PayPal’s Core Business Faces Mounting Pressure as Growth Slows

PayPal US70450Y1038

PayPal's shares continue their downward trajectory, marking one of the technology sector's most significant declines this year. The stock has shed more than 36% of its value since January. Recent commentary from Chief Financial Officer Jamie Miller has intensified investor concerns, indicating a potential slowdown in the company's most vital segment during the crucial holiday shopping period. This development fuels growing apprehension that the former fintech trailblazer is struggling to keep pace with larger technology rivals.

Trading at a price-to-earnings (P/E) ratio of approximately 12, PayPal's equity is valued at a historically low level. However, market skepticism remains prevalent. Analysts are adopting an increasingly cautious stance. J.P. Morgan recently downgraded the stock to a "Neutral" rating, while Deutsche Bank reduced its price target.

Furthermore, the company's substantial share repurchase program has so far failed to arrest the share price decline. Since 2022, PayPal has invested $21.5 billion in buying back its own shares. Despite this, the stock is currently trading just above its 52-week low of €50.41. Investors are increasingly questioning this capital allocation strategy, debating whether strategic acquisitions might have been a more prudent use of funds than buybacks.

Holiday Quarter Growth Projection Sparks Alarm

The immediate concern centers on PayPal's "Branded Checkout" business—the familiar payment button seen during online purchases. Speaking at the UBS Global Technology and AI Conference, CFO Jamie Miller confirmed that growth in this critical segment is expected to be weaker in the fourth quarter than it was in Q3 2025.

Given that growth in the prior quarter was already in the mid-single digits, this guidance suggests a rate potentially as low as 3% or less. A deceleration during the year's highest-revenue period has alarmed the investment community, as it points to fundamental competitive challenges.

Rising Competition and Declining Engagement Metrics

Intense competitive pressure is the primary driver behind this slowdown. Rivals like Apple Pay and Google Pay are aggressively expanding their market presence. Simultaneously, major e-commerce platforms are increasingly developing their own integrated payment solutions. This shifting landscape is reflected in key user engagement data:

• Total payment volume recently declined by 5% year-over-year.
• The number of transactions per active account fell by 6% on a trailing twelve-month basis.

Despite posting solid financials, including a 7% revenue increase in the third quarter, the downward trend in user frequency is a clear warning sign.

Strategic Initiatives Aimed at a Turnaround

Management is pursuing several strategic countermeasures to regain momentum. A heightened focus on artificial intelligence and new partnerships is at the forefront. Collaborations with AI providers such as Perplexity aim to modernize the payment experience and enable "Agentic Commerce," or AI-driven shopping.

Concurrently, PayPal is strengthening its balance sheet through deals in the "Buy Now, Pay Later" space with firms like KKR and Blue Owl Capital. These agreements help offload credit risk and free up capital. The company continues to serve as a payment partner for major brands, including FC Liverpool and Verifone.

Despite these structural headwinds, the leadership team has reaffirmed its profit forecast for the current quarter. With an expected adjusted earnings per share between $1.27 and $1.31, PayPal continues to demonstrate underlying profitability. However, the coming months will be critical in proving whether it can successfully stem the erosion in its core checkout business.