Overview of Results of Operations

PayPal reported strong financial results in 2024, with net revenues increasing 7% to $31.8 billion compared to 2023. This growth was driven primarily by a 10% increase in total payment volume (TPV). Operating income also grew 6% to $5.3 billion, with the operating margin remaining steady at 17%. However, net income declined 2% to $4.1 billion due to a decrease in other income and higher restructuring costs.

The company’s international operations continued to be an important contributor, generating 43% of net revenues in 2024. While foreign exchange rate movements had an unfavorable impact on net revenues in 2024, this was offset by the company’s hedging program.

Key Metrics and Financial Results

PayPal’s key non-financial metrics showed solid growth in 2024. Active accounts increased 2% to 434 million, while the number of payment transactions grew 5% to 26.3 billion. TPV rose 10% to $1.68 trillion. However, transaction revenue growth was lower than TPV growth due to a shift in mix towards larger merchants with lower pricing.

Revenues from other value-added services increased 1% to $4.1 billion. This was driven by higher interest income on customer balances, partially offset by declines in revenue from the company’s credit products and the sale of the Happy Returns business.

Operating Expenses

Total operating expenses increased 7% to $26.5 billion in 2024. This was primarily due to a 9% rise in transaction expense, which is correlated with the growth in TPV. Transaction and credit losses, on the other hand, decreased 14% to $1.4 billion, reflecting improvements in the company’s risk management.

Customer support and operations expenses declined 8%, while sales and marketing increased 11% due to higher advertising and brand spending. Technology and development costs remained flat, while general and administrative expenses rose 4%. Restructuring and other costs increased significantly, reaching $438 million, primarily from workforce reductions and asset impairments.

Credit Products

PayPal’s consumer loan portfolio grew 13% to $5.4 billion, net of participation interest sold. This was driven by growth in installment credit products in Japan and the U.S., as well as the revolving credit product in the U.K. The percentage of consumer loans and interest receivable that were current improved to 96.6%, and the net charge-off rate declined to 4.5%.

The merchant loan portfolio increased 23% to $1.5 billion, with growth in the PayPal Working Capital and Business Loan products. The percentage of merchant loans and advances that were current improved to 90.4%, and the net charge-off rate decreased to 5.3%.

PayPal continued to explore partnerships and third-party funding sources to support the growth of its credit products. The company also entered into an agreement to sell eligible European consumer installment receivables, which provides an additional source of liquidity.

Liquidity and Capital Resources

As of December 31, 2024, PayPal had $13.8 billion in cash, cash equivalents, and investments, excluding customer accounts and strategic investments. The company generated $7.5 billion in operating cash flow in 2024, a 54% increase over the prior year.

PayPal has access to a $5.0 billion revolving credit facility and other uncommitted credit facilities totaling $80 million. The company also has $10.6 billion in fixed-rate debt outstanding. Management believes the company’s existing cash, expected operating cash flows, and access to capital markets will be sufficient to meet its cash requirements for the foreseeable future.

The company’s material cash requirements include funding for operating activities, credit products, customer protection programs, stock repurchases, strategic investments, and other obligations. PayPal continues to evaluate partnerships and third-party funding sources to support the growth of its credit products.

Key Risks and Outlook

PayPal faces several key risks, including foreign exchange fluctuations, changes in customer spending patterns, credit losses on its loan portfolios, and the impact of regulatory changes. The company’s hedging programs and credit risk management efforts aim to mitigate these risks, but cannot eliminate them entirely.

Looking ahead, the company expects continued growth in its core PayPal and Venmo products, though Braintree may see lower volume and revenue growth due to a focus on profitable business. PayPal also anticipates higher marketing and brand spending to support its strategic initiatives.

Overall, PayPal delivered solid financial performance in 2024, demonstrating the strength of its payments platform and the continued demand for its products and services. However, the company will need to navigate macroeconomic uncertainties, competitive pressures, and regulatory changes to sustain its growth and profitability in the years to come.