PayPal’s AI Ambitions Face Operational Headwinds

PayPal US70450Y1038

PayPal is making a strategic push to bolster its technological capabilities with the acquisition of Cymbio, even as a significant operational setback at its Honey subsidiary creates near-term pressure. This mixed picture leaves investors questioning whether the long-term investment can offset current challenges.

A major challenge has emerged for PayPal's Honey browser extension, which automatically finds discount codes for shoppers. Three prominent affiliate networks—Rakuten Advertising, impact.com, and Awin—have suspended or terminated their partnerships with the service. The core allegation involves policy violations and interference with advertising attribution, which determines how sales are credited to marketing partners.

Rakuten Advertising removed Honey from its network in mid-January, severing access to approximately 2,000 retail partners, including major names like Walmart and Sephora. A PayPal spokesperson acknowledged the presence of "problematic code" but stated it originated from before PayPal's acquisition of Honey and affected less than 0.1% of traffic. Nevertheless, the dispute is materially impacting the affiliate business.

Strategic Acquisition for AI-Powered Commerce

In a move to strengthen its future positioning, PayPal announced on Wednesday its plan to acquire Cymbio. The Tel Aviv-based company specializes in "multi-channel orchestration," a platform designed to help merchants sell through AI-driven channels such as Microsoft Copilot and Perplexity. This acquisition targets the growing "agentic commerce" sector, where AI assistants prepare or execute purchasing decisions for users.

This deal represents a logical progression from an existing partnership. Cymbio's technology is slated for integration into PayPal's "Store Sync" service, which makes merchant product data discoverable within these new AI environments. Notable clients already using this technology include Abercrombie & Fitch and Steve Madden. Financial terms and the purchase price were not disclosed; the transaction is scheduled to close in the first half of 2026.

Market Reaction and Analyst Perspectives

The operational concerns are visibly reflected in PayPal's share price. The stock currently trades at 48.01 euros, hovering near its 52-week low of 47.69 euros. The short-term performance has been particularly stark, with shares losing roughly 15% of their value over the past seven trading days.

Market experts are divided on the outlook. Some analysts point to a relatively low price-to-earnings (P/E) ratio of approximately 11.3 as an indicator of undervaluation. Others, however, counsel caution due to the weak momentum and recent negative developments. While the average Wall Street price target remains above the current trading level, the Honey controversy is dampening market sentiment.

Critical Upcoming Catalyst

For investors, the next major focal point is February 3, 2026. Before the U.S. market opens, PayPal will release its fourth-quarter 2025 earnings. The consensus estimate calls for earnings per share of $1.28. Should the company disappoint with these results or fail to present a clear resolution to the Honey issue, a test of the 52-week low appears likely. Until the Cymbio deal closes in the first half of the year, the market's focus will remain squarely on the core business's operational performance.

@ boerse-global.de | US70450Y1038 PAYPAL’S