Feb 3 (Reuters) - PayPal issued a lackluster profit forecast for 2026 and reported fourth-quarter earnings below Wall Street expectations on Tuesday, pressured by weaker U.S. retail spending and slower growth in its branded checkout segment.
The company's shares fell 9% in premarket trading after the results. It also named HP's Enrique Lores as president and CEO, effective March 1.
Retail spending has softened as cautious consumers, squeezed by still-high interest rates, stubbornly high living costs
and signs of a softening labor market, cut back on discretionary purchases and prioritize everyday necessities, a pattern highlighted by major retailers and consumer goods companies as households navigate tighter budgets.
PayPal expects full-year adjusted profit to decline in the low-single digit percentage to increase slightly, compared with Wall Street expectations of about 8% growth, according to data compiled by LSEG.
It reported revenue of $8.68 billion for the holiday quarter, missing the estimate of $8.80 billion. Total payment volume rose 6% on an FX-neutral basis to $475.1 billion.
Adjusted profit was $1.23 per share during the three months ended December 31, also below analysts' view of $1.28.
The fourth-quarter results stand in contrast to a typical holiday quarter for payments firms as consumers usually spend more freely on gifts, travel and seasonal promotions.
SPOTLIGHT ON BRANDED CHECKOUT
Growing PayPal's higher-margin branded checkout business has been a key focus for outgoing CEO Alex Chriss, who is pushing for "profitable growth" while aiming to streamline costs tied to unbranded processing.
Online branded checkout growth decelerated to 1% in the fourth quarter, compared with 6% a year earlier. The company said this was driven by weakness in U.S. retail, international headwinds and tougher comparisons.
Investors have long worried that the entry of Big Tech companies such as Apple and Google into PayPal's core payments business could erode the company's market share despite its status as the legacy market leader.
Though PayPal says it continues to perform well in its core products despite rising competition, the concerns have pressured its stock in recent years, with investors closely monitoring the branded checkout results.
The company said it was taking near-term action to restore online branded checkout momentum.
(Reporting by Manya Saini in Bengaluru; Editing by Shilpi Majumdar)
