PayPal Stock Plummets 18% as Q4 2025 Earnings Miss & CEO Shakeup Rattle Investors

The “Perfect Storm” Q4 2025 Miss

Wall Street’s reaction was swift and brutal, driven primarily by the deterioration of PayPal’s core profit engine. While total payment volume (TPV) grew decently, the mix shift toward lower-margin services alarmed analysts.

Key Financial Metrics vs. Expectations

The 1% growth in branded checkout (currency-neutral) is the headline killer. This segment is PayPal’s “cash cow,” commanding significantly higher transaction margins than its unbranded processing counterpart, Braintree. The slowdown from 5% in Q3 2025 suggests PayPal is losing wallet share to Apple Pay and Shop Pay at an accelerating rate, exacerbated by what Interim CEO Jamie Miller described as “macroeconomic retail headwinds” impacting discretionary spending.

Leadership Shock: Alex Chriss Out, Enrique Lores In

Perhaps more unsettling than the numbers was the unexpected leadership transition. The board announced that Enrique Lores would leave his post as CEO of HP Inc. to take the reins at PayPal. Lores, who has chaired PayPal’s board since July 2024, is viewed as an execution-focused leader, but the sudden exit of Alex Chriss implies the board lost patience with the pace of the turnaround.

“While we made progress in Venmo monetization and BNPL, our core execution in branded checkout has not met the board’s expectations,” said David Dorman, the newly appointed Independent Board Chair. The market interprets this as a signal that the “transition year” narrative is being extended well into 2026.

• Why Lores? Lores is credited with transforming HP’s subscription business and managing complex cost structures. Analysts believe his mandate is to ruthlessly cut costs and stabilize margins, though some question his fintech product pedigree compared to a tech-native founder.
• Interim Leadership: CFO Jamie Miller will serve as Interim CEO until Lores assumes the role on March 1, ensuring short-term stability during the chaotic market reaction.

2026 Outlook: Margin Compression & “Investment Year”

The forward guidance offered little solace. PayPal projected a cautious 2026 profit outlook, warning of a mid-single-digit decline in Q1 2026 earnings. Management cited the need for aggressive reinvestment in “Agentic Commerce” (AI-driven shopping) and omnichannel rewards to stem the bleeding in branded checkout.

Transaction Margin Concerns

The divergence between unbranded processing (Braintree) and branded checkout continues to compress margins. While Braintree volume remains robust, it carries a much lower take rate. With branded growth stalling, PayPal’s transaction margin dollars are under pressure. The company expects transaction margin dollars to be flat to slightly negative in the first half of 2026, a stark contrast to the growth promised during the 2024 investor days.

Bright Spots: Venmo & BNPL

Amid the gloom, there were isolated positives that prevented a total capitulation of the stock price:

• Venmo: Revenue grew 20% YoY to $1.7 billion, driven by the “Pay with Venmo” feature and improved monetization of P2P flows.
• Buy Now, Pay Later (BNPL): Total Payment Volume for BNPL offerings surged over 20%, surpassing $40 billion annually. However, rising delinquency rates in the consumer credit portfolio remain a watch item for risk-averse investors.

Strategic Analysis: Can Lores Fix the “Button” Problem?

The core existential threat remains: active account engagement. While active accounts ticked up slightly by 1.1%, the number of transactions per active account (TPA) dropped 5% when excluding payment service provider (PSP) transactions. This indicates that core users are pressing the PayPal button less often.

Enrique Lores enters with a difficult hand. He must effectively fight a two-front war:

1. Defend against Apple: Apple Pay’s seamless integration on iOS continues to erode PayPal’s mobile checkout dominance.
2. Restore Investor Trust: After multiple “reset” years, Wall Street is skeptical of turnaround promises. Lores’ history of operational discipline at HP suggests a potential pivot toward operational efficiency over “growth at all costs,” but the 1% branded growth figure demands urgent product innovation, not just cost-cutting.

Market Verdict

Analysts have swiftly downgraded PYPL, with several price targets slashed by $15-$20. The consensus view is that PayPal is now a “show-me” stock, with the 2026 valuation multiple likely to remain compressed until there is tangible evidence of a branded checkout recovery.