PayPal’s Core Business Growth Faces a Significant Slowdown

PayPal US70450Y1038

Recent strategic announcements involving artificial intelligence and a favorable legal ruling had briefly shifted the narrative for PayPal. However, the digital payments giant is now squarely back in the spotlight for a less encouraging reason. During an appearance at the UBS Global Technology and Artificial Intelligence Conference, Chief Financial Officer Jamie Miller issued a warning of a marked deceleration in the company's most crucial segment. The market's response from analysts was swift.

While reaffirming the firm's full-year targets, Miller provided a more precise—and concerning—outlook for the final quarter of 2025. Growth in the branded checkout business, the core operation driven by the ubiquitous PayPal button, is projected to slow by at least two percentage points compared to the third quarter. Management now anticipates significantly reduced momentum, stepping back from the 8% growth previously achieved.

Company leadership attributes this expected slowdown to two primary factors:
- Macroeconomic pressures impacting consumers with middle and lower incomes
- Persistent competitive challenges from rivals like Apple Pay and Shop Pay, which continue to erode market share from the traditional PayPal button

This guidance prompted several research firms to downgrade their ratings on the stock on Thursday. Their rationale centered on a contrasting landscape: while competitors such as Visa demonstrate stability and newer players like Toast post strong gains, PayPal continues its arduous transition from a pure growth story to a value-oriented enterprise.

Valuation Plumbs Historic Depths Amid Innovation Push

Trading at a forward price-to-earnings ratio of approximately 10.5, PayPal's shares are now priced notably below the industry average and their own historical levels. This depressed valuation underscores deep-seated investor skepticism about whether the firm's pivot from high-growth play to reliable cash generator will ultimately succeed, or if the stock represents a potential value trap.

From a technical analysis perspective, the equity is testing a critical threshold. The $60 support level has been challenged multiple times in recent sessions. Stabilizing the chart would likely require a recovery above the $65 zone and the 50-day moving average.

Contrasting Developments: Cost Control and Partnerships

Despite the sobering revenue projections, PayPal's executives emphasize continued progress on cost discipline. The company plans to reinvest 1-2 percentage points of its transaction margin into product innovation, specifically targeting AI-powered features developed through its collaborations with OpenAI and Google.

These growth concerns have overshadowed positive developments from just days earlier. On December 3, a class-action lawsuit related to the Honey browser extension was dismissed. Furthermore, PayPal announced a partnership with Kreative & Co. aimed at facilitating cross-border payments for direct-to-consumer brands based in India.

Investors and market observers are now looking ahead to the full quarterly results scheduled for February 11, 2026. That report will provide critical evidence on whether the current slowdown is a temporary hurdle or a sign of more structural challenges in defending PayPal's foundational business.