PayPal Holdings Inc. fell short of expectations Monday with its holiday-quarter outlook while also announcing a new arrangement with Amazon.com Inc. through which Venmo users will be able to use the service as a checkout option on the e-commerce giant’s platform.
The company reported net income of $1.09 billion, or 92 cents a share, compared with net income of $1.02 billion, or 86 cents a share, in the year-earlier quarter.
After adjusting for stock-based compensation and other expenses, PayPal PYPL,
PayPal’s revenue for the third quarter rose to $6.18 billion from $5.46 billion, while analysts had been expecting $6.23 billion.
The company generated $310 billion in total payment volume, or the value of payments flowing through its system, with the metric up 26% from a year earlier. Analysts were projecting $312.5 billion in TPV. PayPal said that its TPV would have increased 31% when excluding contributions from eBay Inc. EBAY,
Venmo processed $60 billion in TPV, up 36% from a year earlier. PayPal announced that U.S. Venmo users will have the option to pay for Amazon purchases with the service starting early next year.
“This agreement with Amazon is the start of an exciting journey with them,” Chief Executive Dan Schulman told MarketWatch. He said that PayPal’s flexibility to strike such an arrangement comes as a result of the company’s changed relationship with eBay.
PayPal is no longer eBay’s main payments partner as it was when the companies first separated in 2015, and PayPal also has the freedom to pursue relationships with other merchants.
Schulman called the agreement “a meaningful moment on Venmo’s monetization efforts.” Wedbush analyst Moshe Katri also called the move a “positive” development.
Even before the Amazon arrangement kicks in, PayPal expects to be transaction-margin positive this year and believes it is on track to hit $900 million in revenue for 2021, Schulman told MarketWatch.
Across the broader PayPal family, the company had 416 million active accounts in the quarter, up from 403 million as of the second quarter.
For the fourth quarter, PayPal expects $6.85 billion to $6.95 billion in revenue as well as $1.12 in adjusted EPS. Analysts were anticipating revenue of $7.24 billion and adjusted EPS of $1.28 a share.
Shares of PayPal rose about 1% in after-hours trading; the stock has declined 18% over the past three months, as the S&P 500 SPX,
