PayPal (NASDAQ: PYPL) raises non-GAAP EPS outlook while GAAP operating income falls 8%

Posted by Stephan Jacobs on Oct 27th, 2026

What happened

PayPal Holdings, Inc. (NASDAQ: PYPL) raised its full-year non-GAAP guidance on Oct. 27 even as GAAP operating income fell 8% to $1.4 billion.

The higher targets cover transaction margin dollars and earnings per share. Non-GAAP operating income excludes restructuring and other items. It rose 3% in the third quarter, so the two profit measures moved in opposite directions. Net revenues rose 2% to $8.6 billion, or 1% excluding currency effects.

Restructuring explains most of the gap. PayPal excluded $178 million of restructuring from non-GAAP operating income, against $1 million a year earlier. Total adjustments grew to $211 million from $48 million.

Key numbers

Metric	Latest	Change	Source
Net revenues	$8.58 billion	from $8.42 billion, +2%	SEC 8-K
GAAP operating income	$1.40 billion	from $1.52 billion, -8%	SEC 8-K
Non-GAAP EPS	$1.45	from $1.34, +8%	SEC 8-K
Total payment volume	$487.14 billion	from $458.09 billion, +6%	SEC 8-K
Free cash flow	$1.43 billion	from $1.72 billion, -17%	SEC 8-K
Diluted weighted average shares	858 million	from 960 million, -10.6%	Calculated from SEC 8-K

Read more: PayPal (PYPL) company research

Where growth came from

Payment activity grew faster than revenue. Total payment volume rose 6% to $487.1 billion, or 7% excluding currency effects. Payment transactions rose 7% to 6.8 billion.

Active accounts rose only 0.6% to 440 million. Transactions per active account over the trailing 12 months rose 6% to 60.8. Growth came from more activity per account, not more accounts.

Transaction margin dollars are revenue less transaction expense and credit losses. They rose 2% to $4.0 billion. Excluding interest on customer balances, they rose 3% to $3.7 billion. Interest on customer balances fell to $289 million from $321 million.

Results were uneven by region. U.S. net revenues rose 5% to $5.00 billion. International net revenues fell 2% to $3.58 billion, or 4% excluding currency effects.

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Buybacks and cash flow

Fewer shares narrowed the gap between net income and per-share results. GAAP net income fell 14% to $1.07 billion, yet GAAP EPS fell only 4% to $1.25. Non-GAAP EPS rose 8% to $1.45 while non-GAAP net income slipped 3%.

OptimistFi calculates that diluted weighted average shares fell 10.6%, to 858 million from 960 million a year earlier. PayPal bought back about 28 million shares for $1.5 billion in the quarter. Over 12 months it bought about 117 million shares for $6.0 billion. Shares outstanding were 837 million on Sept. 30, down from 920 million at Dec. 31, 2025.

Cash generation moved the other way. Operating cash flow fell 19% to $1.6 billion and free cash flow fell 17% from a year earlier. Adjusted free cash flow excludes the timing of buy now, pay later receivables held for sale. It fell 10% to $2.0 billion.

Cash, cash equivalents and investments totaled $15.1 billion against $13.5 billion of debt on Sept. 30.

Why it matters

OptimistFi has argued that PayPal can compound value if its checkout network stays relevant while management lifts margins, cash generation and per-share earnings. The quarter backs the per-share and non-GAAP margin parts of that view. Non-GAAP operating margin widened 16 basis points to 18.8%, and the guidance raise points the same way.

It does not yet back the cash part. GAAP operating margin narrowed 173 basis points to 16.3%. Every cash flow measure the company reports declined from a year earlier.

Top-line and account growth are modest, and the profit gain rests on non-GAAP measures that exclude restructuring. The quarter leaves the case mixed.

What's next

For the fourth quarter, PayPal guided to non-GAAP EPS of $1.43, against $1.23 a year earlier. It guided to GAAP EPS of $1.37, against $1.53. Full-year non-GAAP EPS guidance is now $5.60, which OptimistFi calculates as 4.1% above the $5.38 given in July. Full-year GAAP EPS guidance of $5.07 was reaffirmed, against $5.41 for 2025.

The board declared a cash dividend of $0.14 per share. It is payable Dec. 24 to stockholders of record on Dec. 4.

The next test is the fourth-quarter and full-year 2026 earnings release. Fourth-quarter GAAP EPS below the guided level would weaken the case. A recovery in free cash flow would strengthen it.