Vanguard’s $230 Million PayPal Bet Puts the Spotlight on May 5

Vanguard adds 5.5M PayPal shares as new CEO Enrique Lores bets on ad business; Q1 earnings due May 5 with EPS forecast down 4.5%.

When the world’s largest asset manager adds 5.5 million shares to a position, the market tends to take notice. Vanguard’s recent purchase of PayPal stock—worth roughly $230 million at current prices—arrives at a moment of maximum uncertainty for the digital payments giant. A new chief executive is in place, the share price has been cut by a quarter over the past year, and the company is betting its future on a data-driven advertising business that has yet to prove itself.

The Numbers That Matter

PayPal will report first-quarter results on Tuesday, May 5—the first major earnings release under CEO Enrique Lores, who took the helm in February after predecessor Alex Chriss struggled to reignite growth. The bar is low. Wall Street expects earnings per share of $1.27, representing a 4.5% decline from the same period last year. That forecast aligns with management’s own guidance, which flagged a slight profit drop for the opening quarter.

The Q4 2025 numbers still sting. Revenue came in at $8.68 billion, missing analyst estimates of $8.82 billion. The branded checkout business, PayPal’s core profit engine, delivered only meager growth—triggering a double-digit premarket selloff. For the full year 2026, management expects adjusted earnings per share to stagnate or edge slightly lower.

A Stock That Looks Cheap for a Reason

PayPal shares currently trade at €42.44 (roughly $46), well below their 200-day moving average of €50.57. The forward price-to-earnings multiple sits at about 9x—a steep discount to rivals Visa and Mastercard, which command multiples in the high 20s. The average analyst price target stands at $50.67, implying roughly 10% upside from current levels.

But cheap doesn’t always mean a bargain. The user base has barely budged: PayPal ended 2025 with 439 million active accounts, only marginally above the 435 million recorded at the end of 2022. Competition from Apple Pay, Google Pay, and a growing roster of buy now, pay later providers continues to squeeze margins. The consensus rating among major research houses is “Hold”—a reflection of the uncertainty surrounding the turnaround.

The Ad Bet That Could Change the Narrative

On April 27, PayPal launched “PayPal Ads ID,” a new advertising product built on its proprietary “Transaction Graph”—a database of more than 25 billion transactions across PayPal and Venmo. Unlike traditional digital advertising, which relies on probabilistic modeling or browser cookies, the Ads ID ties ads directly to verified purchase data. That makes attribution far more precise.

First technology partners include Magnite, PubMatic, Rokt, and Taboola. The goal is to create a high-margin revenue stream that reduces PayPal’s dependence on transaction fees. For Lores, the ad business represents the most visible growth lever—and investors will be watching closely for any early signs of traction.

Capital Returns and Venmo’s Bright Spot

The company isn’t waiting for the ad business to mature before returning cash to shareholders. PayPal has authorized $6 billion in share buybacks for 2026 and introduced a quarterly dividend for the first time. The buyback program alone could reduce the share count by roughly 10% at current prices, providing a mechanical boost to earnings per share.

There are also pockets of organic momentum. Venmo, PayPal’s peer-to-peer payments subsidiary, posted double-digit growth in payment volume and rolled out international transfers for its users in March. If Venmo can maintain that trajectory, it could help offset the sluggishness in branded checkout.

What Lores Needs to Deliver

The May 5 report will be the first real test of Lores’s strategy. Analysts want to see whether transaction margins can hold steady—and whether the advertising business can contribute anything measurable this early. Vanguard’s massive share purchase suggests at least one institutional heavyweight believes the pieces are in place.

But the stock’s trajectory over the past year—down 25%—shows how much skepticism remains. Stabilizing the branded checkout segment is the immediate priority. Without a turnaround there, even $6 billion in buybacks may not be enough to prop up the share price.