter. When PayPal is positioned above competitors and the value prop is amplified with either co-marketing or pay later messaging, we see more than twice the selection rate compared to when we're positioned below. On selection over the past 2 years, we've built a more compelling value proposition for consumers. That includes launching new products like our debit card and expanding options such as buy now, pay later, repositioning PayPal as an obvious choice for everyday purchases, whether paying now or over time.

The result is a more engaged and healthier consumer base. Power users, which are consumer accounts that transact more than 100 times per year, grew 5% year-over-year. PayPal mobile app use among online branded checkout users has increased from approximately 50% in January 2023 to more than 60% now, and we will drive that even higher by year-end. Consumers with recent app use are about 40% more likely to select PayPal during checkout the following week, underscoring the value of app engagement in shaping checkout preference.

This approach delivers when fully deployed. When we look at Cyber 5 performance across multiple merchants including in retail, tech and entertainment, for those with our latest checkout experience, strong presentment, upstream BNPL messaging and co-branded marketing with attractive offers, PayPal performed well. On average, those merchants delivered very attractive double-digit branded TPV growth, significantly outpacing their local markets. That gives us confidence that we have the right playbook. It's just not deployed in enough of the right places.

Over the past several months, we've realigned our checkout teams with full ownership and improved operating rhythms to speed decision-making and execution. Two themes will shape our efforts in 2026: focus and investment. This is one area where Enrique will really help. His track record of relentless, disciplined execution in performance improvement in complex business environments makes him ideally suited for this challenge.

First, a relentless focus on the highest impact merchants. To date, we've been optimizing for every merchant, and that approach has slowed our ability to move quickly on what matters most. We're changing our approach to focus on strategic merchants, representing nearly 25% of our branded checkout volume today but could be much larger. In January, we formed dedicated teams to implement improvements across experience, presentment and selection for these merchants.

Second, focus on implementing experience and biometrics together, not sequentially. In too many cases, we were deploying our redesigned checkout without biometric enablement, which does not deliver the full conversion lift we know we can provide. That's changing. We're now deploying experience and biometrics together as a package more consistently. When we integrate a merchant on to our latest experience, we will simultaneously run biometric adoption campaigns, targeting their consumer base.

We made good progress in 2025, but there is more work to be done. About 36% of our consumers are now what we would consider checkout-ready, which means they have biometric authentication in our app or with a device pass key. This is a 15 percentage point improvement relative to the prior year, and our goal is to bring closer to half of our consumers to checkout-ready status by the end of 2026.

Third is a focus on presentment. It is just as critical as experience. As I mentioned before, when we secure a competitive placement on a merchant site, we perform significantly better. It is early days in bringing BNPL messaging on to product pages, now visible to less than 15% of our traffic, but the data is convincing. When our buy now, pay later offerings are presented upstream and with a second payment button, we see more than a 10% lift in branded checkout volume. We don't yet have enough of these high-impact placements in market, which was amplified during the holiday shopping season. And that's front and center as we focus on branded checkout execution. In many cases, we're tying our economics directly to performance so merchants share in the upside.

Fourth, a focus on giving consumers a reason to come back. Our checkout improvements help with conversion, but we can do more to drive repeat usage by combining rewards, buy now, pay later and app-led engagement to make PayPal the obvious choice for consumers time after time. PayPal Plus, our rewards program launching in Europe and in the U.S. in '26, enables consumers to earn and redeem rewards at checkout, creating the consumer flywheel we've been working to build.

We're seeing early but still encouraging results from the U.K. launch late last year. In December, branded checkout TPV rose by mid-single digits year-over-year for U.K. users enrolled in PayPal Plus and their overall PayPal TPV increased year-over-year compared to nonenrolled users. This was achieved almost entirely organically before activating marketing, which speaks to the opportunity ahead. In parallel, we're launching a brand-new app this year, which will be a destination for buy now, pay later management, rewards tracking through PayPal Plus and personalized offers, all designed to drive app engagement, which leads to a better checkout experience.

From an investment perspective for branded checkout, we're striking calculated deals with strategic merchants that create value for both sides. Our approach helps them tackle their greatest needs, whether that's improving conversion, lowering payment costs, acquiring new customers or co-developing solutions while simultaneously modernizing PayPal's experience and strengthening our presentment across their channels. These are important investments to make. When more flagship merchants are live with full experience, benefits cascade, we accelerate learnings, refine our go-to-market and unlock the brand halo effect from being optimized at scale on merchants consumers use most.

Overall, we're focused on execution as we move through 2026 as our redesigned experiences scale, biometric adoption increases presentment improves and our rewards program and app drive the flywheel. We expect these initiatives to deliver improving results daily, weekly, monthly and build over time as they reach scale and produce measurable impact.

I'll now briefly cover the progress on our other growth drivers where we are seeing strong success: scaling omni, growing Venmo, driving PSP profitability and scaling our next-gen growth sectors. Despite online branded checkout challenges, branded experiences TPV grew 4% in the fourth quarter. We're live with debit or Tap to Pay in the U.S., Germany and in the U.K. with positive initial results.

Starting with the U.S., where the PayPal debit card was launched over a year ago. In the fourth quarter, TPV growth accelerated to over 50% and MAAs grew by over 35%. We're happy with this performance and learning from and scaling what worked in the U.S. to Germany and the U.K., where we now have more than 700,000 debit card MAAs combined. This includes unique reward offers, marketing investment, in-app prompts and making it easy to add the cards to mobile wallets. We're pleased with the initial progress of our omni initiative and see a clear path to extending that success as we move through 2026.

2025 was a breakthrough year for Venmo, evolving from peer-to-peer payments into a monetized commerce platform. We reached over 100 million active accounts and the progress is showing in our results. Venmo TPV grew 13% in the fourth quarter and monthly active accounts reached 67 million, up 7% year-over-year. Venmo debit card TPV was up over 50% and MAAs grew 50%. Pay with Venmo TPV was up 32% and MAAs are up 26%. Venmo revenue grew approximately 20% year-over-year to $1.7 billion in 2025.

More importantly, revenue composition has shifted as more consumers are using Venmo for everyday commerce. Over the past 2 years, Pay with Venmo and Venmo debit card revenue has doubled. This mix shift is important to our overall transformation and positions Venmo for stronger profitability as we continue to grow.

Turning to our PSP business. In the fourth quarter, we continued to build on positive momentum in our PSP business. Within Enterprise Payments, thanks to both progress on price to value and value-added services, we meaningfully expanded margins year-over-year, roughly doubling our net processing yield and significantly improving profitability. At the beginning of 2024, we had several value-added services but didn't consistently charge for them. We exited 2025 with 16 services that merchants are happy to pay for because they're designed to improve authorization performance or reduce costs.

Value-added services adoption continued to scale through the year, and in the fourth quarter, we added incremental capabilities, including flex factor and authorization enhancement delivered through our open architecture partner ecosystem as well as Visa's pre-dispute resolution service through VERIFY, which will help to reduce merchant costs.

We took our first omnichannel enterprise merchant live through Verifone, expanding to in-store payments where 80% of payments occur, qualifying us for RFPs requiring both online and in-store capabilities. Going forward, because of our relationship with Verifone, we can compete for those opportunities and grow our share of both online and in-store volume. This is the realization of the vision we presented at Investor Day last year, and we expect to add new merchants and expand volumes with our existing ones as a result.

Let me quickly share some of our latest developments in agentic commerce. Our vision is to create a universally trusted catalog that AI agents can access, discover and transact with safely and securely. Through our Store Sync offering, we are already connecting early adopters like Abercrombie & Fitch, Fabletics, PacSun and Wayfair with agentic chat platforms to allow consumers to discover, evaluate and purchase items within the chat. We went live with agentic purchasing through Perplexity ahead of Thanksgiving, and we are now also live on Microsoft Co-Pilot.

We are helping merchants connect with customers through new channels and remove friction from the checkout process. Store Sync is enabled through a partnership with Cymbio, which we have agreed to acquire to bring this technology in-house. Agentic won't materially impact 2026 growth. But as AI-powered shopping scales, our aim is to become the default payment option. This is only the beginning, and we are collaborating closely with the major AI platforms as we build agentic commerce capabilities together.

Before passing to Steve, let me address the Investor Day outlook provided a year ago. The environment has proven more demanding than we anticipated, presenting both challenges and opportunities. E-commerce growth has been challenging in key verticals and markets. Competitive intensity has increased, and merchant adoption has been more complicated to implement than we anticipated. And our execution is not yet where it needs to be.

While we're addressing those challenges, other parts of the business are delivering. Venmo is on track to exceed $2 billion in revenue ahead of plan. Our Enterprise Payments business returned to double-digit volume growth in the fourth quarter and buy now, pay later continues to grow rapidly. And entirely new channels like agentic commerce have emerged faster than anyone expected a year ago.

For branded checkout, our focus is on narrowing the gap with the market over time. Following our fourth quarter performance, we need to prove that out in coming quarters and years. There are multiple ways for us to deliver profitable growth over the long term, and 2025 was a great example of that. But given everything I've outlined, we are no longer committing to the specific outlook for 2027 we laid out at Investor Day last year.

For these reasons, we think it's prudent for now to provide financial guidance 1 year at a time. And Steve will speak in more detail about how we're thinking about 2026 as a starting point. The strategy I outlined today focuses on three fundamentals: experience, presentment and selection. And these critical changes to our go-to-market approach will lay the groundwork for a stronger, more competitive online branded checkout business over time.

In closing, while we're not satisfied with our online branded checkout performance today, we are confident in the plan to stabilize and strengthen it. Importantly, we are executing with multiple competitive advantages. Our scale, our trusted brand, deep consumer and merchant relationships and diversified growth drivers give us resilience and flexibility moving forward.

As we continue transforming into a commerce platform, our focus remains clear: drive innovation that scales, deepen engagement on both sides of our network, strengthen and unify our core infrastructure and deliver sustainable, profitable growth. As Enrique steps into the CEO role, he will bring additional operational focus and discipline to priorities underway. And together with the right assets, strategy and team in place, we believe PayPal is well positioned for 2026 and beyond.

Steve, over to you.

Thanks, Jamie. Moving to Slide 9. TM dollars excluding interest grew 4% in the fourth quarter. The drivers of that growth were broad-based, led by strong credit performance, PSP profitability, Venmo monetization and loss improvement across multiple products. This diversification was key in offsetting the headwinds to branded checkout that Jamie walked through. As a result, we delivered 6% TM dollar growth and 14% non-GAAP EPS growth for 2025. And we continue to have clear opportunities to drive durable profitable growth in the years ahead.

Moving to the fourth quarter and full year financials in more detail. Total payment volume grew 9% spot, 6% currency neutral in 4Q and 7% and 6%, respectively, for the full year, reaching $1.8 trillion. 4Q revenue grew 4% on a spot and 3% on a currency-neutral basis. Full year revenue grew 4% on a spot and currency-neutral basis to $33.2 billion.

Non-GAAP earnings per share increased 3% to $1.23 and 14% for the full year to $5.31. Compared to our fourth quarter guidance, non-GAAP EPS came in $0.04 below the low end of our range. This was driven largely by a higher-than-expected tax rate and slightly lower-than-expected non-GAAP operating income resulting from pressure on branded and the timing of OpEx.

Adjusted free cash flow, which excludes the timing impact from the origination and sales of pay later receivables, was $2.1 billion and $6.4 billion for the full year.

Turning to Slide 10. We continue to drive deeper, more active relationships with our customers. Monthly active accounts increased 1% to 231 million. Transactions per active account excluding PSP, which is a good proxy for engagement, maintained momentum with 5% growth.

Moving to Slide 11. Total payment volume in the fourth quarter grew 9% at spot and 6% on a currency-neutral basis to $475 billion. Working our way down the page, branded experiences' TPV, which includes online checkout, PayPal and Venmo debit as well as Tap to Pay, grew 4% in the fourth quarter and 6% for the full year. While debit card and Tap to Pay spend represent a small portion of branded experiences volume today, they continue to grow rapidly, up 60% year-over-year.

Venmo TPV increased 13%, marking the fifth consecutive quarter of double-digit growth. On an online-only branded checkout basis, volume grew 1% on a currency-neutral basis, impacted by the factors that Jamie discussed in depth earlier. I'll talk more about how we are planning for the current year shortly.

Pay with Venmo and buy now, pay later continue to outpace the market, taking share from other payment methods and growing 32% and 23%, respectively. P2P and other consumer volume accelerated to 10% growth in the fourth quarter, reflecting the debit card and Venmo momentum I just mentioned.

Turning to PSP. Volume growth accelerated to 8% from 6% in 3Q and 2% in the first half of the year. Within PSP, Enterprise Payments showed notable strength with volume growth accelerating to 12% due to a combination of growth and profitable front book business and high retention and growth alongside our existing merchant base. Driving higher attachment of value-added services will be a key focus as we move through 2026.

Moving to more financial detail on Slide 12. Transaction revenue grew 3% on a spot basis to $7.8 billion and grew 3% for the full year to $29.8 billion. Other value-added services revenue grew 10% to $857 million and 14% for the full year to $3.4 billion, driven by strong contribution from merchant and consumer credit, partially offset by lower interest rates.

Transaction take rate declined by 9 basis points to 1.65%. Excluding the impact of foreign exchange hedges, transaction take rate declined about 7 basis points. This output was driven by a combination of higher growth in Enterprise Payments, Venmo and debit card adoption as well as branded co-marketing investments.

TM dollars ex interest grew 4% in the quarter and 6% for the full year. Growth was led by contribution from our credit and omni initiatives, improvements in PSP profitability and Venmo monetization. Branded checkout flow-through was relatively neutral in the quarter given the combination of lower volume growth and increased investment intended to drive engagement, habituation and incrementality over time.

Within volume-based expenses, transaction loss as a percentage of TPV improved to 6 basis points, a notable improvement compared to an average of 8 basis points during the first 3 quarters of the year. This outcome is a testament to our team's ongoing work to continue to improve and strengthen onboarding, fraud prevention and risk management capabilities.

Non-transaction-related OpEx increased 2% in the quarter as we continue to actively manage our cost structure while reinvesting in key growth initiatives. Non-GAAP operating income grew 3% in the quarter to $1.6 billion and 9% for the full year to $6.4 billion.

Moving to capital allocation. In the fourth quarter, we completed $1.5 billion in share repurchases, bringing full year repurchases to a total of $6 billion. We also paid the company's first quarterly dividend of $0.14 per share. We ended the quarter with $14.8 billion in cash, cash equivalents and investments and $11.6 billion in debt.

Moving to guidance on Slide 13 for 1Q and full year 2026. Let me start by walking you through some key assumptions. As we discussed last quarter and Jamie detailed earlier, we see a significant opportunity to drive consumer engagement, habituation and higher selection of PayPal through targeted investments across the portfolio.

For 2026, we expect these targeted growth investments to represent approximately 3 points of headwind to TM dollar growth while driving durable long-term benefits in the years ahead. This spend encompasses the strategic priorities Jamie outlined: scaling new experiences, improving presentment, increasing consumer selection as well as driving adoption of new channels. About 2/3 of the spend is targeted directly towards branded checkout and buy now, pay later with the remainder allocated to areas including Venmo loyalty and agentic.

What's important to call out here is our approach. While a portion of these investments result in lower upfront economics that will weigh on TM dollar and EPS growth in 2026, they are critical to fundamentally shifting our branded checkout product and positioning over the next few years and have attractive multiyear payoffs that will improve the durability of our business in the years ahead. We're being very disciplined about how and where we deploy capital and will adjust as necessary, leaving flexibility to lean into areas that are working.

We're actively harvesting productivity across the organization and reallocating resources to the highest return opportunities. We have conviction in the impact these initiatives will drive. However, given the slower exit rate from 4Q and the time required to scale these programs, our guidance reflects slightly positive to low single-digit branded checkout growth for the full year as we rebuild the momentum Jamie mentioned.

Turning to more specifics. For the first quarter, we expect low single-digit revenue growth on a currency-neutral basis, TM dollars to decline slightly or roughly flat, excluding interest on customer balances, mid-single-digit growth in non-transaction operating expenses and non-GAAP EPS to be down mid-single digits.

For the full year, we expect TM dollars to decline slightly or roughly flat excluding interest and customer balances, approximately 3% growth in nontransaction operating expenses and non-GAAP EPS ranging from down low single digits to slightly positive. Our guidance assumes approximately $6 billion in share repurchases and at least $6 billion of adjusted free cash flow.

As Jamie discussed, we are no longer providing the specific multiyear growth outlook we presented at our Investor Day a year ago. As it relates to branded checkout, our prior outlook assumed a more stable e-commerce environment and a certain pace of product rollout and merchant adoption. Neither has materialized to date as we anticipated. And while we can point to a number of constructive indicators, it's hard to call the precise time frame when we will see an overall inflection for branded. Branded checkout represents over half our profit dollars, and we're confident the product, channel and marketing investments we're making will drive improvement and acceleration over time.

There are also multiple paths to deliver attractive growth. Venmo, PSP, omnichannel initiative and credit are all levers that can contribute to TM dollar and EPS growth alongside branded improvements. Our overall value creation framework centers on driving volume growth by closing the online branded gap with e-commerce, increasing penetration off-line and keeping MAA growth in customer engagement at the center of our KPIs.

We are strengthening and investing in our core, building out new growth paths like BNPL and Venmo while staying at the forefront of next-gen growth drivers, including agentic, PayPal World, ads and crypto. We are also driving process improvements and using AI to leverage our cost base and redirect spending to innovation. All of this will help us deliver higher levels of EPS growth, grow free cash flow in line with net income and apply disciplined capital allocation to deliver durable growth and higher returns.

The business has already proven an ability to deliver at least mid-single-digit transaction margin dollar growth and double-digit EPS growth even in a challenging branded environment. The investments we're making in 2026 are designed to strengthen that foundation and position us to sustain and build on that performance in the years ahead. We have the financial flexibility to make these investments while returning capital to shareholders and, under Enrique's leadership, we're confident in our ability to execute the action plan Jamie laid out.

With that, let's go to Q&A. But before we open the lines, I'd like to ask everyone to limit themselves to one question so we can get to as many of your fellow analysts as possible.

Sarah, please open the line.

[Operator Instructions] Your first question comes from Tien-Tsin Huang with JPMorgan.

Just you went through a lot. I wanted to ask on just the change in the CEO and the timing here. Just maybe, Jamie, can you give us some assurance that the change is primarily to address execution rather than the strategy? Because I'm getting questions from investors asking if there's still risk of wholesale strategy changes once Enrique comes in that could delay or extend the turnaround further here.

Sure, Tien-Tsin. So the Board's decision is based on execution. They have been discussing this for the past few months. And when you look at the company, there's really good progress across innovation in a handful of different areas in the company, and you heard us call those out in our prepared remarks. Having said that, our execution is just too slow. And both the Board and Enrique have been deeply involved in setting our plans strategically and around our initiatives, and that carries into what our execution plan is in 2026.

And so when you look at Enrique, Enrique has a very deep track record in not only innovation, but operationalizing innovation at scale and driving really complex tech-forward transformations. And so his background and who he is around faster decision-making, clear prioritization, more disciplined execution, which really we need that leaning into branded checkout, I think it's going to be very, very helpful. And I think the other accelerant here that will be good is having been on the Board for 5 years, having been the Chairman for the past 18 months, he just brings a level of depth and immediate context, which really should help shorten the typical cycle that you'd have in a new CEO coming onboard.

The next question comes from Ramsey El-Assal with Cantor Fitzgerald.

I second Tien-Tsin's appreciation about all the granularity here. It sounds like you're quite confident in your strategy around modern online checkout and meaning you see the offering itself is pretty effective and compelling. The issue seems to be getting the merchants to engage and implement it. So how do you do that? How do you get them to adopt it? Is it a question of incentives? Is competition keeping them from engaging? Like what can you guys do to sort of force the issue a little bit?

So engaging with merchants really takes on a lot of different flavors. And whether that's a large enterprise, a small business, merchants want different things. They want to grow their business. They want to bring in new customers. They want to improve conversion. And so honestly, every single conversation we have involves a different strategy with respect to how we approach it.

And that can range from really driving our merchant integrations to the latest integration and getting more conversions, combining that with our consumers on biometrics and pass key. It can really lean into upstream presentment around buy now, pay later and again more customer acquisition strategy all the way over to how do we co-market together and how do we pull people in, customers to engage and habituate not only around us but, equally importantly, with them.

And so all of that are parts of these discussions. When we've looked at what we've learned over the last several months, I think one of the big things we learned was that we have been trying to do this across all merchants all at the same time. And what we have done now is really reformulated our teams around dedicated, mission-based teams particularly for high-impact merchants and really leaning into the latest integration, really deploying experience and biometrics together and really going in with an aggressive upstream presentment strategy.

And you heard me talk about it in my prepared remarks, but I think it's worth repeating that when we see merchants with the latest integration, when we see them with upstream presentment and a second button and with that co-marketing, like that combination drives markedly higher performance for us with our merchants. And we saw that in the holiday season. So there's multiple ways to win here with our merchants, but each is unique, and that's exactly why we're organized the way we are going into '26.

The next question comes from Darrin Peller with Wolfe Research.

Maybe just a quick clarification in terms of the timeline you'd expect some of these investments to help come to fruition. And just help me frame a little bit more on if you're expecting TM dollars and branded to improve in the back half of this year or is this more of a 2027 story? So in other words, exiting the year, should we start to see any evidence of success?

And then a bigger picture question would just be your thoughts on balancing between really a growth company and capital return story. I'm just curious if that's changed at all in your framework of how you think about investments in the business, capital investments going forward.

Darrin, why don't I tackle the first question on transaction margin and Jamie will handle the growth versus capital return part of the question. On TM, think about the full year, we talk about a slight decline. We talk about that really coming from a consistent contribution from PSP and Venmo, offset by the roughly 3 points of headwinds from those increased growth investments. And then also we have a 1 to 1.5 points of lower interest. There's a bit less contribution from omni given credit normalization and tougher comps.

And then I would call DXO a neutral contribution given the slightly positive to LSC growth we're talking about. This is pretty smooth as we go through the year in the sense that you have our 1Q numbers that we lay out there. Those investments have already started. So they will hit us in 1Q and through the course of the year as opposed to us calling for kind of a back-end loaded year. We're not doing this at this point, and I think we're going to need increased visibility from each of these initiatives and the new incremental investments are performing.

We learned a ton in the fourth quarter from the investments that we made, and those are incredibly helpful. We'll apply that through the rest of the year. Jamie?

Yes. And then, Darrin, with respect to balancing between growth and capital return, listen, we've got a collection of really unique assets here. And our focus right now is on transforming this business and really growing the assets we have and investing organically. In addition to that, we've had a strong capital return profile over the last couple of years with $6 billion buyback, the initiation of a dividend and continuing that program into this year.

The Board discusses and is involved with our capital allocation strategy on a regular basis. And part of Enrique coming in really is to lean into continuing to improve and grow our businesses, and doing that through prioritization through better execution and really being very choiceful about where we're placing our bets.

The next question comes from Sanjay Sakhrani with KBW.

I just want to follow up on some of the questions that have been asked, maybe just a little bit more embellishment on what's included and embedded in the 2026 outlook given it's a transition year. I guess when we think about the underperformance in branded volumes, some of it's been the lack of upgrading merchants, macro and then maybe others taking share. Like which parts can actually turn the corner as we move through 2026?

And then just on Tien-Tsin's question, is it fair that Enrique was involved in the process of sort of setting the expectation? So we shouldn't expect a big change after he comes on?

Why don't I start with your questions around '26, then I'll hand it over to Jamie for the second part of your question around the branded and Board decision process, Sanjay.

First, just running down the kind of P&L for a moment for '26 to give everybody that color. We talked about a slight decline in TM. Ex FBO, that's roughly flat, call it, about 3% increase in OpEx for the year. That gets you to non-GAAP EPS of this low single-digit decline to slightly positive. GAAP EPS of mid-single-digit decline. Tax rate assumption, call it, 19% to 21%. And then we provided the free cash flow story when you move over there. CapEx, about $1 billion or so.

And then within all of that, OVAS, about flattish for the year, low single digit, by the way, in 1Q. TEs, at a bit of a lower rate versus '25, so called out about 88 bps or so versus 89 this year. TL, in line with '25, so call that about 7.5 bps of TPV. And creditor loan losses of about 2.5 bps, which is another 0.5 bp or so. So those are the numbers, Jamie, do you want to hit on the kind of how to think about branded and then the Board decision?

Yes. With respect to branded, as Steve mentioned earlier, when we execute on these investments, we have included the cost of investments but we have assumed minimal in-year benefit from those. And when you look at the traction side of it, certainly, the changes we're making in go-to-market and traction around all elements of merchant integration, upstream presentment, all those different pieces will begin to gain traction as we go throughout the year. As we go live and merchants go up, we test, we start to see where we can adjust and pivot and optimize. But that will just continue as we go throughout the year.

What I'm really excited about is Enrique coming in. I think the prioritization element here for us is really important. We have lots of good ideas. We love to do lots of things. And I think us getting laser-focused on what to go after and where with respect to branded is going to help us get even more traction sooner.

And then with respect to Enrique's involvement from a strategy perspective, look, he's deeply involved in it. He has helped shape and reviewed not only the capital allocation strategy, the investment priorities that support them, but also the 2026 guidance. And he is coming in focused on the acceleration of our plan and just continuity in building on the work of the team.

The next question comes from Andrew Schmidt with KeyBanc Capital Markets.

So obviously, the branded checkout piece is a function of both the consumer and the merchant experience. Maybe you could talk about whether -- and obviously, you're addressing both pieces. But do you think the shortfall is attributable to one side or the other? Obviously heard the slowness in terms of the modern checkout experience, et cetera. But I'm curious if there's attribution more on one side versus the other.

And then just if you could drill down the consumer side, just core PayPal trends, account acquisition, TPA ex-PSP trends and then also the need to perhaps drive a more holistic experience versus the transacting experience on the consumer side. Maybe talk a little bit about how all that's resonating.

Sure. Let me talk a little bit about the first part of your question, then I'll turn it over to Steve for the account trends and some of that. And then I can talk a little bit about loyalty and some of the other programs that we're really focused on in 2026.

With respect to branded checkout, in the second half, we began to see some slowdown really in September, and that really persisted into the fourth quarter. We saw weakness in U.S. retail. People have talked a lot about K-shaped economy. And we're really a middle-income demographic as it relates to the PayPal brand. And so certainly, we felt that in a slightly more pronounced way than others.

We've had moderating international growth, including in Germany, and deceleration in high-growth verticals. We've had really strong growth over the last 18 months in places like travel, ticketing, crypto, gaming, things like that. And not only did we have tough comps, but those slowed a bit in December as well. And so all of this has been amplified by execution, by slower product deployment.

So when you level back up to sort of merchant versus consumer, I'd say it's a play of both. And really, it underscores our need to get our experience further out into the market with our merchants, the latest integrations and consumers using biometrics and pass key and the presentment that we talked about and really leaning into things like co-marketing and loyalty programs.

Andrew, to your question on transactions for active or TPA. Ex-PSP, it was growth of about 5%, which is in line with prior quarters. Think of the consistency quarter-to-quarter in branded P2P plus improvements in Venmo. And then we continue to be encouraged by the strength on the PayPal debit card engagement front as well. So positive here.

And maybe this just brings me back to talking a little bit about the focus on quality in our consumer base, and that's indicative of that, the strength in PayPal power users, the idea that we're really going for more and more depth of engagement with our customer base as a key differentiator as opposed to just simply adding folks who are not durable or we're not able to drive deeper with.

Yes. And then just coming back to the loyalty question, which I think is really most relevant to the third question you asked. We have been or are introducing competitive rewards programs for both PayPal and for Venmo.

Venmo, we launched a couple of months ago, it's a program called Stash. And it's changed our onboarding. The program is about stepping up in levels as you come in, really incenting behavior around using our debit card, stepping up to credit and more rewards the more you work in and around our Venmo ecosystem. It is super cool. The onboarding process is very engaging and catchy. And we've had really good progress in our first several weeks on that.

The other piece is PayPal Plus. And this is something we've been working on for over a year, really doing deep industry benchmarking. We really want this to be a very competitive program we soft launched in the U.K. a couple of months ago. And so while it's early, we're seeing some good cohorts of results come through there. And this rewards you for not just what you buy online but also what you buy off-line in sending money to friends, dabbling in crypto, things like that and again rewards but also some pretty unique characteristics around it with special drops of access to whether it's a deal or whether it's some other thing.

This will be a global multiyear rollout and part of the incremental investment we talked about. It began, as I mentioned, fourth quarter for Venmo and PayPal U.K. But really, I'd say, midyear to second half is when PayPal Plus will come out for us. Early reads, super encouraging. We're just seeing nice TPV lift up across consumer cohorts that have come onboard. But again, something we're pretty excited about.

The next question comes from Harshita Rawat with Bernstein.

I think a question which is in investors' minds is whether the branded business can be turned around or is the shift has tailed. Besides the macro, you have intensified competition, e-commerce is aggregating into platforms, aggregate you a smaller share. I know you talked about presentment, experience and rewards as kind of the key areas of execution.

And maybe, I guess, talk about upstream presentment. It seems like PayPal historically has been a premium offering. Competitors are catching up on value proposition. Does it all mean that transaction margin dollars and branded will come down as you focus on upstream presentment? There's a concern on price-based competition as well.

And also it's hard to, at this point, to kind of narrow the range of outcomes in branded. I know you talked about Venmo and PSP profitability. Can PayPal grow earnings if branded doesn't improve from here?

Yes. So there's a lot there. And maybe I'll talk first about our approach with merchants and then I'll move over to talking about sort of the multiple ways we can win. With respect to upstream presentment, and let me just talk generally about the investments we're making. These clearly are multiyear investments. You look at these kinds of programs, and these are deep, going into co-invest with our merchants to really shift how we perform for them and, candidly, bring more value to them.

And so what you see in '26, we fully expect that this kind of investment level will be consistent as we go into the few years following. And we think it's really important because we've really got to lean into the product, both in terms of having to deliver what it needs to deliver but also remain competitive, as you mentioned.

Having said that, when you look at the company, I think one thing that 2025 really illustrated for us is that we do have really strong assets across the board between Venmo, PSP, debit and credit. We've really diversified our revenue growth sources as well as our margin growth sources. And so even with a low mid-single-digit branded checkout profile in 2025, we delivered very solid transaction margin dollar growth. We delivered mid-teens earnings per share growth. And so I think there continues to be a lot of ways we can win here. And again, I'm particularly excited about the acceleration in our execution and the galvanization around that, that we'll see this year with both investment and with Enrique.

The next question comes from Dan Dolev with Mizuho.

My question is kind of going back to sort of buybacks versus investing. The key question I'm asking and we're getting from a lot of investors is, why not just focus 100% on the merchant and just kind of drive as much growth as you can? What is sort of the puts and takes of that? Because you do have like this very strong two-sided network that's really powerful and global. And so obviously, everyone sees the opportunity. So what prevents you from just going all in on that one?

The most important thing we've got to focus on right now, Dan, is improving our own execution and doing that with the investment dollars we have today and, as we prove that out, increasing that or shifting that or reprioritizing and doing different things with it. And I think you've got to have a balance on that between merchants and consumers. I think one of the great things Alex did when he came in was really focus on the different cohorts of how we work in the market, which is large enterprise, small business and consumer.

And having a dedicated consumer team was really important for us because we have really drilled into where and how we win, as Steve talked before, about power users versus active loyalists and just understanding our consumer cohorts better. We know that we win with consumers when we've got a great merchant product, but we also know that merchants win when we bring the value of the consumers and that whole consumer base to them as well. So we've got to focus on both. But clearly, in the investment dollars this year, it's clearly very merchant-focused.

And Dan, I would just add that this debate and question that you're raising is one that we've debated, you and I and many other investors, over time. I think it's our view that you can't win without both. The consumer, you've got to bring strength with the consumer to these merchant negotiations and discussions. That's one of the major reasons merchants want to work with us. And at the same time, you need to bring merchants to the consumers as well. So both are absolutely critical.

The next question comes from Jason Kupferberg with Wells Fargo.

So I know Enrique hasn't officially started yet, but he's obviously pretty familiar with the company. So just wondering, are all options on the table here with respect to creating shareholder value, potential asset sales, et cetera? And then can you just clarify on the branded outlook for '26, I think you said slightly positive. But does that represent a little bit of an acceleration versus where you exited Q4?

Yes. What we said on the branded outlook was that it would be slightly positive to low single digits. And when you look at January quarter-to-date, while the environment continues to be dynamic, quarter-to-date, we're running slightly better than we were in the fourth quarter.

Turning to the question on asset sales, things like that. I guess what I'd say is that we are really focused on transforming the business and driving shareholder value. And right now, that means executing on our integrated strategy. We've got several unique assets. We've talked about that, Venmo, Enterprise Payments, things like that. And both are core to our value creation and are performing well and they reinforce them and they complement our portfolio.

So right now, our current plan is to really drill into that. The best way to create value is to improve your sales organically, and we're going to be very focused on doing that.

Sarah, we are past the top of the hour. So I'm just going to turn it over to Jamie. Any final thoughts that you have?

Yes. So first, thank you all for your questions. Over the past 2 years, this team has laid important groundwork and built significant momentum with meaningful opportunities ahead. And at the same time, we operate in one of the most competitive tech sectors, which makes disciplined execution really important to fully realizing the competitive advantages of our scaled two-sided network. And I'm really proud of the progress our team has made, and I have strong conviction that we're on the right trajectory to accelerate growth.

And again, I want to both thank Alex and welcome Enrique, who brings deep experience leading large-scale organizational transformations, along with strong innovation and operational discipline and a clear understanding of our current priorities. And his familiarity with the business and track record of execution is going to help us move faster and with greater clarity as we enter this next phase. And I look forward to supporting a smooth transition and sustaining our momentum. So thank you.

Thank you. This concludes today's conference. Thank you for participating. You may now disconnect.

All right. Good morning, everyone. I'm Tim Chiodo, I'm the lead payments processors and fintech analyst here at UBS. We're very fortunate here to be having the team from PayPal with us in Arizona.

Joining us on stage, we have Jamie Miller, the CFO. And also here, we have Ryan Wallace from the Investor Relations team. Thank you to Ryan and Jamie for being a big part of our conference and making the trip here to Arizona. Thank you.

Yes. Happy to be here. Thanks.

All right. We have a great list of topics here that we're going to run through. I'm just going to give a little bit of an agenda of what we're going to attempt to cover here. I don't know if we're going to get to all of that. We're going to do our best. We're going to start out with a little bit of a reflection on Jamie's first 2 years at the company. Then we're going to get into branded checkout TPV growth. We're going to talk a little bit about Q4, and then we're going to talk a little bit about some things to consider into 2026. We're going to hit on some of the transaction margin dollar investments, and we'll talk a little bit about button placement. So a lot of the upfront piece will be around branded checkout.

We'll then move into what we consider to be two of the highlights from PayPal this year, some pretty positive developments. One will be the take rate stability within the branded checkout button this year and next will be the branded experiences growth. Then we'll get into some more financial topics. We'll talk about transaction margin dollars and OpEx growth and time permitting, we'll talk on some additional topics around the BNPL and the Agentic Commerce.

So with that, Jamie, if you'd like to kick us off with a few comments reflecting on your first few years at PayPal.

Great. So first, thank you for having me here. PayPal has been a lot of fun in the first couple of years. When you look at 2 years ago to today, there's a lot that's changed. And a lot of it really revolves around just how we're running the company. We have put in a new operating structure, operating rhythms we are just much more focused today in terms of what we're going after, how we measure it, how we measure that in daily, monthly and quarterly increments.

And I would say from a team perspective, across the board, the team has really not only gelled, but we've also brought in different elements of outside talent to combine with our in-house expertise. And I think it's helped us be just much more robust in not only tackling and defining our strategic initiatives, but really also in learning as we go and pivoting. And our results have shown that.

Over the last couple of years, we've not only demonstrating today 6% to 7% transaction margin dollar growth and mid-teens earnings per share growth. But if you go below that, we've really diversified our revenue and margin sources. If you look beyond just branded checkout, you see really nice growth across Venmo, across buy now, pay later, across our debit card offering and across our processing business. And we've done that with a lot of operating discipline. So if you look at our OpEx management and how we have remixed and really shifted dollars to fund growth, I think that's been very disciplined. And we continue to perform with high free cash flow. So $6 billion to $7 billion of free cash flow the last couple of years. It's just been very strong.

So if I pull up, what I am really excited about right now is I think we've got real confidence in our strategic initiatives and where we're going. We've got real momentum in important areas, and we've got a lot of work to do in other areas, too.

All right. Thanks for getting us started there, Jamie. Let's move into branded checkout. As I mentioned, we'll start with Q4 and then we'll talk -- we'll move into 2026. So to set the stage in terms of Q4, you had talked about at the earnings call a little bit of a slight deceleration expected in Q4. You had called out a little bit of macro you had mentioned lower AOV. At a recent conference, you talked about some of that persisting into a few more weeks into the quarter. Maybe you could, with that context, give us a little more thoughts on Q4 branded TPV growth.

Well, we just completed Cyber 5. And as you know, that plus the coming weeks, the rest of the quarter are really important weeks for our merchants and our consumers. And so we're really focused right now on just delivering for them.

Having said that, to your point, we called out in our third quarter earnings call that we had seen some macro pressure in September that had persisted into October. And we are continuing to see that persist in our performance in November.

When you look below the surface, we are a very middle income, lower income Main Street America sort of consumer base in our portfolio. We also skew retail and a little bit more discretionary. And when you look at that, that -- we continue to see consumers spending less trading down, average order values down and just a shifting in that space. And that has persisted.

We also have tougher comps this quarter versus last year. Last year, we had real strength in things like gaming and travel verticals and things like that. But as you look at fourth quarter, what we're expecting at this point is that the fourth quarter branded checkout growth will grow at least a couple of points lower than what we saw in the third quarter. But when you pull up and look at the financial framework for the quarter, our guidance, we're well intact on that front.

All right. Great. Well, we appreciate that update. Let's talk a little bit more about 2026. So as you mentioned in Q4, yes, there are some tough comps. There was the gaming, the travel, the crypto that drove about a 300 basis point acceleration last year in Q4. But as we head into 2026, there's actually some easier compares because you'll be lapping some of the APAC-related tariff headwinds. You'll also start to get some of the benefits from the rollout of the modern checkout experience. So with that context, as we head into 2026, how should investors be thinking about branded checkout growth?

I think that branded checkout growth, what I'm excited about is that I feel like we really are understanding what levers are really moving the needle. And I think what we're very focused on is the fact that it's just taking longer to really see the momentum start to shift in the areas we're spending time on. We have spent a lot of time very focused on really, how do you habituate the consumer around the product? And how do we bring better experiences both for our merchants and our consumers to bear as we do it.

And this is really very multipronged. I mean, it gets back to how do we bring up the new experiences with our merchants. How do we deepen consumers around not just checkout, but around debit and offline and buy now, pay later and other things that continue to have them intersect and interact with PayPal in ways that just keep bringing them back. And we've also been focused on things like rewards programs.

And so all of that is very much underway. But if I'm candid, it's slower in terms of progress and in terms of the work effort than we had wanted and we had hoped.

When you look across at things like buy now, pay later and Pay with Venmo, really nice momentum and movement there. And I'm sure we'll talk about that more in a bit. But buy now, pay later continuing to grow consistently at 20% quarter-over-quarter. Pay with Venmo at 40% quarter-over-quarter. But I think if you look at '26, what we're focused on is, again, propelling forward what's working but also continuing to double down and make sure that we are building durability into the spaces that I talked about upfront and making sure that we get the momentum there. And I'm -- what I am confident about is we are seeing good signs of progress across all of this. And as we get into '26, I think these investments we're making and the different focuses we have are really going to continue to build momentum there.

All right. Excellent. Well, that's a great segue into some of those investments. So on the last earnings call, you talked a little bit about some of the transaction margin dollar investments. So things like co-marketing and rewards that will help drive branded checkout growth. Those are all accounted for as a contra revenue. I was hoping you could talk a little bit about these investments and the expected return on them, right? So they should start to drive more engagement, more volume, et cetera. And then in terms of a financial follow-up there, I think the question we get from investors is, if the expectation is a roughly 1 to 2-point investment in transaction margin dollars in Q4. Is that the right jumping off point to think about the investment levels in 2026? Or would it be higher or lower or about the same?

Yes. So first, fourth quarter, we said we would invest 1 to 2 points of transaction margin dollars back into the space around product attachment and habituation. And that is really what we're focused on when we get into '26. '26 for us around investment in branded checkout is product attach and habituation and it's about Agentic Commerce and making sure that we can really lean in there and be a first mover to capture that shift.

And if I focus on the first piece of this, product attach and habituation it really goes across several fronts. It is a lot of the co-marketing we talked about. And really making sure that with our merchants, we're bringing consumers to them. But with our consumers, we're really demonstrating value and giving them offers and things that will continue to bring them back to PayPal.

When we structure that, those kinds of offers, it typically is a 12-month ROI. But depending on what we're trying to do, ranging from really driving growth all the way to really thinking much more holistically around bringing in real new users. It can range from 12 months to 24 to 36 months depending on what we're focused on doing there.

And when you look at the agent a commerce side of it, clearly, that's an investment in the future. It is something where we're leaning in with a lot of different partners right now, both Perplexity, Open AI, Google and a few others, but really, again, focused around how do we enable agenda commerce through orchestration layer through really building out the Agentic Commerce platform side of this and bringing a very seamless and easy way for that to come to life. And being something that we start to see momentum in '26. But clearly, this is a longer-term sort of effort in terms of how that's likely going to evolve with our consumers. If you level up and look at sort of the '26 profile. A lot of people have asked us, okay, how should I think about this? How should I think about your financial profile? What I would say is that we expect that the investments we're going to make, mostly in transaction margin dollars, but some in OpEx, to bring slower growth to transaction margin dollar and earnings per share growth in '26 versus what we had in '25, still positive growth, but at a much slower rate.

Okay. Excellent. Thank you, Jamie. I appreciate that update. Let's talk about another branded checkout topic, which is button presentment. It came up a little bit on the last earnings call and also something that's been coming up in discussion with investors. So there's Shop Pay, Apple Pay, Stripe Link, multiple BNPL providers. How does PayPal compete for that positioning on the merchant website?

It really depends on a merchant-by-merchant discussion, if I'm honest. It depends on our performance and the experience we bring to merchants and to consumers, but it also oftentimes gets down to what the merchant wants to accomplish. It is clear that presentment matters, the more upstream it is, the more you capture. And that relates not only just to the button, the buy now at the point of click all the way through to how do merchants think about buy now, pay later. And whether that is offered right upfront or that's something that is offered further down in the stack and down in the flow. And so every conversation we have, really, this is an important part of it.

There are places where the overall economics of what we bring to the table, we may give more to get better presentment and that's something that we're pretty selective about in terms of which merchants, the why, the what and when we do it. But I think if you pull back our new experiences are allowing us to perform better for our merchants around conversion and auth rates. And buy now, pay later is something that when you look at the overall holistic economics of it, is something that really allows you and candidly, gives you a huge platform and opportunity to lean into how do you do customer acquisition in a different way. And that is something that, while PayPal on one hand, has been in buy now, pay later for a handful of years now. And really, it's been a very good product for us. We've been more focused on helping our consumers in that regard. But when you really shift our strategy to one of customer acquisition, I think it's a really powerful strategy for us and one where we can compete in a big way.

All right. Excellent. Will you kind of hinted that this one is a little bit of a segue into some of the modern checkout experience. So you've given an update that about 25% of transactions are successfully migrated. However, only about half of that optimized, so call it, 12% to 13% or so. When you talked about the -- once this was fully ramped and optimized, it would be kind of a point or so, maybe a little bit more in terms of conversion uplift. Maybe just talk a little bit about the progress and also the end state result conversion uplift.

Yes. So we've been at this about a year. And when you look at progress, it's been really strong in the U.S., and we began scaling globally 4 months ago. And so 25% global penetration at this point, about half of which, as you mentioned, is optimized. We are seeing conversion uplift as we expected, about a point, a full point there. And that comes when the merchant is optimized. And the candid reality here is that. We've got merchants on many different types of integrations with us. And because we've been in this business for so long, some of those date back years and are very complex, all the way up to merchants who are on more of our latest integrations where it's a very simple and easy upgrade process for them. I think what we found is that there's a real mixed range in terms of how this process can work with our merchants. In many cases, it takes longer than we expected. And some of that's the complexity. Some of that's just the tuning you have to do to get it optimized once we're in and once we're working.

What we're really excited about is when it's optimized, it works. And then when you start to combine that with biometric changes and other spaces where we're really investing against consumer experience. The whole experience together is bringing not just the conversion uplift but a better, more holistic and seamless way for consumers and merchants to interact across all of branded checkout. So I'd say it's something that just takes time.

When you look at a network, a two-sided network this big, I mean, this is the kind of thing that just takes time to move the needle. And 25% going into '26 and '27, we're going to continue to be very methodical as we approach our execution going forward and move the needle.

Thank you. Jamie, all right, as mentioned, we were going to move into two topics that we consider to be highlights of 2025 for PayPal, two very positive developments. The first one being the branded checkout take rate. So for multiple quarters this year, you had mentioned that the take rate was very stable. And I think to some investors that, that was a surprising stat.

One possible reason to explain that could be the SMB mix shift has kind of stabilized. In other words, for many, many quarters, for years and years, PayPal had talked about a mix shift to larger merchants and marketplaces that we're sort of driving this mix shift driven take rate reduction. It seems to have stabilized. Maybe you could elaborate on that topic and then more broadly, other potential drivers of this take rate stability?

So we're really proud of the work Michelle Gill has done in small business. She has really brought not only just a keen passion for small businesses, but really a very focused and tactical approach to how we've shifted the portfolio there. They have stabilized small business. In fact, it's growing really nicely at this point, which has been a faster growth rate than what we've seen in LE. LE continues to grow. But small business is sort of making up some space there.

And to your point, small businesses bring with them higher branded checkout take rates. So that we've seen that mix shift happen in a positive way. We've seen a little bit of benefit from FX. But the other piece that has been a dynamic here that I've been watching all year this year, has been really around branded checkout pricing. And that's been something that, as you know, 2 years ago when we came in, we really looked across the company and wanted to shift ourselves sort of culturally and in our conversations with our merchants to one of just profitable growth and really making sure that we had a really good value exchange and bringing real value to merchants, but also having the right balance in our pricing discussions. And I think you're seeing a little bit of that pull through, too. So a little bit more stability there and a little bit more balance in the conversations and whether it's a reengagement or whether it's new wins, the kind of work we're doing there to balance those kinds of conversations.

Excellent. Thank you, Jamie. Let's move to another big highlight, which was branded experiences growth. So 8% globally and 10% in the U.S. Those were impressive numbers. the branded experience is definition. Just for context for everyone, extends the definition of branded checkout online. It also includes debit card transactions, including some of the NFC business that's starting up in Germany. So strong growth for branded experiences. Maybe you could talk a little bit more about this and the card contributions. .

Yes. So 10% growth in branded experiences in the third quarter, which was double the rate of the prior year. And this is another one that we started maybe September of last year when we launched the PayPal debit card and the introduction of that in the U.S., along with our welfare campaign and our marketing and our advertising.

And if you look at the growth in debit, both for PayPal and for Venmo candidly, it's been really nice progression ever since then, not only year-over-year, but importantly, month-over-month and quarter-over-quarter. It's interesting because that debit growth is important for us in a couple of respects. One is when you've got users who routinely come back to us and do offline purchasing, it brings them back to online purchasing with a halo effect with branded checkout that is really important. I mean 20% to 30% lift there. The other piece of it is that the economics of the offline debit transactions are as good as branded checkout transaction margin profit margins when you look at just gross margin percent. So from that perspective, it's really positive as well.

I look at it more holistically, too, though. When we do offline. When we really look at everything that is not the online piece of it, it really surrounds the consumer. And so us bringing it back to holistically, how do we grow, how do we move our brand, how do we bring more consumers to merchants. It's a really important part of our process. And it's a really important part of our progress.

You talked about internationally. We launched in Germany earlier this year, and it's been a really good uptake. I mean, within the first 2 weeks, when we hadn't even formally done any campaigning, any launch, really any messaging, we had seen very strong uptake. So I'm really excited about what we can do there overseas as well.

Right. Excellent. And Jamie, you touched on this just naturally in the discussion here a little bit on the transaction margin dollars. You hit it on the percentage. One of the questions we sometimes get maybe just briefly elaborate on this is around the transaction margin dollars per unit of volume given the rewards component on the debit cards is accounted for as a contra revenue.

Yes, the rewards piece of it -- and candidly, that's an important part of this because not only do you get 5% cash back, but it's stackable with other rewards. And so it's really attractive to consumers. The flip side of it is we have structured those rewards offers to be capped. So once you pick a category, it's only applicable to a certain amount of TPV within the category, things like that. So that is baked into the economics that I talked about. And so the unit economics here are very positive and very healthy.

All right. Excellent. We also covered this a little bit earlier, but maybe we can just combine these next two questions in the interest of time. Just talking a little bit about 2026, you hit on some of the high-level factors. Maybe you could elaborate a little bit more on the transaction margin dollar puts and takes that investors should be considering? And also in terms of the operating expense growth.

For context, in the past, we had been thinking about OpEx growth is roughly half the level of transaction margin dollar growth. And then the question from the investment community is, should we think about 2026 a little bit differently and maybe go back to that framework in '27 and beyond?

Yes. So transaction margin dollars first. I talked before about the fact that we've really diversified our sources of transaction margin dollars growth. And we've seen really nice consistency in the contribution across our different products to that. So we start with that going into '26. The second piece of it, which I talked about before as well, is really our intent to take some of those dollars and that growth and reinvest it back into our business. And again, reinvesting it along two lines, driving product attach and habituation and also really investing against the Agentic shift that we're seeing. And I mentioned before some of the forms that, that will take, but really focused on building for the future and driving durability for future over the next couple of years, but importantly, setting us up as well for the periods beyond that.

When you look at the OpEx side of it, as a general rule, the framework you mentioned is exactly how we think about it, which is to grow OpEx at about half the rate of our transaction margin dollar growth. Having said that, when you get into 2026, given the investments that we plan to make, I would say the way to think about it for '26 right now or at least as we're still working through our planning is that the OpEx growth rate will probably be about the same as our transaction margin dollar growth rate. So we'll see some compression there. With, again, to your point, as we begin to return that and begin to grow over that over the next couple of years, that will create a nice algorithm of growth for us to continue to have momentum around.

All right. Thank you for that update, Jamie. We have -- with the time permitting, I think the next topic we should hit is Agentic Commerce. So plenty of great announcements from PayPal on this topic. Maybe you could elaborate a little bit on those the two main announcements that you made. But one more mechanical follow-up is a question we often get from investors is how does a merchant go about getting the PayPal button placed within, let's say, the ChatGPT user interface? And what is the, let's call it, opt-in process?

Yes. So with respect to Agentic, we're really excited about it. I mentioned before, we've got partnerships with a handful of different players at this point. And we're really focused on a couple of things. Number one, for the LLM, it's really about bringing them sort of merchants at scale very quickly. We can bring to them tens of millions of merchants very, very quickly to help them sort of launch Agentic Commerce very quickly. The other side of it is bringing hundreds of millions of consumers to them at the same time and doing it with real global scale around identity, around authorization, around fraud protection, both with respect to sellers and with respect to buyers. And that is really, really important to LLM because all of those capabilities and particularly all the global elements of it are something that they just don't have time nor do they want to build out. And so we're doing that in a couple of different ways.

Number one is building an orchestration layer that allows merchants to opt in and allow their catalog presentment and allow their pricing, all of that to be presented very seamlessly with the LLMs. And the other side of it is building out the Agentic Commerce platform side of it, which allows -- once the consumer is in there, they can transact very seamlessly and very quickly. And so how we do that and how we scale that, that's what we're focused on building out over the next year and working very closely with a couple of big LLM as we do it.

What's interesting and exciting, too, is because we already have contracts with all of these merchants in place, right? All of our branded checkout economics, those are already there. This doesn't require the LLMs to have to recontract with anybody. It's just pass-through, for us in terms of once a consumer comes in, they click on a specific brand. That brand flows right through our branded checkout performance and transaction just like it would under any other transaction if they had done it directly with the merchant. So from that perspective, things don't look much different from the economic side of things.

All right. Perfect. Appreciate that update. Let's go to BNPL, which is another topic that's somewhat related to those existing merchant relationships that you have. So we've seen some great observations around the Pay Later button being shown more upfront in the shopping process. You referenced this a little bit earlier. So maybe you could just talk a little bit about what PayPal is doing to help that Pay Later button show up earlier in the shopping journey.

Yes. So buy now, pay later has become a really important part of how consumers shop. And we've seen the growth, not just with us but just in the space, generally been very strong. When you look at buy now, pay later, we are a very global business. About 30% of our buy now, pay later product is in the U.S., the rest is rest of world. We are a very short duration, generally skewed towards paying for pay monthly. So our product averages about a 41-day cycle. And the AOV side of it is quite small compared to some of the others. We are generally more transactional, not the larger purchase in terms of how you look at it. And from an economic perspective, the unit economics on the product itself are on par or better than our competitors.

And what we find, to your point about when we have it embedded in the stack, whether it's upfront or even when it's embedded later, it brings people back to PayPal because once they've gone through our onboarding process, they know when they click pay in for with PayPal that they can use it every time. And so it brings us back, they transact more, but we also get a proven halo effect in terms of transacting at higher levels as well. It's really positive in terms of how it contributes to us and it's a real opportunity for us. And one that candidly, up until a year or 2 ago, we had, had the product, but we hadn't focused on it as much as well. So think about this big consumer installed base that we have and a big opportunity to really lean in differently with our merchants and our consumers to capture it.

Okay. Excellent. Well, in the final few minutes that we have here, I think going to Venmo would be a great way to cap things off. If you could talk a little bit about some of the monetization progress that you've made. And then we have one more specific follow-up. In the past, the company had noted roughly about a 50% user overlap between Venmo users and PayPal users, and we're hoping you could give us a status update there.

Sure. So Venmo, and you know this because every time we talk, I get super excited when I talk about Venmo. It's a product that we've had for a long time. but we just hadn't invested in. It just sort of grew on its own. But I would say from a monetization perspective, it had been pretty static. And about 1.5 years ago, we really shifted the profile there. We brought in a new leader. We've shifted our investment profile. And Venmo is really growing at a very nice clip.

We've got a very engaged, very attractive young user base there. What's different now is, A, we've made the app just better in terms of pulling people in. It's find your contacts easier Venmo groups. We've had other features in it, bill pay, split, just different things that people can come in and find and service very quickly. But important to that, we started combining that with real campaigns around the Venmo debit card and embedding that in wallet, so that it's easy to use. You can tap to pay with Venmo, which has been really fun and exciting for folks. And we've really just begun this journey around how do we build out a more habituated consumer.

One of the big campaigns we launched a few months ago was around the Venmo college campaign, the Big TEN, Big 12, which is really fun because it not only on-campus sort of co-marketing to exactly our demographic that we want to capture. But it's around embedding the debit card as we do it, so in the onboarding process. And it's also about embedding Pay with Venmo and that experience in college bookstores, how we pay athletes mean all of these different things, which just brings different ways we can monetize. On top of that, it's just been a really, really fun way to get out there. I'm sure as you guys have seen some of the college game days, you've seen some of our advertising and some of the way we've really brought the brand there.

And your last question was around the overlap piece of it. it's interesting because while we have said that in the past, so we have 50% overlap, I guess what I would think today is I really are much deeper on PayPal and Venmo, we go after different target demographics. PayPal SKUs, 30-plus, slightly more affluent and in terms of our target demographic and our general user base is much more Main Street America there. When you look at Venmo, it is a more young Gen Z, a little bit of millennial, but really embedding into being the way the next generation pays and how the money flows for them. So yes, some overlap. But again, we operate in a space where we think we can do all of that pretty well and complementary.

Excellent. Well, on behalf of my team and everyone here at UBS, we want to thank -- I mean the whole team at PayPal. So Steve and Allison, that weren't able to join us here, but also to Ryan and Jamie for being here in Arizona and being a big part of our conference for many years. So thank you so much.

Thanks for having us.

Thanks for coming to the session with PayPal. My name is Bryan Keane. I head up the U.S. research practice here at Citi, and we're really excited to have Alex Chriss here, who's the CEO of PayPal. So we will do a fireside chat here, but Alex, thanks for coming.

It's great to be here. Really, good to see everyone and appreciate you having me.

Sure. I was thinking maybe we'd start with a little state of the union, Alex. It's been a little over 2 years that you've been at PayPal as President and CEO. And what kind of progress report would you give the company over the past 2 years?

Yes. Well, it has been 2 years. I think we're still early in our transformation. But I would say today, we are a fundamentally stronger company than we were 2 years ago. If you think about something like transaction margin, we've inflected that from negative to -- we're on pace for 6% to 7% transaction margin growth this year. We've turned around almost every part of the business. So our Processing business was negative. We've now turned that positive, went through some really good discussions with our merchants to turn that business around.

Our Venmo business, which had been stagnant, but just so incredible as an asset, is now growing and delivering really exciting results and Branded Checkout, we've invested in the experience. I'm very excited about where the experience is going. But to be transparent, that's probably the piece I underestimated the most in terms of just how long it would take to get that experience out to customers. So if I were to be constructively dissatisfied, I think getting the experience out to customers has gone slower than I expected. So good first couple of years, but again, this is going to be a good transformation for us to get through, but again, stronger today than we were a couple of years ago.

Yes, yes. We'll talk about some of those pieces of business. One of the things you talked about at the Analyst Day was the vision to enable commerce, connecting merchants and consumers. How's the progress you think on the big picture of PayPal becoming a commerce platform?

Yes. So one of the things that drew me to PayPal was we are really the only company that has 2 sides of the ecosystem, the consumer ecosystem and the merchant ecosystem at scale. And I think previously, we've done well to grow each of them, but not really connect the dots. And so part of the vision that we laid out at our Analyst Day was how do we leverage this ecosystem and build a network effect between our consumers and our merchants. And so we're still, again, early in that journey, but I'll give you a couple of examples.

So we rolled out a partnership with the Big 12 and the Big Ten to actually distribute payments through payouts for NIL athletes to Venmo. That's something that was unique to us. The reason we got that deal was because there's so many Venmo users on college campuses. We have an incredible payout product through our Processing business. But we won that deal because we could actually put money into a consumer wallet that now puts money into the consumer ecosystem. So we won the deal for a reason because we had the consumer ecosystem, and then it just drew more money into the ecosystem for our users to be able to spend money on. So it's just an example.

I'll give you another one. We have a number -- we have a commerce API now that our merchants are using to be able to actually get access to consumer information at the very beginning of a commerce journey. So as soon as the consumer shows up on a site, they're able to ping our API and say, who is this user? What information do you have about them? How do I now personalize my e-commerce experience because PayPal has seen this user before and knows their purchase history.

So we're working with merchants to not just enable a frictionless checkout experience, but really move upstream in terms of creating that full end-to-end commerce journey. And that's -- it's fundamentally changed the nature of the conversations we have with merchants because they're now looking to us as a partner that can really help them drive new customers and drive conversion beyond just the payment.

That's really helpful. I wanted to ask about the macro. I think PayPal called out a little bit of weakness in discretionary spend in the U.S. and Europe. There's also tougher comps, I know from last year. Can you just talk a little bit about what you're seeing in the health of consumer spending?

Yes. So obviously, as a business, we are going to control what we can control and continue to execute on our strategy. But we called out sort of mid-Q3 that we started to see a slowdown on consumers, particularly around discretionary spending, retail and really in middle to low income brackets, which we are -- play a significant role in PayPal. That slowdown has persisted into Q4.

There's a lot of holiday shopping to still come in Q4, so we'll see what happens. But what we've seen so far is that there's a lot of pressure on consumer right now. This is across U.S. and Europe, and it has persisted into Q4. And we expect that to have an impact on branded checkout. So we said this, and I still expect branded checkout in Q4 to grow but grow slower than Q3 if this persists.

And is that -- the change in the consumer, has that just been sudden? Or have you seen it throughout this year that they become a little more stretched?

It really became more pronounced mid-September. And we've been watching this very closely. Obviously, there's a lot going on in the macro right now, that's been tightening for consumers. And again, it is differentiated. If we look at some of our cohorts of higher income spenders, they're still spending. But we are seeing pressure for middle to lower income, and we're also seeing a shift to Buy Now Pay Later, which for us is an opportunity to take share.

We have a tremendous Buy Now Pay Later product and one that with the data that we have, we think we can really put in front of consumers at the right time to help them make the purchases they need and spread those payments over a couple of paychecks if they need to. But it really started mid-September and has persisted.

Yes, you started out talking about some of the things going well and then the challenge of maybe branded checkout, which we'll go to. But I wanted to start with some of the things that are really going well right now for PayPal and one of them is BNPL that you just called out. So I think BNPL, both volume and the MAA grew 20%. I think it's expected to be about a $40 billion volume business this year. What have you seen for overall kind of differentiation that PayPal can provide? And how can you push BNPL to be even a bigger piece of the PayPal pie?

Yes. So we're really excited about the BNPL. We see this as actually a generational shift. We're seeing a younger cohort, a younger demographic, really leaning towards debit and Buy Now Pay Later as their preferred methods and moving away from credit card as a way to fund their purchases. So we think that's an exciting sort of generational tailwind that will happen. And then as you said, we're on track to do $40 billion or so in Buy Now Pay Later, much of that has happened actually post button click.

So what that means is you're on a checkout page, you see PayPal, you click on PayPal and we give you a pay sheet of which one of those options is Buy Now Pay Later. So almost all of our volume has been post that selection. What we're hearing from consumers is and from merchants is we actually want to see what our Buy Now Pay Later option is up on the checkout page -- on the product page, before the checkout page. And we see a significant increase when we're on that product page.

So we're going to move upstream from a presentment perspective. We're going to move PayPal as a pay later option onto the product page so that consumers can actually see what that [ pay in for ] as an example, price would look like for the good that they're looking at. And we see -- I think right now, we're seeing a 10% lift in conversion when we are up on that product page. And so that's going to be a strategic shift for us, which we think will actually accelerate.

As you said, we're seeing significant growth right now in Buy Now Pay Later because of the brand that we have, because of the trust that we have, because of the data and loyalty that we have from our customers. We think once we actually move upstream, we're going to see accelerated growth from Buy Now Pay Later. So we're going to lean in there.

We just had Klarna on the data presentation before you got here. And then, of course, a firm, we're seeing huge growth in their cards, you guys obviously have great growth in your cards, too. What do you think about the whole strategy of pushing more transactions so that consumer can have the choice of a debit transaction versus a Buy Now Pay Later transaction and growing that helps with PayPal anywhere, helps moving you into getting into off-line as well.

Yes. I mean if you just pull back and think about the strategic shift that we've made as PayPal over the last 2 years. 2 years ago, you really thought of PayPal as a pay now e-commerce option and you fast forward 2 years, and we are meeting customers where they are. So we are now pay now, pay later, we're pay online, we're pay in store, and we're pay agentically. And so being able to meet customers wherever they are, we have launched our off-line capabilities and seeing tremendous growth in our debit card, both for PayPal and for Venmo.

We're seeing growth that we just talked about in Buy Now Pay Later. And so for us, customers, they are making sure that they can pay however they want. There are some purchases where Pay Now in store makes perfect sense. They can use our debit card and have that transaction happen. They're somewhere they want to be able to pay later and do that in-store or online, we've got a great Buy Now Pay Later option for them. So we've expanded Buy Now Pay Later in-store as well.

So this is just part of our overall strategy, and we're leveraging the brand that we've built over 25 years with PayPal and the incredible brand of Venmo in the U.S. to again meet customers where they are, and we want to be the right purchase for them everywhere, every time.

One of the things that's definitely turned in the last couple of years since you've been there is Venmo in general. For 10 years, we've been talking, I feel like that Venmo was going to finally scale and turn. I feel like it's hit an inflection point. I guess the first question to me is, maybe you can help us understand what's been the difference? How do we finally maybe hit an inflection point in Venmo where we talked about it for years before you got here, and we never saw any really growth in Pay with Venmo or growth in the debit card, which is now -- both of them are growing 40% in volume and Pay with Venmo and the debit card, I think, grew 65% volume.

Yes. I mean, Venmo is just an absolutely incredible asset. It's rare that you get something that is a verb for one of the most attractive demographics of young affluent spenders. The turnaround is exciting. It's about focused execution. We've gone out and really focused on verticals that matter to this demographic. So ensuring that partners like Taco Bell and Sephora are places where we can ensure that a demographic that wants to have their discretionary spend used through their Venmo ecosystem, they now have that opportunity.

So we've invested in the debit card. We've invested in Pay with Venmo. We've invested in partnerships. We just launched a partnership with Bilt so that our ecosystem can now start to split their rent and pay it with their friends through the Venmo app. And really, if you think about the transformation we've gone through, we were seeing $18 billion of funds coming into the Venmo ecosystem every month through peer-to-peer transactions. Almost all of that would then exit the ecosystem, right? That was just an incredible sign that we weren't giving our consumers the opportunity to make the spend that they needed within the app.

They were using us for peer-to-peer. It was the best way for them to share money with their friends and family, but they weren't seeing the opportunities to spend once it was in their wallet. That has now turned around. We're actually seeing a significant increase in consumers that are bringing new funds into the ecosystem outside of peer-to-peer. So their direct deposit or other bank transfers into Venmo because they now see Venmo as that wallet for them to do all of their spending, again, online, in-store, with their debit card, Pay with Venmo. So we think we're just scratching the surface there.

If you really look at the ARPA that we have with Venmo, it is increasing while our consumer base continues to increase, but we're still just scratching the surface of what we think it could be. So very, very exciting. We're on track to eclipse $2 billion in revenue from Venmo in the near term. And we think we're maybe 1/4 to 1/5 of the ARPA potential that Venmo has. So focused execution, we're going to continue to lean in there.

Yes. I think Pay with Venmo is now $10 billion in volume or will be thereabouts in fiscal year '25. What's the key now to hit the next level of growth? Is it more merchant acceptance, getting the consumer comfortable with using their card? And is this going to look like PayPal maybe 20, 30 years ago?

Yes. So there's a couple of things. One, we want to make sure we've got focused execution on verticals that matter to this cohort. So we will have very specific merchants that are coming in that are offering cash-back offers. Remember, this demographic is incredibly valuable to merchants. And so what we're seeing is merchants leaning in and wanting to create offers inside of the Venmo application. This goes back to that commerce platform that we talked about earlier, wanting to give cash back or discounts to this population to drive purchasing and now they can do it online or in-store.

The second big unlock is going to be what we've rolled out with PayPal World, which is connecting PayPal, Venmo, UPI, WeChat, Mercado Pago and a number of other wallets around the world into an interoperable ecosystem. So what does that actually mean? Well, for the first time, a Venmo user and a PayPal user can actually move money with each other. For the first time, a Venmo user will now be able to click on any PayPal button on any merchant and make a purchase. So we will instantly open up the world of the entire PayPal merchant ecosystem to every Venmo user. So we don't have to go one by one and unlock every single merchant to now add a Pay with Venmo button, we can leverage the entire ecosystem that PayPal has.

So we think this is now -- we've created the ecosystem. We have an incredible valuable base that is bringing money into their wallets. And now we've given them millions and millions of merchants to be able to go spend on. So we think we're going to see a significant unlock there with Pay with Venmo.

And when is that PayPal World and the volume and the transactions, when will we see that interoperability?

Yes. It's starting now. It will come over the next couple of quarters when we really roll it out. We started to do some early peer-to-peer testing of PayPal and Venmo money, but this is all within the next couple of quarters.

Awesome. Wanted to turn to the PSP business, the old -- we think about it as the Braintree, it grew 6% FX-neutral. Obviously, that was a business what you came and inherited. It was losing money on a transaction margin dollar basis and you've been able to turn that business. Can you talk a little bit about how you were able to fix the pricing issue there? And how can that business maybe gain share versus competition?

Yes. So as a reminder, and you touched on it, when I got here, the Processing business was growing customers, but growing customers at negative margin. And we were providing some value-added services, but really giving them away in order to drive incremental Processing revenue, but again, at low to negative margins. That's just not a healthy business, and we called early on that we were going to turn that around.

So I'm very proud of the execution of the team. We've done a couple of things. One, we've invested in value-added services, things like Risk as a Service, FX as a Service, payouts that I mentioned earlier. These are now best-in-class value-added services. We've gone back and renegotiated our contracts with our largest merchants. I'm very -- those were difficult conversations, renegotiating and pricing to value, but I'm very proud we didn't lose any merchants.

They saw the value in our processing, and they saw the value in the value-added services that we have. And having done that, we actually reduced the total processing that we were demanding from them, but have made it much healthier margins as we move forward. So now we feel like we've inflected on revenue. We see that continuing to grow, and we think transaction margin will continue to grow as well.

So very, very excited, difficult couple of years to go through that process, but it was the right thing for the long term of the company. And if you just step back, what I'm excited about is this really changes the profile of PayPal. We now have multiple levers for growth across transaction margin. It's not just branded checkout, now we are growing transaction margin through our Processing business, through Venmo, through Buy Now Pay Later. So we now have multiple levers for us to be able to grow, and it just creates a healthier profile for us for the future.

In that PSP business, can the transaction margin dollar grow equal to the volume growth? Or will there always be a little bit of a lag there?

We think volume will grow. Our focus is to grow at or above e-commerce trends. And I would go back and look at what we said in our Investor Day, we're on track for that kind of profile for '27 in the PSP business.

Yes, I think it was the goal of doing 2x the amount of transaction margin dollars by fiscal year '27.

That's right.

Let's get to branded checkout. So I think you called fixing checkout as one of the top priorities on your list. You mentioned to begin with, maybe that was one area that you underestimated to turn that business. So as you know, the Street is hypersensitive on this number. Online branded growth has been 5% in the third quarter, and you talked a little bit about due to economic considerations, that's going to probably be a little bit lower here in the fourth quarter. The current initiatives are to drive checkout scaling, redesign the pay sheet from 20% global branded traffic to 80% by '27. I guess help us understand why the progress has been maybe slower than expected. And is that enough if you can upgrade online checkout? Will you see an inflection point when you get towards that 80% target?

Yes. So I will answer that question. First, I know everyone is hyper-focused on branded checkout. I would love for folks to understand strategically that what we talked about earlier, we were playing a bigger game than just online. We are now meeting customers where they are. And if you look at the metrics that we're putting out on branded online experiences, this is really an omnichannel play. So we have to solve branded checkout from an online perspective, but I would encourage you all to look at what we're driving from an off-line experience as well because that's driving Buy Now Pay Later, it's driving branded experiences.

We drew branded experience is 10% in the U.S. last quarter, which was double the year before. So we're really starting to see penetration of off-line checkout. Now to your question on branded online. There's 3 components to branded online. Two, we've already talked about, Pay with Venmo, which we talked about the growth there. Buy Now Pay Later, we've talked about the growth there. Then you come down to the core of the PayPal button. And I've been transparent when I got here, that experience, particularly on mobile was below my expectation and really below competition.

It was full of friction. It was using really almost a decade old experience for consumers, where it would be -- you'd be on a mobile device, you would click to check out with PayPal, and we would ask you for your user name or e-mail, your password, we'd do 2-factor authentication. I mean, just full of friction in an experience where customers are looking for one click checkout.

So what I'm very proud of is we have gone through and rebuilt that experience. We're now leveraging what sounds obvious, but important technology like passkeys to ensure that you're now using face ID, you're able to actually just check out with one click. So for that experience, where we have rolled that out and optimized it, we are seeing the lift that we expect. We're talking about over a point of conversion improvement and where passkeys are really there, it can be as much as 2 to 5 points of improvement.

So we know that this new experience works. The challenge is we have 15-plus years of really bespoke integrations across our merchant base. And this was something I personally didn't appreciate when I got here of just how many different integration patterns there have been and how hard this was going to be. So we have started the process. We are 20-plus percent of the way through. We've optimized about half of that, call it, mid-teens of the total transaction volume. It's now being rolled out in the U.S. and across Europe. It's just slower than I want.

So good news is it works. Bad news is it's taking some time. My expectation is we will continue to accelerate this through '26. And there will be a point where we actually go from the [ carrot ] moment with our merchants where, hey, this is an improved experience into the stick moment of we're deprecating our old integrations. I just don't want to live in an environment anymore where we have 15 years of legacy integrations. It's expensive for us to maintain, and it's a terrible experience for customers. And so we will march through this. It is -- I wish it were a quick fix. I wish I could flip a switch.

We'll never go through this again because we now have a single common integration pattern, but we're just going to have to go through the hard work over the next few quarters and maybe even a couple of years to get through our backlog of merchants.

When you start to roll this out in Europe, what are some of the challenges? Is it by country and it just makes it more difficult to roll out the new checkout?

No, it's not really a geography issue. It's a merchant integration issue. It's -- we did not have discipline over the last 15 years of having and demanding consistent integration patterns. We let every merchant choose their own. So now as we go through and ask them to make a change, we've got a -- there's not just one set of instructions to go do it. We've got to go through their code and help them go through the upgrade. And again, it's not that, that work is excruciatingly hard, it's just that it's not consistent. So we can't just put a single set of instructions out and just run through the entire merchant base. We have to go through different patterns.

So we've started with some of the largest merchants. Those are growing incredibly well. And again, when we've done the upgrade, the conversion rate improves. We've gone through some of our platform partners that then can roll it out to millions of their businesses. That's going really well. But we've just got to get through the backlog.

So you talked about doing a [ carrot ] for another year or so, and then you're going to have to come with the stick. How would you do that? And you just say, hey, you have to upgrade. There's no longer you can be on the old system.

Yes. I mean, I've done this before in my career. At some point, you deprecate the old integration patterns and you no longer support it. And so -- the only way you can do that is if you have confidence that the improvement is better for customers and for merchants. We know and we have the data that shows that this is an improved experience and it will improve conversion. So I feel very confident about deprecating an old experience. When I can tell a merchant, this is going to improve your conversion rate. This is going to put more money in your pocket, and it's going to improve your consumer experience.

So I will feel very good about that. But these merchants all have lots of priorities and this may not be their top priority. When we help them see that the improvement is there, and we're deprecating the old experience, we'll move through the backlog.

And how would you do that? Would you put a date out like, hey, June of '27?

We give people time and work through it.

Got it. Can you -- one of the things I'm always thinking about is driving the online branded checkout experience through more loyalty program or merchant incentives or if I gave you all the marketing dollars possible, can you do those things within a budget that makes sense to help drive even faster online branded checkout?

Yes. I mean, look, we are at a point now where we're really excited about the experience that we've put out. We've invested in ensuring that things like Buy Now Pay Later are best-in-class. Our NPS for our Buy Now Pay Later product is 80 plus. I mean it's one of the highest NPS as I've ever seen. And so now we have confidence that we can spend. And as I talked about earlier, when we want to have either cash back or presentment upstream for our consumers to be able to choose and habituate with PayPal, we may need to spend into that. And that will -- we're doing it now with 5% back on Buy Now Pay Later purchases through the holidays. Those are things that we want to continue to invest in because it drives consumer habituation and it drives significant ROI for the long term.

Yes. I was going to ask about the spending, and you talked about it on the quarterly call that there'll be more investments in the fourth quarter with some of the rewards in cash back, better placement presentment. Can you talk about how you see the return on the investment there? And could '26 be a year of more investment where you keep margins maybe flat? I have no idea what the thought is, but -- and use as much of those investments as possible to help spur the other top line growth.

Yes. So what I'm excited about is, over the last 2 years, we've repositioned the company to be able to have this kind of optionality, right? As we talked about at the beginning, we went from negative margins to now being able to drive and have confidence that we are on a great path this year, 6% to 7% transaction margin growth. And we know we could continue to invest in driving a very healthy profile. We also know that there are some big shifts in the market that we want to take advantage of, whether it's Buy Now Pay Later, whether it's agentic, there are some elements where we want to lean in and make sure that we are in a winning position going forward. And that will likely come with some investment.

Now those investments, if it's incentives for consumers to make purchases, come at a headwind to transaction margin. And so we will make those investments in the short term to be able to drive long-term habituation and win the market going forward where we think we've got a best-in-class product and can take share. If we have to invest now to drive ROI for the next 3, 5, 10 years and set PayPal up for the future, those are the investments we'll make through '26.

Yes, because I was trying to figure out from the Analyst Day, what you put out in terms of disclosures for EPS growth and margin growth and transaction margin dollars. Does it make sense maybe to given the opportunity and given where you are, maybe to change that model and invest for the growth instead of trying to drive more dollars to the bottom line?

Yes. I think if I think about the profile of what we talked about at Analyst Day, macro aside, just the profile of what we talked about, we still have confidence that it is the right profile for the long term of the company. But a lot has changed, and this is never going to be a linear path. But if I even think back to February when we did Analyst Day, I didn't get a single question about agentic and now in most of my conversations with everyone, it's half the conversation. And so that is an opportunity for us to lean in and win in agentic, to win in Buy Now Pay Later and invest to be able to then set us up for the long term.

So again, the timing may shift, but the overall, how we're building the ecosystem of PayPal being able to have multiple levers of growth for overall transaction margin and EPS growth over time. I think that's consistent. I think the timing and how we invest to win in the short term will be impacted.

So you're going to be surprised, but Agentic is the next question.

Shocking.

Can you talk a little bit about what you guys are doing in agentic, and you're obviously excited about it. How do you -- why is PayPal different versus the other competitors. And I think it has to do with being a 2-sided network, but maybe you can help folks understand as Agentic takes off in '26, '27 and beyond, why is PayPal better off maybe than some other competitors?

Consumers will have a tolerance for hallucinations when they get to commentary back from their LLM. They will have 0 tolerance for hallucinations when it comes to their money and when it comes to purchases. And the reason PayPal is perfectly set up is because we are built on trust across both consumers and merchants to provide that Agentic commerce experience that you can believe in, and that will be consistent and trustworthy. So what does that look like? So we bring a merchant ecosystem, that we have already onboarded that we've KYBed, that we now have released a commerce protocol to allow them to bring their catalog and actually connect to our orchestration layer that connects to every LLM that's out there.

So we already have announced deals with Google, with OpenAI and with Perplexity as examples, where our merchant ecosystem can actually connect to PayPal once and have their catalog available in a KYB trusted environment across all of those LLMs for discovery. On the consumer side, we bring not only hundreds of millions of consumers that we've KYCed through PayPal and Venmo, but also our PayPal World ecosystem. So we now bring 2 billion-plus consumers across PayPal World into this consumer ecosystem where we're able to provide -- because we have both sides of the ecosystem, we're able to provide buyer protection for those consumers.

When we talk to these LLMs, again, they are incredibly excited about what the future of Agentic commerce can be. But we also know fraud is going to be so easy to be able to have fake catalogs and fake merchants just proliferate through these LLMs. That doesn't happen with PayPal. So one of the reasons you've seen us as first to market with wallets and integrations with Google and OpenAI and Perplexity is because they know that PayPal brings a trusted 2-sided ecosystem to bear and enables the confidence of a consumer and a merchant to actually move into this next wave.

So I really look at this as in the dawn of e-commerce, PayPal was at the forefront and built a trusted relationship. This is the dawn of Agentic commerce and we're going to leverage the 25 years of brand equity and the millions of consumers and merchants that we can bring to the table and lead Agentic commerce going forward. So we're incredibly excited about this shift and it's a big opportunity for us to win this market.

And how do you see the volume of Agentic commerce? When do you -- is there an inflection point that you see in the horizon? And then maybe a little bit about the revenue model, any changes that you guys would see and how you guys generate the revenue?

So on the revenue model, these are branded checkout transactions for us. So we have relationships with the merchants, a consumer makes a purchase, a PayPal purchase and [ Vault ] PayPal as their Agentic commerce wallet where we're providing them buyer protection and everything else that we do, that's a branded checkout transaction. So no change to the revenue, just upside opportunity for us to take share.

In terms of scale, I have no idea. I wish I could look and do a crystal ball and tell you how fast commerce is going to move into Agentic. But we're going to follow where consumers are. For me, I think the experience for many purchases is superior when you actually use an agentic experience, you get right to the right product at the right time, and it can create a really personalized experience. But it's all going to come down to trust. People aren't going to make purchases until they feel like they know and they can trust that when they're allowing their agents to make a purchase on their behalf that the purchase is actually going to show up and that it's going to be the right product. And that if they have a challenge, they can do a dispute resolution or they can do a return. And all of that, they can track through their PayPal app, and so we think we actually have the opportunity to lean in, be that first wallet to be vaulted in their experience and create that trusted relationship.

Okay. We're almost out of time. So just to wrap thinking about the Analyst Day and obviously, there's a lot of changes here. So I think you talked about transaction margin dollar acceleration in fiscal year '26. And then you talked about a low-teens EPS growth in '27 and high single-digit growth in transaction margin dollars and then long term, we're talking about transaction margin dollar growth of 10% in long term, up to 20% EPS growth. Do all those things still hold and everything we talked about today and how do we think about the medium to long term for PayPal?

Yes. So If I go back and reiterate what I said earlier, what I'm proud of is we now have the levers to control what we want to control. So if we wanted to lean in, in '26 and deliver what we talked about, that's our choice. I would not expect that. I would expect that, as we've talked about, we're going to lean in and invest our dollars to win what we see to be very critical generational shifts right now. Agentic commerce, Buy Now Pay Later, we think we've got best-in-class products. and we want to be the winner in these spaces as they grow.

So expect us to actually invest and that comes at a headwind of transaction margin dollar growth in '26, but we will invest in order to win these markets over the next year. So that's a choice that we have. It sets us up for the long term. And again, we're building this company for the next 3, 5, 10 years and we'll make the right choices as these shifts come upon us to be able to set the company up.

Well, I think personally, I think that's the right thing to do. So I'm excited to see that. Alex, thanks so much for doing this.

Great to be here.

I want to welcome Diego Scotti. He is the General Manager of PayPal's Consumer Group. Diego oversees marketing, communications and product design across several lines of business at PayPal. He joined PayPal in 2023 after serving as CMO at Verizon. He also spent 15 years at American Express, leading a variety of different functions there. Thank you, Diego, for making the trip over here.

At your Investor Day earlier this year, you laid out 3 pillars of consumer strategy, including pay everywhere, pay your way and driving value for consumers. Maybe start with PayPal Everywhere. PayPal's very strong penetration online. Maybe give us an overview of what you're looking to do in terms of expanding into omnichannel with PayPal Everywhere, which can help drive usage of the overall platform.

Thank you for having me here. It's great to be with all of you. And just to give you a context, the consumer business per se and PayPal is pretty new. So we formed this group in 2023 with Alex Chriss became the CEO. And under this group, we have PayPal, obviously, the brand that you guys know and Venmo as well, and we manage the 2 brands separate, but together under the group.

And yes, like you mentioned when we had our Investor Day early in the year, I talked about a strategy that had those 3 pillars in order for us to be the smartest way to pay and really bring back the consumer. We wanted to have the pay everywhere portion of it. We wanted to also make sure that people can pay the way they want, and that's all the payment flexibility that comes with it, and we'll talk about that later, I hope.

And then the third piece is loyalty and give people value a reason to really use PayPal. The pay everywhere piece is an important one because if you think about PayPal and think about yourselves as consumers, you think about PayPal as, oh, it's great to use online and traditionally, it's being used like that. So when you think about the consumer, they're thinking about PayPal in this box, which is for those type of purchases. That means that then if you want to shop offline, then you need something else. So that is a barrier that when we say to the consumer, now you can use us online and offline, you only can think about PayPal. It becomes a new frontier for us to be playing a different space in the mind of the consumer.

And I tell you, we completely repositioned our debit card proposition with 5% cash back and completely embedded in the experience. The results have been incredible. We are now 6 million new FTUs on debit card, 70% growth on TPV on debit card year-over-year, which is incredible. I don't know, guys, if you know, but we launched our first NFC tap to pay off-line solution in Germany early in the year as well, the first in the world for us. And that's funny because it comes not only with that, but also with the first solution for BNPL in the country.

In Germany, it is a country that is still you want to have a deferred purchase. You need to go to the eighth floor of the department store, get somebody to sign a pay lift or something and you get your loan. Now you can do it right there in the app when you select the TV that you want to buy. We're already almost 6 billion customers in NFC in Germany. So we're very, very excited. And what you hear me say all the time, and I'm sure you're going to -- I'm going to repeat this a lot today, what we see is when a customer use one of our products, we see the impact on our checkout business. So what you see in this case is for customers that are using us offline, 6x the number of transactions that they do at checkout and 3x the ARPA in the value of those customers. So you see how the flywheel starts to work also when we talk about offline.

Perfect. Frictionless checkout is another area. Upgrading merchants to the latest checkout experience has been a focus point for you guys. Where are we in that progression in the United States and outside?