What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-07-30 compared with 2024-04-30 · 324 added, 241 removed, 1113 unchanged (34% of the section changed)

9 unchanged sentences

Loans and interest receivable, held for sale 369 563

Loans and interest receivable, net of allowances of $ 465 and $ 540 as of March 31, 2024 and December 31, 2023, respectively

Loans and interest receivable, net of allowances of $ 442 and $ 540 as of June 30, 2024 and December 31, 2023, respectively

Funds receivable and customer accounts 38,727 38,935

19 unchanged sentences

4,000 shares authorized;

1,053 and 1,072 shares outstanding as of March 31, 2024 and December 31, 2023, respectively

1,032 and 1,072 shares outstanding as of June 30, 2024 and December 31, 2023, respectively

Preferred stock, $ 0.0001 par value;

100 shares authorized, unissued

Treasury stock at cost, 270 and 245 shares as of March 31, 2024 and December 31, 2023, respectively

Treasury stock at cost, 294 and 245 shares as of June 30, 2024 and December 31, 2023, respectively

( 24,064 ) ( 21,045 )

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions, except per share data)

23 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions)

5 unchanged sentences

Unrealized gains (losses) on cash flow hedges, net 3 ( 23 ) 99 ( 134 )

Tax (expense) benefit on unrealized gains (losses) on cash flow hedges, net ( 5 ) 6

Tax benefit (expense) on unrealized (losses) gains on cash flow hedges, net

Unrealized gains on available-for-sale debt securities, net 15 13 98 188

22 unchanged sentences

Balances at March 31, 2024 1,053 $ ( 22,552 ) $ 19,825 $ ( 659 ) $ 24,088 $ 20,702

Net income — — — — 1,128 1,128

Foreign CTA — — — ( 125 ) — ( 125 )

Net investment hedges CTA gains, net — — — 100 — 100

Tax expense on net investment hedges CTA gains, net — — — ( 24 ) — ( 24 )

Unrealized gains on cash flow hedges, net

Unrealized gains on available-for-sale debt securities, net

— — — 15 — 15

Tax expense on unrealized gains on available-for-sale-debt securities, net

— — — ( 3 ) — ( 3 )

Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes 3 — 13 — — 13

Common stock repurchased ( 24 ) ( 1,516 ) — — — ( 1,516 )

Treasury stock reissuance — 4 — — — 4

Stock-based compensation — — 325 — — 325

Balances at June 30, 2024 1,032 $ ( 24,064 ) $ 20,163 $ ( 693 ) $ 25,216 $ 20,622

PayPal Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—(continued)

Common Stock Shares Treasury Stock Additional Paid-In Capital Accumulated Other

14 unchanged sentences

Balances at March 31, 2023 1,122 $ ( 17,522 ) $ 18,529 $ ( 898 ) $ 19,749 $ 19,858

— — — — 1,029 1,029

Foreign CTA — — — ( 216 ) — ( 216 )

Net investment hedges CTA gains, net — — — 169 — 169

Tax expense on net investment hedges CTA gains, net — — — ( 39 ) — ( 39 )

Unrealized losses on cash flow hedges, net

— — — ( 23 ) — ( 23 )

Tax benefit on unrealized losses on cash flow hedges, net

Unrealized gains on available-for-sale-debt securities, net

— — — 13 — 13

Tax expense on unrealized gains on available-for-sale-debt securities, net

— — — ( 3 ) — ( 3 )

Common stock and stock-based awards issued and assumed, net of shares withheld for employee taxes 2 — 39 — — 39

Common stock repurchased ( 22 ) ( 1,542 ) — — — ( 1,542 )

Stock-based compensation — — 375 — — 375

Balances at June 30, 2023 1,102 $ ( 19,064 ) $ 18,943 $ ( 996 ) $ 20,778 $ 19,661

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(In millions)

26 unchanged sentences

Collateral posted related to derivative instruments, net 75 ( 11 )

Other investing activities 20 8

Net cash provided by investing activities 980 153

Other ( 100 ) 83

Net cash (used in) provided by investing activities

( 3,667 ) 1,593

Cash flows from financing activities:

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—(continued)

Three Months Ended March 31,

Six Months Ended June 30,

(In millions)

33 unchanged sentences

If we determine an investment is in a VIE, we then assess if we are the primary beneficiary, which would require consolidation.

As of March 31, 2024 and December 31, 2023, no VIEs qualified for consolidation as the structures of these entities do not provide us with the ability to direct activities that would significantly impact their economic performance.

As of March 31, 2024 and December 31, 2023, the carrying value of our investments in nonconsolidated VIEs was $ 178 million and $ 175 million, respectively, and is included as non-marketable equity securities applying the equity method of accounting in long-term investments on our condensed consolidated balance sheets.

As of June 30, 2024 and December 31, 2023, no VIEs qualified for consolidation as the structures of these entities do not provide us with the ability to direct activities that would significantly impact their economic performance.

As of June 30, 2024 and December 31, 2023, the carrying value of our investments in nonconsolidated VIEs was $ 188 million and $ 175 million, respectively, and is included as non-marketable equity securities applying the equity method of accounting in long-term investments on our condensed consolidated balance sheets.

The investments in nonconsolidated VIEs are primarily investments in funds that are limited partnerships or similar structures which are focused on increasing access to capital for underserved communities.

Our maximum exposure to loss related to our nonconsolidated VIEs, which represents funded commitments and any future funding commitments, was $ 246 million as of March 31, 2024 and December 31, 2023.

Our maximum exposure to loss related to our nonconsolidated VIEs, which represents funded commitments and any future funding commitments, was $ 246 million as of June 30, 2024 and December 31, 2023.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 8, 2024.

In the opinion of management, these condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the condensed consolidated financial statements for all interim periods presented.

Certain amounts for prior periods have been reclassified to conform to the financial statement presentation as of and for the three months ended March 31, 2024.

Certain amounts for prior periods have been reclassified to conform to the financial statement presentation as of and for the three and six months ended June 30, 2024.

PayPal Holdings, Inc.

19 unchanged sentences

We are required to apply these amendments as a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is adopted.

The adoption of this guidance is not expected to have a material impact on our condensed consolidated financial statements based on our current crypto asset holdings and fair value.

Based on our current crypto asset holdings and fair value, the adoption of this guidance is not expected to have a material impact on our condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

23 unchanged sentences

The following table presents our revenue disaggregated by primary geographical market and category:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions)

2 unchanged sentences

Other countries (1)

3,335 3,077 6,567 5,970

Total net revenues (2)

6 unchanged sentences

(1) No single country included in the other countries category generated more than 10% of total net revenues.

(2) Total net revenues include $ 468 million and $ 451 million for the three months ended March 31, 2024 and 2023, respectively, which do not represent revenues recognized in the scope of Accounting Standards Codification Topic 606, Revenue from contracts with customers .

(2) Total net revenues include $ 520 million and $ 452 million for the three months ended June 30, 2024 and 2023, respectively, and $ 988 million and $ 903 million for the six months ended June 30, 2024 and 2023, respectively, which do not represent revenues recognized in the scope of Accounting Standards Codification Topic 606, Revenue from contracts with customers .

Such revenues relate to interest and fees earned on loans and interest receivable, including loans and interest receivable, held for sale, as well as hedging gains or losses, and interest earned on certain assets underlying customer balances.

9 unchanged sentences

The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions, except per share amounts)

8 unchanged sentences

NOTE 4— BUSINESS COMBINATIONS AND DIVESTITURES

There were no acquisitions accounted for as business combinations or divestitures completed in the three months ended March 31, 2024 and 2023.

There were no acquisitions accounted for as business combinations or divestitures completed in the three and six months ended June 30, 2024 and 2023.

NOTE 5— GOODWILL AND INTANGIBLE ASSETS

The following table presents goodwill balances and adjustments to those balances during the three months ended March 31, 2024:

2023 Goodwill Acquired Adjustments March 31,

The following table presents goodwill balances and adjustments to those balances during the six months ended June 30, 2024:

2023 Goodwill Acquired Adjustments June 30,

(In millions)

Total goodwill $ 11,026 $ — $ ( 210 ) $ 10,816

The adjustments to goodwill during the three months ended March 31, 2024 pertained to foreign currency translation adjustments.

The adjustments to goodwill during the six months ended June 30, 2024 pertained to foreign currency translation adjustments.

INTANGIBLE ASSETS

The components of identifiable intangible assets were as follows:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Gross Carrying Amount Accumulated Amortization

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amortization expense for intangible assets was $ 56 million and $ 57 million for the three months ended March 31, 2024 and 2023, respectively.

Additionally, in the three months ended March 31, 2023, we retired approximately $ 84 million of fully amortized intangible assets, of which $ 65 million and $ 19 million were included in customer lists and user base and developed technology, respectively.

Expected future intangible asset amortization as of March 31, 2024 was as follows (in millions):

Amortization expense for intangible assets was $ 52 million and $ 58 million for the three months ended June 30, 2024 and 2023, respectively.

Amortization expense for intangible assets was $ 108 million and $ 115 million for the six months ended June 30, 2024 and 2023, respectively.

Additionally, in the three months ended June 30, 2023, we retired approximately $ 8 million of fully amortized intangible assets, all of which were included in developed technology;

and in the six months ended June 30, 2023, we retired approximately $ 92 million of fully amortized intangible assets, of which $ 65 million and $ 27 million were included in customer lists and user base and developed technology, respectively.

Expected future intangible asset amortization as of June 30, 2024 was as follows (in millions):

Fiscal years:

10 unchanged sentences

The components of lease expense were as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions)

2 unchanged sentences

Total lease expense, net (1)

(1) During the three months ended March 31, 2024, finance lease expense was de minimis.

Supplemental cash flow information related to leases during the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended March 31, 2024

(In millions)

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 43

Right-of-use (“ROU”) lease assets obtained in exchange for new operating lease liabilities

ROU lease assets obtained in exchange for new finance lease liabilities $ 16

$ 36 $ 37 $ 70 $ 76

(1) During the three and six months ended June 30, 2024, finance lease expense was de minimis.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended March 31, 2023

Supplemental cash flow information related to leases during the three and six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions)

1 unchanged sentence

Operating cash flows from operating leases $ 42 $ 43 $ 85 $ 86

ROU lease assets obtained in exchange for new operating lease liabilities $ ( 1 )

Financing cash flows from finance leases $ 20 $ — $ 20 $ —

Right-of-use (“ROU”) lease assets obtained in exchange for new operating lease liabilities

$ 134 $ 23 $ 277 $ 22

ROU lease assets obtained in exchange for new finance lease liabilities $ 39 $ — $ 55 $ —

Other non-cash ROU lease asset activity (1)

$ — $ ( 4 ) $ — $ ( 25 )

(1) ROU lease asset impairment.

1 unchanged sentence

Supplemental balance sheet information related to leases was as follows:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(In millions, except weighted-average figures)

11 unchanged sentences

(2) ROU assets for finance leases are included in “property and equipment, net” and lease liabilities for finance leases are included in “ accrued expenses and other current liabilities ” and “ other long-term liabilities ” on our condensed consolidated balance sheets.

Future minimum lease payments for our leases as of March 31, 2024 were as follows:

Future minimum lease payments for our leases as of June 30, 2024 were as follows:

Operating leases Finance leases

9 unchanged sentences

The amounts presented are consistent with contractual terms and are not expected to differ significantly from actual results under our existing leases.

As of March 31, 2024, we have additional operating leases, primarily for data centers, which will commence in the second quarter of 2024 or later with minimum lease payments aggregating to $ 102 million and lease terms ranging from four to eight years .

As of March 31, 2024, we have additional finance leases for computer equipment, which will commence in the second quarter of 2024 or later with minimum lease payments aggregating to $ 62 million and lease terms of five years .

As of June 30, 2024, we have additional operating leases, primarily for data centers, which will commence in the third quarter of 2024 or later with minimum lease payments aggregating to $ 4 million and lease terms ranging from one to five years .

As of June 30, 2024, we have additional finance leases for computer equipment, which will commence in the third quarter of 2024 or later with minimum lease payments aggregating to $ 21 million and lease terms of five years .

PayPal Holdings, Inc.

7 unchanged sentences

We maintain the internal recordkeeping of our customers’ crypto assets, including the amount and type of crypto asset owned by each of our customers in that custodial account.

As of March 31, 2024, we utilize two third-party custodians;

as such, there is concentration risk in the event these custodians are not able to perform in accordance with our agreement.

As of June 30, 2024, we utilize two third-party custodians;

as such, there is concentration risk in the event these custodians are not able to perform in accordance with our agreements.

Due to the unique risks associated with cryptocurrencies, including technological, legal, and regulatory risks, we recognize a crypto asset safeguarding liability to reflect our obligation to safeguard the crypto assets held for the benefit of our customers, which is recorded in accrued expenses and other current liabilities on our condensed consolidated balance sheets.

2 unchanged sentences

The corresponding safeguarding asset may be adjusted for loss events, as applicable.

As of March 31, 2024 and December 31, 2023, the Company had not incurred any safeguarding loss events, and therefore, the crypto asset safeguarding liability and corresponding safeguarding asset were recorded at the same value.

The following table summarizes the significant crypto assets we hold for the benefit of our customers and the crypto asset safeguarding liability and corresponding safeguarding asset as of March 31, 2024 and December 31, 2023:

As of June 30, 2024 and December 31, 2023, the Company had not incurred any safeguarding loss events, and therefore, the crypto asset safeguarding liability and corresponding safeguarding asset were recorded at the same value.

2024 December 31, 2023

7 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended March 31, 2024:

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended June 30, 2024:

Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Available-for-sale Debt Securities

6 unchanged sentences

Other comprehensive income (loss) before reclassifications 25 16 ( 125 ) 100 ( 27 ) ( 11 )

Amount of loss reclassified from accumulated other comprehensive income (loss) (“AOCI”) — ( 42 ) — — — ( 42 )

Amount of net gain (loss) reclassified from accumulated other comprehensive income (loss) (“AOCI”)

22 1 — — — 23

Net current period other comprehensive income (loss) 3 15 ( 125 ) 100 ( 27 ) ( 34 )

Ending balance $ 43 $ ( 36 ) $ ( 999 ) $ 390 $ ( 91 ) $ ( 693 )

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended March 31, 2023:

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended June 30, 2023:

Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Available-for-sale Debt Securities

4 unchanged sentences

Other comprehensive income (loss) before reclassifications 11 13 ( 216 ) 169 ( 41 ) ( 64 )

Amount of gain (loss) reclassified from AOCI 76 ( 25 ) — — — 51

Amount of net gain (loss) reclassified from AOCI

34 — — — — 34

Net current period other comprehensive income (loss) ( 23 ) 13 ( 216 ) 169 ( 41 ) ( 98 )

Ending balance $ ( 23 ) $ ( 403 ) $ ( 811 ) $ 195 $ 46 $ ( 996 )

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30, 2024:

Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Available-for-sale Debt Securities

Net Investment Hedges CTA Gains (Losses)

Estimated Tax (Expense) Benefit Total

(In millions)

Beginning balance $ ( 56 ) $ ( 134 ) $ ( 731 ) $ 191 $ ( 16 ) $ ( 746 )

Other comprehensive income (loss) before reclassifications 121 57 ( 268 ) 199 ( 75 ) 34

Amount of net gain (loss) reclassified from AOCI

22 ( 41 ) — — — ( 19 )

Net current period other comprehensive income (loss) 99 98 ( 268 ) 199 ( 75 ) 53

Ending balance $ 43 $ ( 36 ) $ ( 999 ) $ 390 $ ( 91 ) $ ( 693 )

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30, 2023:

Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Available-for-sale Debt Securities

Net Investment Hedges CTA Gains (Losses)

Estimated Tax (Expense) Benefit Total

(In millions)

Beginning balance $ 111 $ ( 591 ) $ ( 575 ) $ ( 1 ) $ 128 $ ( 928 )

Other comprehensive income (loss) before reclassifications ( 24 ) 163 ( 236 ) 196 ( 82 ) 17

Amount of net gain (loss) reclassified from AOCI

110 ( 25 ) — — — 85

Net current period other comprehensive income (loss) ( 134 ) 188 ( 236 ) 196 ( 82 ) ( 68 )

Ending balance $ ( 23 ) $ ( 403 ) $ ( 811 ) $ 195 $ 46 $ ( 996 )

The following table provides details about reclassifications out of AOCI for the periods presented below:

1 unchanged sentence

Affected Line Item in the Statements of Income (Loss)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions)

Gains on cash flow hedges — foreign currency exchange contracts

Net gains (losses) on cash flow hedges — foreign currency exchange contracts

$ 22 $ 34 $ 22 $ 110 Net revenues

Losses on investments ( 42 ) ( 23 ) Net revenues

Losses on investments — ( 2 ) Other income (expense), net

Net gains (losses) on investments

1 — ( 41 ) ( 23 ) Net revenues

Net gains (losses) on investments

— — — ( 2 ) Other income (expense), net

23 34 ( 19 ) 85 Income before income taxes

1 unchanged sentence

Total reclassifications for the period $ 23 $ 34 $ ( 19 ) $ 85 Net income (loss)

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

OTHER INCOME (EXPENSE), NET

The following table reconciles the components of other income (expense), net for the periods presented below:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions)

2 unchanged sentences

Net gains (losses) on strategic investments ( 6 ) 133 ( 55 ) 181

Other 8 8 18 14

Other income (expense), net $ 74 $ 170 $ 115 $ 245

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 8— CASH AND CASH EQUIVALENTS, FUNDS RECEIVABLE AND CUSTOMER ACCOUNTS, AND INVESTMENTS

The following table summarizes the assets underlying our cash and cash equivalents, funds receivable and customer accounts, short-term investments, and long-term investments as of March 31, 2024 and December 31, 2023:

2024 December 31,

19 unchanged sentences

Total long-term investments $ 4,653 $ 3,273

(1) Includes $ 1.5 billion and $ 777 million of available-for-sale debt securities with original maturities of three months or less as of March 31, 2024 and December 31, 2023, respectively.

(2) Includes $ 931 million and $ 399 million of available-for-sale debt securities with original maturities of three months or less as of March 31, 2024 and December 31, 2023, respectively.

(1) Includes $ 85 million and $ 777 million of available-for-sale debt securities with original maturities of three months or less as of June 30, 2024 and December 31, 2023, respectively.

(2) Includes $ 51 million and $ 399 million of available-for-sale debt securities with original maturities of three months or less as of June 30, 2024 and December 31, 2023, respectively.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of March 31, 2024 and December 31, 2023, the estimated fair value of our available-for-sale debt securities included within cash and cash equivalents, funds receivable and customer accounts, short-term investments, and long-term investments was as follows:

March 31, 2024 (1)

As of June 30, 2024 and December 31, 2023, the estimated fair value of our available-for-sale debt securities included within cash and cash equivalents, funds receivable and customer accounts, short-term investments, and long-term investments was as follows:

June 30, 2024 (1)

Losses Estimated

2 unchanged sentences

government and agency securities $ 85 $ — $ — $ 85

Commercial paper 200 — — 200

Funds receivable and customer accounts:

2 unchanged sentences

Corporate debt securities 385 — — 385

Asset-backed securities 1,860 4 ( 1 ) 1,863

Mortgage-backed and asset-backed securities 3,102 5 ( 2 ) 3,105

Municipal securities 793 — ( 3 ) 790

4 unchanged sentences

Corporate debt securities 1,335 — ( 5 ) 1,330

Asset-backed securities 751 4 ( 3 ) 752

Mortgage-backed and asset-backed securities 653 3 ( 2 ) 654

Commercial paper 2,635 1 ( 1 ) 2,635

3 unchanged sentences

Corporate debt securities 1,476 3 ( 2 ) 1,477

Asset-backed securities 686 3 — 689

Mortgage-backed and asset-backed securities 863 1 ( 1 ) 863

Total available-for-sale debt securities (2)

34 unchanged sentences

Refer to “Note 9 — Fair Value Measurement of Assets and Liabilities.”

Gross amortized cost and estimated fair value balances exclude accrued interest receivable on available-for-sale debt securities, which totaled $ 108 million and $ 101 million at March 31, 2024 and December 31, 2023, respectively, and were included in other current assets on our condensed consolidated balance sheets.

Gross amortized cost and estimated fair value balances exclude accrued interest receivable on available-for-sale debt securities, which totaled $ 146 million and $ 101 million at June 30, 2024 and December 31, 2023, respectively, and were included in other current assets on our condensed consolidated balance sheets.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of March 31, 2024 and December 31, 2023, the gross unrealized losses and estimated fair value of our available-for-sale debt securities included within cash and cash equivalents, funds receivable and customer accounts, short-term investments, and long-term investments for which an allowance for credit losses was not deemed necessary in the current period, aggregated by the length of time those individual securities have been in a continuous loss position, was as follows:

March 31, 2024 (1)

As of June 30, 2024 and December 31, 2023, the gross unrealized losses and estimated fair value of our available-for-sale debt securities included within cash and cash equivalents, funds receivable and customer accounts, short-term investments, and long-term investments for which an allowance for credit losses was not deemed necessary in the current period, aggregated by the length of time those individual securities have been in a continuous loss position, was as follows:

June 30, 2024 (1)

Less than 12 months 12 months or longer Total

3 unchanged sentences

(In millions)

Cash and cash equivalents:

government and agency securities $ 897 $ — $ — $ — $ 897 $ —

Commercial paper 200 — — — 200 —

Funds receivable and customer accounts:

2 unchanged sentences

Corporate debt securities 125 — — — 125 —

Asset-backed securities 719 ( 1 ) 94 — 813 ( 1 )

Mortgage-backed and asset-backed securities 1,098 ( 2 ) 11 — 1,109 ( 2 )

Municipal securities 448 ( 2 ) 247 ( 1 ) 695 ( 3 )

4 unchanged sentences

Corporate debt securities 349 — 416 ( 5 ) 765 ( 5 )

Asset-backed securities 124 — 114 ( 3 ) 238 ( 3 )

Mortgage-backed and asset-backed securities 159 — 109 ( 2 ) 268 ( 2 )

Commercial paper 1,519 ( 1 ) — — 1,519 ( 1 )

3 unchanged sentences

Corporate debt securities 451 ( 1 ) 33 ( 1 ) 484 ( 2 )

Asset-backed securities 142 — 22 — 164 —

Mortgage-backed and asset-backed securities 395 ( 1 ) — — 395 ( 1 )

Total available-for-sale debt securities $ 11,557 $ ( 16 ) $ 2,921 $ ( 36 ) $ 14,478 $ ( 52 )

33 unchanged sentences

We will continue to monitor the performance of the investment portfolio and assess whether impairment due to expected credit losses has occurred.

During the three months ended March 31, 2024, we received $ 11.3 billion in proceeds from the sale and maturity of available-for-sale debt securities and incurred gross realized losses of $ 42 million.

During the three months ended March 31, 2023, we received $ 6.4 billion in proceeds from the sale and maturity of available-for-sale debt securities and incurred gross realized losses of $ 25 million.

During the three months ended June 30, 2024, we received $ 8.9 billion in proceeds from the sale and maturity of available-for-sale debt securities, incurring gross realized gains and losses which were de minimis.

During the six months ended June 30, 2024, we received $ 20.2 billion in proceeds from the sale and maturity of available-for-sale debt securities, incurring gross realized losses of $ 42 million and gains which were de minimis.

During the three months ended June 30, 2023, we received $ 5.0 billion in proceeds from the sale and maturity of available-for-sale debt securities, incurring gross realized gains and losses which were de minimis.

During the six months ended June 30, 2023, we received $ 11.4 billion in proceeds from the sale and maturity of available-for-sale debt securities, incurring gross realized losses of $ 25 million and gains which were de minimis.

Gross realized gains and losses were determined using the specific identification method.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our available-for-sale debt securities included within cash and cash equivalents, funds receivable and customer accounts, short-term investments, and long-term investments classified by date of contractual maturity were as follows:

March 31, 2024

June 30, 2024

Amortized Cost Fair Value

6 unchanged sentences

Actual maturities may differ from contractual maturities as certain securities may be prepaid.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Supplemental cash flow information related to investments

Non-cash investing transactions that are not reflected in the condensed consolidated statement of cash flows for the three months ended March 31, 2024 include the purchase of investments not yet settled of $ 413 million.

Non-cash investing transactions that are not reflected in the condensed consolidated statement of cash flows for the six months ended June 30, 2024 include the purchase of investments, net of sale, not yet settled of $ 126 million.

STRATEGIC INVESTMENTS

1 unchanged sentence

Our marketable equity securities have readily determinable fair values and are recorded as long-term investments on our condensed consolidated balance sheets at fair value with changes in fair value recorded in other income (expense), net on our condensed consolidated statements of income (loss).

Marketable equity securities totaled $ 21 million and $ 24 million as of March 31, 2024 and December 31, 2023, respectively.

Marketable equity securities totaled $ 15 million and $ 24 million as of June 30, 2024 and December 31, 2023, respectively.

Our non-marketable equity securities are recorded in long-term investments on our condensed consolidated balance sheets.

The carrying value of our non-marketable equity securities totaled $ 1.8 billion as of March 31, 2024 and December 31, 2023.

As of March 31, 2024 and December 31, 2023, we had non-marketable equity securities of $ 185 million and $ 182 million, respectively, for which we have the ability to exercise significant influence, but not control, over the investee.

The carrying value of our non-marketable equity securities totaled $ 1.8 billion as of June 30, 2024 and December 31, 2023.

As of June 30, 2024 and December 31, 2023, we had non-marketable equity securities of $ 202 million and $ 182 million, respectively, for which we have the ability to exercise significant influence, but not control, over the investee.

We account for these equity securities using the equity method of accounting.

2 unchanged sentences

Measurement Alternative adjustments

The adjustments to the carrying value of our non-marketable equity securities accounted for under the Measurement Alternative in the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended March 31,

The adjustments to the carrying value of our non-marketable equity securities accounted for under the Measurement Alternative in the three and six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions)

6 unchanged sentences

(1) Net additions include purchases, reductions due to sales of securities, and reclassifications when the Measurement Alternative is subsequently elected or no longer applies.

The following table summarizes the cumulative gross unrealized gains and cumulative gross unrealized losses and impairment related to non-marketable equity securities accounted for under the Measurement Alternative, held at March 31, 2024 and December 31, 2023, respectively:

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2024 December 31,

2 unchanged sentences

Cumulative gross unrealized losses and impairments $ ( 346 ) $ ( 283 )

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Unrealized gains (losses) on strategic investments, excluding those accounted for using the equity method

The following table summarizes the net unrealized gains (losses) on marketable and non-marketable equity securities, excluding those accounted for using the equity method, held at March 31, 2024 and 2023, respectively:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions)

4 unchanged sentences

FINANCIAL ASSETS AND LIABILITIES MEASURED AND RECORDED AT FAIR VALUE ON A RECURRING BASIS

The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023:

March 31, 2024 Quoted Prices in

The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:

June 30, 2024 Quoted Prices in

Active Markets for

5 unchanged sentences

government and agency securities $ 85 $ — $ 85

Commercial paper 200 — 200

Total cash and cash equivalents 1,496 — 1,496

Short-term investments (2) :

2 unchanged sentences

Corporate debt securities 1,330 — 1,330

Asset-backed securities 752 — 752

Mortgage-backed and asset-backed securities 654 — 654

Commercial paper 2,635 — 2,635

4 unchanged sentences

Corporate debt securities 459 — 459

Asset-backed securities 1,863 — 1,863

Mortgage-backed and asset-backed securities 3,105 — 3,105

Municipal securities 790 — 790

8 unchanged sentences

Corporate debt securities 1,477 — 1,477

Asset-backed securities 689 — 689

Mortgage-backed and asset-backed securities 863 — 863

Marketable equity securities 15 15 —

9 unchanged sentences

(3) Excludes cash, time deposits, and funds receivable of $ 23.3 billion underlying funds receivable and customer accounts not measured and recorded at fair value.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(4) Derivative assets and liabilities are included within “prepaid expenses and other current assets” and “other assets” and “accrued expenses and other current liabilities” and “other long-term liabilities,” respectively, on our condensed consolidated balance sheets.

1 unchanged sentence

(5) Excludes non-marketable equity securities of $ 1.8 billion measured using the Measurement Alternative or equity method accounting.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2023 Quoted Prices in

43 unchanged sentences

(3) Excludes cash, time deposits, and funds receivable of $ 22.8 billion underlying funds receivable and customer accounts not measured and recorded at fair value.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

1 unchanged sentence

(5) Excludes non-marketable equity securities of $ 1.8 billion measured using the Measurement Alternative or equity method accounting.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our marketable equity securities are valued using quoted prices for identical assets in active markets (Level 1).

3 unchanged sentences

A majority of our derivative instruments are valued using pricing models that take into account the contract terms as well as multiple observable inputs where applicable, such as currency rates, interest rate yield curves, option volatility, and equity prices (Level 2).

As of March 31, 2024 and December 31, 2023, we did not have any assets or liabilities requiring measurement at fair value on a recurring basis with significant unobservable inputs that would require a high level of judgment to determine fair value (Level 3).

As of June 30, 2024 and December 31, 2023, we did not have any assets or liabilities requiring measurement at fair value on a recurring basis with significant unobservable inputs that would require a high level of judgment to determine fair value (Level 3).

We elect to account for available-for-sale debt securities denominated in currencies other than the functional currency of our subsidiaries under the fair value option.

Election of the fair value option allows us to recognize any gains and losses from fair value changes on such investments in other income (expense), net on the condensed consolidated statements of income (loss) to significantly reduce the accounting asymmetry that would otherwise arise when recognizing the corresponding foreign exchange gains and losses relating to customer liabilities.

The following table summarizes the estimated fair value and amortized cost of our available-for-sale debt securities under the fair value option as of March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

The following table summarizes the estimated fair value and amortized cost of our available-for-sale debt securities under the fair value option as of June 30, 2024 and December 31, 2023:

June 30, 2024 December 31, 2023

Amortized Cost Fair Value Amortized Cost Fair Value

1 unchanged sentence

Funds receivable and customer accounts $ 569 $ 565 $ 625 $ 618

The following table summarizes the gains (losses) from fair value changes recognized in other income (expense), net related to the available-for-sale debt securities under the fair value option for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions)

Funds receivable and customer accounts $ ( 8 ) $ 4 $ ( 15 ) $ 11

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

ASSETS MEASURED AND RECORDED AT FAIR VALUE ON A NON-RECURRING BASIS

The following tables summarize our assets held as of March 31, 2024 and December 31, 2023 for which a non-recurring fair value measurement was recorded during the three months ended March 31, 2024 and the year ended December 31, 2023, respectively:

March 31, 2024 Significant Other

The following tables summarize our assets held as of June 30, 2024 and December 31, 2023 for which a non-recurring fair value measurement was recorded during the six months ended June 30, 2024 and the year ended December 31, 2023, respectively:

June 30, 2024 Significant Other

Observable Inputs

4 unchanged sentences

Total $ 425 $ 379 $ 46

(1) Excludes non-marketable equity securities of $ 1.6 billion accounted for under the Measurement Alternative for which no observable price changes occurred during the three months ended March 31, 2024.

(1) Excludes non-marketable equity securities of $ 1.6 billion accounted for under the Measurement Alternative for which no observable price changes occurred during the six months ended June 30, 2024.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2023 Significant Other

20 unchanged sentences

Impairment losses on ROU lease assets related to office operating leases are calculated using estimated rental income per square foot derived from observable market data, and the impaired asset is classified within Level 2 in the fair value hierarchy.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AND RECORDED AT FAIR VALUE

Our financial instruments, including cash, restricted cash, time deposits, loans and interest receivable, net, certain customer accounts, and long-term debt related to borrowings on our credit facilities, are carried at amortized cost, which approximates their fair value.

Our notes receivable had a carrying value of approximately $ 508 million and fair value of approximately $ 465 million as of March 31, 2024.

Our notes receivable had a carrying value of approximately $ 513 million and fair value of approximately $ 472 million as of June 30, 2024.

Our notes receivable had a carrying value of approximately $ 513 million and fair value of approximately $ 474 million as of December 31, 2023.

Our term debt (including current portion) in the form of fixed rate notes had a carrying value of approximately $ 10.5 billion and fair value of approximately $ 9.8 billion as of March 31, 2024.

Our term debt (including current portion) in the form of fixed rate notes had a carrying value of approximately $ 11.7 billion and fair value of approximately $ 10.9 billion as of June 30, 2024.

Our term debt (including current portion) in the form of fixed rate notes had a carrying value of approximately $ 10.6 billion and fair value of approximately $ 10.0 billion as of December 31, 2023.

2 unchanged sentences

and the remaining financial instruments would be classified as Level 3 in the fair value hierarchy.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 10— DERIVATIVE INSTRUMENTS

17 unchanged sentences

Accordingly, the cash flows associated with derivatives designated as cash flow hedges are classified in cash flows from operating activities on our condensed consolidated statements of cash flows.

As of March 31, 2024, we estimated that $ 40 million of net derivative gains related to our cash flow hedges included in AOCI are expected to be reclassified into earnings within the next 12 months.

During the three months ended March 31, 2024 and 2023, we did not discontinue any cash flow hedges because it was probable that the original forecasted transaction would not occur and as such, did not reclassify any gains or losses to earnings prior to the occurrence of the hedged transaction.

As of June 30, 2024, we estimated that $ 43 million of net derivative gains related to our cash flow hedges included in AOCI are expected to be reclassified into earnings within the next 12 months.

During the three and six months ended June 30, 2024 and 2023, we did not discontinue any cash flow hedges because it was probable that the original forecasted transaction would not occur and as such, did not reclassify any gains or losses to earnings prior to the occurrence of the hedged transaction.

If we elect to discontinue our cash flow hedges and it is probable that the original forecasted transaction will occur, we continue to report the derivative’s gain or loss in AOCI until the forecasted transaction affects earnings, at which point we also reclassify it into earnings.

Gains and losses on derivatives held after we discontinue our cash flow hedges and on derivative instruments that are not designated as cash flow hedges are recorded in the same financial statement line item to which the derivative relates.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Net investment hedges

5 unchanged sentences

We have no t reclassified any gains or losses related to net investment hedges from AOCI into earnings for any of the periods presented.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Foreign currency exchange contracts not designated as hedging instruments

4 unchanged sentences

FAIR VALUE OF DERIVATIVE CONTRACTS

The fair value of our outstanding derivative instruments as of March 31, 2024 and December 31, 2023 was as follows:

Balance Sheet Location March 31,

The fair value of our outstanding derivative instruments as of June 30, 2024 and December 31, 2023 was as follows:

Balance Sheet Location June 30,

2024 December 31,

12 unchanged sentences

However, we have elected to present the derivative assets and derivative liabilities on a gross basis on our condensed consolidated balance sheets.

Rights of set-off associated with our foreign currency exchange contracts represented a potential offset to both assets and liabilities of $ 33 million as of March 31, 2024 and $ 38 million as of December 31, 2023.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Rights of set-off associated with our foreign currency exchange contracts represented a potential offset to both assets and liabilities of $ 30 million as of June 30, 2024 and $ 38 million as of December 31, 2023.

We have entered into collateral security arrangements that provide for collateral to be received or posted when the net fair value of certain financial instruments fluctuates from contractually established thresholds.

6 unchanged sentences

(2) Obligation to return counterparty cash collateral related to our derivative assets recognized in other current liabilities on our condensed consolidated balance sheets.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

EFFECT OF DERIVATIVE CONTRACTS ON CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following tables provide the location in the condensed consolidated statements of income (loss) and amount of recognized gains or losses related to our derivative instruments:

Three Months Ended March 31,

Three Months Ended June 30,

(In millions)

2 unchanged sentences

Gains (losses) on derivatives in cash flow hedging relationship:

Amount of gains on foreign currency exchange contracts reclassified from AOCI — — 76 —

Amount of net gains (losses) on foreign currency exchange contracts reclassified from AOCI

Gains (losses) on derivatives in net investment hedging relationship:

Amount of gains on foreign currency exchange contracts excluded from the assessment of effectiveness

Amount of net gains (losses) on foreign currency exchange contracts excluded from the assessment of effectiveness

Gains (losses) on derivatives not designated as hedging instruments:

Amount of gains (losses) on foreign currency exchange contracts — 21 — ( 75 )

Total gains (losses) $ — $ 41 $ 76 $ ( 45 )

The following table provides the amount of pre-tax unrealized gains or losses included in the assessment of hedge effectiveness related to our derivative instruments designated as hedging instruments that are recognized in other comprehensive income (loss):

Three Months Ended March 31,

Amount of net gains (losses) on foreign currency exchange contracts

— ( 16 ) — ( 81 )

Total net gains (losses)

$ 22 $ 5 $ 34 $ ( 52 )

Six Months Ended June 30,

(In millions)

Unrealized gains (losses) on foreign exchange contracts designated as cash flow hedges $ 96 $ ( 35 )

Unrealized gains on foreign exchange contracts designated as net investment hedges 99 27

Total unrealized gains (losses) recognized from derivative contracts designated as hedging instruments in the condensed consolidated statements of comprehensive income (loss) $ 195 $ ( 8 )

Net revenues Other income (expense), net Net revenues Other income (expense), net

Total amounts presented in the condensed consolidated statements of income (loss) in which the effects of cash flow hedges and net investment hedges are recorded $ 15,584 $ 115 $ 14,327 $ 245

Gains (losses) on derivatives in cash flow hedging relationship:

Amount of net gains (losses) on foreign exchange contracts reclassified from AOCI

Gains (losses) on derivatives in net investment hedging relationship:

Amount of net gains (losses) on foreign exchange contracts excluded from the assessment of effectiveness

Gains (losses) on derivatives not designated as hedging instruments:

Amount of net gains (losses) on foreign exchange contracts

— 5 — ( 156 )

Total net gains (losses)

$ 22 $ 46 $ 110 $ ( 97 )

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions)

Unrealized net gains (losses) on foreign exchange contracts designated as cash flow hedges

$ 25 $ 11 $ 121 $ ( 24 )

Unrealized net gains (losses) on foreign exchange contracts designated as net investment hedges

100 169 199 196

Total unrealized net gains (losses) recognized from derivative contracts designated as hedging instruments in the condensed consolidated statements of comprehensive income (loss)

$ 125 $ 180 $ 320 $ 172

NOTIONAL AMOUNTS OF DERIVATIVE CONTRACTS

12 unchanged sentences

Loans and interest receivable, held for sale are recorded at the lower of cost or fair value, determined on an aggregate basis, with valuation changes and any associated charge-offs recorded in restructuring and other on our condensed consolidated statements of income (loss).

As of March 31, 2024 and December 31, 2023, loans and interest receivable, held for sale was $ 307 million and $ 563 million, respectively.

During the three months ended March 31, 2024, we sold $ 4.8 billion of loans and interest receivable in connection with this agreement.

During the six months ended June 30, 2023, we reclassified approximately $ 1.2 billion of eligible consumer installment receivables from loans and interest receivable, net to loans and interest receivable, held for sale.

As of June 30, 2024 and December 31, 2023, loans and interest receivable, held for sale was $ 369 million and $ 563 million, respectively.

During the six months ended June 30, 2024, we sold $ 9.6 billion of loans and interest receivable in connection with this agreement.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

LOANS AND INTEREST RECEIVABLE, NET

6 unchanged sentences

consumers by an independent chartered financial institution (“partner institution”) and are responsible for the servicing functions related to that portfolio.

During the three months ended March 31, 2024 and 2023, we purchased approximately $ 25 million and $ 268 million in consumer receivables, respectively.

As of March 31, 2024 and December 31, 2023, the outstanding balance of consumer receivables, which consisted of revolving and installment loans and interest receivable, was $ 4.5 billion and $ 4.8 billion, respectively, net of the participation interest sold to the partner institution of $ 9 million and $ 14 million, respectively.

During the six months ended June 30, 2024 and 2023, we purchased approximately $ 217 million and $ 514 million in consumer receivables, respectively.

As of June 30, 2024 and December 31, 2023, the outstanding balance of consumer receivables, which consisted of revolving and installment loans and interest receivable, was $ 4.6 billion and $ 4.8 billion, respectively, net of the participation interest sold to the partner institution of $ 14 million for both periods.

We closely monitor the credit quality of our consumer receivables to evaluate and manage our related exposure to credit risk.

2 unchanged sentences

We use delinquency status and trends to assist in making (or, for interest-bearing installment loans in the U.S., to assist the partner institution in making) new and ongoing credit decisions, to adjust our models, to plan our collection practices and strategies, and in determining our allowance for consumer loans and interest receivable.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Consumer receivables delinquency and allowance

2 unchanged sentences

The “current” category represents balances that are within 29 days of the billing date or contractual repayment date, as applicable.

March 31, 2024

June 30, 2024

(In millions, except percentages)

8 unchanged sentences

Total $ 2,344 $ 1,561 $ 559 $ 120 $ — $ — $ 4,584 100 %

Gross charge-offs for the three months ended March 31, 2024

Gross charge-offs for the six months ended June 30, 2024

$ 69 $ — $ 98 $ 11 $ — $ — $ 178

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2023

11 unchanged sentences

$ 125 $ 101 $ 140 $ 5 $ — $ — $ 371

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the activity in the allowance for consumer loans and interest receivable for the three months ended March 31, 2024 and 2023:

March 31, 2024 March 31, 2023

Consumer Loans Receivable Interest Receivable Total Allowance Consumer Loans Receivable Interest Receivable Total Allowance

The following table summarizes the activity in the allowance for consumer loans and interest receivable for the six months ended June 30, 2024 and 2023:

June 30, 2024 June 30, 2023

Consumer Loans Receivable Interest Receivable Total Allowance

Consumer Loans Receivable Interest Receivable Total Allowance (1)

(In millions)

Beginning balance $ 357 $ 23 $ 380 $ 322 $ 25 $ 347

Changes in allowance due to reclassification of loans and interest receivable to or from held for sale — — — ( 33 ) — ( 33 )

Provisions 106 10 116 182 13 195

3 unchanged sentences

Ending balance $ 312 $ 20 $ 332 $ 337 $ 24 $ 361

(1) Beginning balances, provisions and charge-offs include amounts related to loans and interest receivable prior to their reclassification to loan and interest receivable, held for sale.

(2) Includes amounts related to foreign currency remeasurement.

The provision for the three months ended March 31, 2024 for our consumer receivable portfolio was primarily attributable to loan originations during the period for installment loans in Japan and revolving loans in the U.K.

Qualitative adjustments were made to account for limitations in our current expected credit loss models due to uncertainty with respect to macroeconomic conditions and the financial health of our borrowers.

The increase in charge-offs for the three months ended March 31, 2024 compared to the same period in the prior year was due to credit quality deterioration of our U.S.

interest-bearing installment credit products and the growth of U.K.

revolving credit products and installment credit products in Japan.

The provision for the six months ended June 30, 2024 for our consumer receivable portfolio was primarily attributable to loan originations during the period for installment loans in Japan and revolving loans in the U.K.

Qualitative adjustments were made to account for limitations in our current expected credit loss models due to uncertain macroeconomic conditions and financial health of our borrowers.

The provision for current expected credit losses relating to our consumer receivable portfolio is recognized in transaction and credit losses on our condensed consolidated statements of income (loss).

5 unchanged sentences

Charge-offs are recorded as a reduction to our allowance for loans and interest receivable and subsequent recoveries, if any, are recorded as an increase to the allowance for loans and interest receivable.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Merchant receivables

2 unchanged sentences

merchants by a partner institution and are responsible for the servicing functions related to that portfolio.

During the three months ended March 31, 2024 and 2023, we purchased approximately $ 419 million and $ 666 million in merchant receivables, respectively.

As of March 31, 2024 and December 31, 2023, the total outstanding balance in our pool of merchant loans, advances, and interest and fees receivable was $ 1.2 billion, net of the participation interest sold to the partner institution of $ 43 million and $ 44 million, respectively.

During the six months ended June 30, 2024 and 2023, we purchased approximately $ 774 million and $ 975 million in merchant receivables, respectively.

As of June 30, 2024 and December 31, 2023, the total outstanding balance in our pool of merchant loans, advances, and interest and fees receivable was $ 1.2 billion, net of the participation interest sold to the partner institution of $ 43 million and $ 44 million, respectively.

Through our PPWC product, merchants can borrow a certain percentage of their annual payment volume processed by PayPal and are charged a fixed fee for the loan or advance based on the overall credit assessment of the merchant.

2 unchanged sentences

PPBL repayments are collected through periodic payments until the balance has been satisfied.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The interest or fee is fixed at the time the loan or advance is extended and is recognized as deferred revenue in accrued expenses and other current liabilities on our condensed consolidated balance sheets.

10 unchanged sentences

We use delinquency status and trends to assist in making (or, in the U.S., to assist the partner institution in making) ongoing credit decisions, to adjust our internal models, to plan our collection strategies, and in determining our allowance for these loans, advances, and interest and fees receivable.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Merchant receivables delinquency and allowance

2 unchanged sentences

The “current” category represents balances that are within 29 days of the expected repayment date or contractual repayment date, as applicable.

March 31, 2024

June 30, 2024

(In millions, except percentages)

7 unchanged sentences

Total $ 860 $ 236 $ 53 $ 3 $ 16 $ 9 $ 1,177 100 %

Gross charge-offs for the three months ended March 31, 2024

Gross charge-offs for the six months ended June 30, 2024

$ — $ 56 $ 31 $ 2 $ 4 $ 1 $ 94

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

December 31, 2023

10 unchanged sentences

$ 38 $ 228 $ 14 $ 16 $ 4 $ 300

The following table summarizes the activity in the allowance for merchant loans, advances, and interest and fees receivable for the three months ended March 31, 2024 and 2023:

March 31, 2024 March 31, 2023

The following table summarizes the activity in the allowance for merchant loans, advances, and interest and fees receivable for the six months ended June 30, 2024 and 2023:

June 30, 2024 June 30, 2023

Merchant Loans and Advances Interest and Fees Receivable Total Allowance Merchant Loans and Advances Interest and Fees Receivable Total Allowance

5 unchanged sentences

Ending balance $ 104 $ 6 $ 110 $ 232 $ 24 $ 256

The provision for the three months ended March 31, 2024 was primarily attributable to loan originations during the period partially offset by improvement in credit quality of the PPBL portfolio.

Qualitative adjustments were made to account for limitations in our current expected credit loss models due to uncertainty around the financial health of our borrowers, including the effectiveness of loan modification programs made available to merchants, as described further below.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The provision for the six months ended June 30, 2024 was primarily attributable to loan originations during the period partially offset by improvement in credit quality of the PPBL portfolio.

Qualitative adjustments were made due to uncertainty around the financial health of our borrowers, including the effectiveness of loan modification programs made available to merchants.

The decrease in charge-offs for the six months ended June 30, 2024 compared to the same period of the prior year was due to the decrease in originations in the second half of 2023 and improvement in credit quality of the PPBL portfolio.

For merchant loans and advances, the determination of delinquency is based on the current expected or contractual repayment period of the loan or advance and fixed interest or fee payment as compared to the original expected or contractual repayment period.

4 unchanged sentences

Loan modifications for merchants experiencing financial difficulty

In certain instances, we may modify the merchant loans, advances, and interest and fees receivable for which we determine it is probable that, without modification, we would be unable to collect all amounts due.

These modifications are intended to provide merchants with financial relief and enable us to potentially mitigate losses.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Modifications to loans for merchants experiencing financial difficulty during the three months ended March 31, 2024 and 2023 increased the term while moving the delinquency status to current.

These modifications were not material.

We closely monitor the performance of the merchant loans, advances, and interest and fees receivable that were modified to extend the term to understand the effectiveness of these modification efforts.

The following table depicts the performance of merchant loans, advances, and interest and fees receivable as of March 31, 2024 that were modified during the 12 months ended March 31, 2024:

March 31, 2024

(In millions)

Merchant loans, advances, and interest and fees receivables:

30 - 59 days past due 8

60 - 89 days past due 6

90 - 179 days past due 10

A merchant is considered in payment default after a modification when the merchant’s payment is 60 days past their expected or contractual repayment date.

Merchant loans, advances, and interest and fees receivable modified during the 12 months ended March 31, 2024 that subsequently defaulted were not material.

Allowances for merchant loans, advances, and interest and fees receivable modified due to merchants experiencing financial difficulties are assessed separately from other loans and advances within our portfolio and are determined by estimating current expected credit losses utilizing the modified term.

Historical loss estimates are utilized in addition to macroeconomic assumptions to determine current expected credit losses.

Further, we may include qualitative adjustments that incorporate incremental information not captured in the quantitative estimates of our current expected credit losses.

NOTE 12— DEBT

FIXED RATE NOTES

In June 2023, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of ¥ 90 billion (approximately $ 595 million as of March 31, 2024).

In May 2022, May 2020, and September 2019, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of $ 3.0 billion, $ 4.0 billion and $ 5.0 billion, respectively.

The notes issued from the June 2023, May 2022, May 2020, and September 2019 debt issuances are senior unsecured obligations and are collectively referred to as the “Notes.”

In May 2024, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of $ 1.3 billion.

Interest on these notes is payable on June 1 and December 1 of each year, beginning on December 1, 2024.

In June 2023, May 2022, May 2020, and September 2019, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of ¥ 90 billion (approximately $ 559 million as of June 30, 2024), $ 3.0 billion, $ 4.0 billion and $ 5.0 billion, respectively.

The notes issued from the May 2024, June 2023, May 2022, May 2020, and September 2019 debt issuances are senior unsecured obligations and are collectively referred to as the “Notes.” We may redeem the Notes in whole, at any time, or in part (except for the June 2023 notes), from time to time, prior to maturity, at their redemption prices.

Upon the occurrence of both a change of control of the Company and a downgrade of the Notes below an investment grade rating, we will be required to offer to repurchase each series of Notes at a price equal to 101 % of the then outstanding principal amounts, plus accrued and unpaid interest.

The Notes are subject to covenants, including limitations on our ability to create liens on our assets, enter into sale and leaseback transactions, and merge or consolidate with another entity, in each case subject to certain exceptions, limitations, and qualifications.

Proceeds from the issuance of these Notes may be used for general corporate purposes, which may include funding the repayment or redemption of outstanding debt, share repurchases, ongoing operations, capital expenditures, acquisitions of businesses, assets, or strategic investments.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of March 31, 2024 and December 31, 2023, we had an outstanding aggregate principal amount of $ 10.6 billion related to the Notes.

The following table summarizes the Notes:

Maturities Effective Interest Rate March 31,

As of June 30, 2024 and December 31, 2023, we had an outstanding aggregate principal amount of $ 11.8 billion and $ 10.6 billion, respectively, related to the Notes.

The following table summarizes the Notes outstanding:

Maturities Effective Interest Rate June 30,

2024 December 31,

30 unchanged sentences

6/9/2028 1.31 % 230 262

May 2024 debt issuance:

Fixed-rate 5.150 % notes

6/1/2034 5.35 % 850 —

Fixed-rate 5.500 % notes

6/1/2054 5.66 % 400 —

Total term debt $ 11,809 $ 10,638

4 unchanged sentences

(1) Principal amounts represent the U.S.

dollar equivalent as of March 31, 2024 and December 31, 2023, respectively.

dollar equivalent as of June 30, 2024 and December 31, 2023, respectively.

(2) The current portion of term debt is included within “accrued expenses and other current liabilities” on our condensed consolidated balance sheets.

The effective interest rates for the Notes include interest on the Notes, amortization of debt issuance costs, and amortization of the debt discount.

The interest expense recorded for the Notes, including amortization of the debt discount and debt issuance costs, was $ 84 million and $ 83 million for the three months ended March 31, 2024 and 2023, respectively.

The interest expense recorded for the Notes, including amortization of the debt discount and debt issuance costs, was $ 90 million and $ 174 million for the three and six months ended June 30, 2024, respectively.

The interest expense recorded for the Notes, including amortization of the debt discount and debt issuance costs, was $ 83 million and $ 166 million for the three and six months ended June 30, 2023, respectively.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

CREDIT FACILITIES

Paidy credit agreement

In February 2022, we entered into a credit agreement (the “Paidy Credit Agreement”) with Paidy as co-borrower, which provided for an unsecured revolving credit facility of ¥ 60.0 billion, which was modified in September 2022 to increase the borrowing capacity by ¥ 30.0 billion for a total borrowing capacity of ¥ 90.0 billion (approximately $ 595 million as of March 31, 2024).

Borrowings under the Paidy Credit Agreement are for use by Paidy for working capital, capital expenditures, and other permitted purposes.

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The financial covenant requires us to meet a quarterly financial test with respect to a maximum consolidated leverage ratio.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of March 31, 2024 and December 31, 2023, ¥ 61.0 billion (approximately $ 403 million) and ¥ 50.0 billion (approximately $ 355 million) was drawn down under the Paidy Credit Agreement, respectively, which was recorded in long-term debt on our condensed consolidated balance sheets.

At March 31, 2024, ¥ 29.0 billion (approximately $ 192 million) of borrowing capacity was available for the purposes permitted by the Paidy Credit Agreement, subject to customary conditions to borrowing.

During the three months ended March 31, 2024 and 2023, the total interest expense and fees we recorded related to the Paidy Credit Agreement were de minimis.

As of June 30, 2024 and December 31, 2023, ¥ 70.0 billion (approximately $ 435 million) and ¥ 50.0 billion (approximately $ 355 million) was drawn down under the Paidy Credit Agreement, respectively, which was recorded in long-term debt on our condensed consolidated balance sheets.

At June 30, 2024, ¥ 20.0 billion (approximately $ 124 million) of borrowing capacity was available for the purposes permitted by the Paidy Credit Agreement, subject to customary conditions to borrowing.

During the three and six months ended June 30, 2024 and 2023, the total interest expense and fees we recorded related to the Paidy Credit Agreement were de minimis.

Other available facilities

As of March 31, 2024 and December 31, 2023, we had short-term borrowings of $ 41 million and $ 359 million, respectively, due to bank overdrafts, which were recorded in accrued expenses and other liabilities on our condensed consolidated balance sheets.

The weighted average interest rate on the borrowings were 8.19 % and 7.92 % as of March 31, 2024 and December 31, 2023, respectively.

We repaid the borrowing of $ 359 million during the three months ended March 31, 2024.

As of June 30, 2024 and December 31, 2023, we had short-term borrowings of nil and $ 359 million, respectively, due to bank overdrafts, which were recorded in accrued expenses and other liabilities on our condensed consolidated balance sheets.

The weighted average interest rate on the borrowing was 7.92 % as of December 31, 2023.

We repaid $ 400 million of borrowings due to bank overdrafts during the six months ended June 30, 2024.

The total interest expense and fees we recorded related to the borrowings were de minimis.

FUTURE PRINCIPAL PAYMENTS

As of March 31, 2024, the future principal payments associated with our term debt were as follows (in millions):

As of June 30, 2024, the future principal payments associated with our term debt were as follows (in millions):

Remaining 2024 $ 1,250

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Other than as provided above, there were no significant changes to the information disclosed in our 2023 Form 10-K.

NOTE 13— COMMITMENTS AND CONTINGENCIES

As of March 31, 2024 and December 31, 2023, approximately $ 6.5 billion and $ 6.2 billion, respectively, of unused credit was available to PayPal Credit account holders in the U.K.

While this amount represents the total unused credit available, we have not experienced, and do not anticipate, that all our PayPal Credit account holders will access their entire available credit at any given point in time.

In addition, the individual lines of credit that make up this unused credit are subject to periodic review and termination based on, among other things, account usage and customer creditworthiness.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 13— COMMITMENTS AND CONTINGENCIES

LITIGATION AND REGULATORY MATTERS

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With respect to the matters disclosed in this Note 13, we are unable to estimate the possible loss or range of losses that could potentially result from the application of such non-monetary remedies.

Amounts accrued for legal and regulatory proceedings for which we believe a loss is probable and reasonably estimable were not material as of March 31, 2024.

Amounts accrued for legal and regulatory proceedings for which we believe a loss is probable and reasonably estimable were not material as of June 30, 2024.

Except as otherwise noted for the proceedings described in this Note 13, we have concluded, based on currently available information, that reasonably possible losses arising directly from the proceedings (i.e., monetary damages or amounts paid in judgment or settlement) in excess of our recorded accruals are also not material.

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We cannot predict the outcome of AUSTRAC’s decision.

Any failure to comply with the enforceable undertaking could result in penalties or require us to change our business practices.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

We have received Civil Investigative Demands (“CIDs”) from the Consumer Financial Protection Bureau (“CFPB”) related to Venmo’s unauthorized funds transfers and collections processes, and related matters, including treatment of consumers who request payments but accidentally designate an unintended recipient.

The CIDs requested the production of documents and answers to written questions, to which we responded.

In March 2024, the CFPB communicated it was closing this inquiry without enforcement action.

In February 2022, we received a CID from the Federal Trade Commission (“FTC”) related to PayPal’s practices relating to commercial customers that submit charges on behalf of other merchants or sellers, and related activities.

Any failure to comply with the enforceable undertaking could result in penalties or require us to change our business practices.

In February 2022, we received a Civil Investigative Demand (“CID”) from the Federal Trade Commission (“FTC”) related to PayPal’s practices relating to commercial customers that submit charges on behalf of other merchants or sellers, and related activities.

The CID requests the production of documents and answers to written questions.

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We are cooperating with the FCO in connection with this proceeding.

We have received CIDs from the CFPB related to investigation and error-resolution obligations under Regulation E, the presentment of transactions to linked bank accounts, and related matters.

We have received CIDs from the Consumer Financial Protection Bureau (“CFPB”) related to investigation and error-resolution obligations under Regulation E, the presentment of transactions to linked bank accounts, and related matters.

The CIDs request the production of documents and answers to written questions.

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The PPH Securities Action asserts claims relating to our public statements with respect to net new active accounts (“NNA”) results and guidance, and the detection of illegitimately created accounts.

The PPH Securities Action purports to be brought on behalf of purchasers of the Company’s stock between February 3, 2021 and February 1, 2022 (the “Class Period”), and asserts claims for alleged violations of Sections 10(b) of the Exchange Act against the Company, as well as its former Chief Executive Officer, Chief Strategy, Growth and Data Officer, and former Chief Financial Officer (collectively, the “Individual Defendants,” and together with the Company, “Defendants”), and for alleged violations of Sections 20(a) and 20A of the Exchange Act against the Individual Defendants.

The PPH Securities Action purports to be brought on behalf of purchasers of the Company’s stock between February 3, 2021 and February 1, 2022 (the “Class Period”), and asserts claims for alleged violations of Section 10(b) of the Exchange Act against the Company, as well as its former Chief Executive Officer, former Chief Strategy, Growth and Data Officer, and former Chief Financial Officer (collectively, the “Individual Defendants,” and together with the Company, “Defendants”), and for alleged violations of Sections 20(a) and 20A of the Exchange Act against the Individual Defendants.

The complaint alleges that certain public statements made by Defendants during the Class Period were rendered materially false and misleading (which, allegedly, caused the Company’s stock to trade at artificially inflated prices) by the Defendants’ failure to disclose that, among other things, the Company’s incentive campaigns were susceptible to fraud and led to the creation of illegitimate accounts, which allegedly affected the Company’s NNA results and guidance.

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On July 14, 2023, the court denied Defendants’ motion to dismiss the complaint.

Trial is scheduled to begin in April 2025.

Trial is scheduled to begin in October 2025.

General matters

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Intellectual property claims, whether meritorious or not, are time-consuming and costly to defend and resolve, could require expensive changes in our methods of doing business, or could require us to enter into costly royalty or licensing agreements on unfavorable terms or make substantial payments to settle claims or to satisfy damages awarded by courts.

From time to time, we are involved in other disputes or regulatory inquiries that arise in the ordinary course of business, including suits by our customers (individually or as class actions) or regulators alleging, among other things, improper disclosure of our prices, rules, or policies, that our practices, prices, rules, policies, or customer/user agreements violate applicable law, or that we have acted unfairly or not acted in conformity with such prices, rules, policies, or agreements.

From time to time, we are involved in other disputes or regulatory inquiries that arise in the ordinary course of business, including suits by our consumers (individually or as class actions), merchants or regulators alleging, among other things, improper disclosure of our prices, rules, or policies, that our practices, prices, rules, policies, or user, product, business or merchant agreements violate applicable law, or that we have acted unfairly or not acted in conformity with such prices, rules, policies, or agreements.

In addition to these types of disputes and regulatory inquiries, our operations are also subject to regulatory and legal review and challenges that may reflect the increasing global regulatory focus to which the payments industry is subject and, when taken as a whole with other regulatory and legislative action, such actions could result in the imposition of costly new compliance burdens on our business and customers and may lead to increased costs and decreased transaction volume and revenue.

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Small Business Administration.

Loans made under this program are funded by an independent chartered financial institution that we partner with.

We receive a fee for providing services in connection with these loans and retain operational and audit risk related to those activities.

Loans made under this program were funded by an independent chartered financial institution that we partnered with.

We received a fee for providing services in connection with these loans and retained operational and audit risk related to those activities.

We have agreed, under certain circumstances, to indemnify the chartered financial institution and its assignee of a portion of these loans in connection with the services provided for loans made under this program.

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however, the maximum potential amount of the indemnification is not, in our view, representative of the expected future exposure.

As of March 31, 2024, the current outstanding balances of the loans sold was $ 2.4 billion.

As of June 30, 2024, the outstanding balances of the loans sold was $ 2.5 billion.

The terms of the indemnification align to the maturities of the loans sold.

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OFF-BALANCE SHEET ARRANGEMENTS

As of March 31, 2024 and December 31, 2023, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.

As of June 30, 2024 and December 31, 2023, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.

PROTECTION PROGRAMS

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These protection programs are considered assurance-type warranties under applicable accounting standards for which we estimate and record associated costs in transaction and credit losses during the period the payment transaction is completed.

At March 31, 2024 and December 31, 2023, the allowance for transaction losses was $ 62 million and $ 64 million, respectively.

The allowance for negative customer balances was $ 205 million and $ 218 million at March 31, 2024 and December 31, 2023, respectively.

The following table shows changes in the allowance for transaction losses and negative customer balances related to our protection programs for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

At June 30, 2024 and December 31, 2023, the allowance for transaction losses was $ 59 million and $ 64 million, respectively.

The allowance for negative customer balances was $ 211 million and $ 218 million at June 30, 2024 and December 31, 2023, respectively.

The following table shows changes in the allowance for transaction losses and negative customer balances related to our protection programs for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(in millions)

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NOTE 14— STOCK REPURCHASE PROGRAMS

During the three months ended March 31, 2024, we repurchased approximately 25 million shares of our common stock for approximately $ 1.5 billion at an average cost of $ 59.18 , excluding excise tax.

During the six months ended June 30, 2024, we repurchased approximately 49 million shares of our common stock for approximately $ 3.0 billion at an average cost of $ 61.30 , excluding excise tax.

These shares were purchased in the open market under our stock repurchase program authorized in June 2022.

As of March 31, 2024, a total of approximately $ 9.4 billion remained available for future repurchases of our common stock under our June 2022 stock repurchase program.

As of June 30, 2024, a total of approximately $ 7.9 billion remained available for future repurchases of our common stock under our June 2022 stock repurchase program.

PayPal Holdings, Inc.

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Beginning in the first quarter of 2023, we have reflected the applicable excise tax in treasury stock on our condensed consolidated balance sheets.

During the three months ended March 31, 2024, we recorded $ 10 million in excise tax within treasury stock on our condensed consolidated balance sheets.

During the six months ended June 30, 2024, we recorded $ 25 million in excise tax within treasury stock on our condensed consolidated balance sheets.

The payable associated with the excise tax is a non-cash financing activity which is not reflected on the condensed consolidated statement of cash flows until settled.

NOTE 15— STOCK-BASED PLANS

In May 2024, our stockholders approved the authorization of an additional 20 million shares to the Amended and Restated PayPal Holdings, Inc.

2015 Equity Incentive Award Plan.

STOCK-BASED COMPENSATION EXPENSE

Stock-based compensation expense for our equity incentive plans are measured based on their estimated fair value at the time of grant and recognized over the award’s vesting period.

The impact on our results of operations of recording stock-based compensation expense under our equity incentive plans for the three months ended March 31, 2024 and 2023 was as follows:

Three Months Ended March 31,

The impact on our results of operations of recording stock-based compensation expense under our equity incentive plans for the three and six months ended June 30, 2024 and 2023 was as follows:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(In millions)

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NOTE 16— INCOME TAXES

Our effective tax rate for the three months ended March 31, 2024 and 2023 was 27 % and 26 %, respectively.

Our effective tax rate for the three and six months ended June 30, 2024 was 19 % and 23 %, respectively.

Our effective tax rate for the three and six months ended June 30, 2023 was 21 % and 23 %, respectively.

The difference between our effective tax rate and the U.S.

federal statutory rate of 21% in both periods was primarily the result of foreign income taxed at different rates and discrete tax adjustments, including tax expense related to stock-based compensation.

Gross unrecognized tax benefits were approximately $ 2.2 billion as of March 31, 2024 and December 31, 2023.

federal statutory rate of 21% in the periods presented was primarily the result of foreign income taxed at different rates and discrete tax adjustments, including tax expense related to stock-based compensation.

Gross unrecognized tax benefits were approximately $ 2.2 billion as of June 30, 2024 and December 31, 2023.

Due to various factors, including uncertainties of the judicial, administrative, and regulatory processes in certain jurisdictions, the timing of the resolution of these unrecognized tax benefits is highly uncertain.

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During the first quarter of 2024, management initiated a global workforce reduction intended to streamline operations, focus resources on core strategic priorities, and improve our cost structure.

The associated restructuring charges during the three months ended March 31, 2024 were $ 175 million and included employee severance and benefits costs and stock-based compensation expense.

In connection with this restructuring, we expect to incur additional charges related to employee severance and benefits costs of approximately $ 70 million to $ 90 million, which includes stock-based compensation expense.

We expect the remaining charges to be substantially recognized by the second quarter of 2024.

The associated restructuring charges during the three and six months ended June 30, 2024 were $ 83 million and $ 258 million, respectively, and included employee severance and benefits costs and stock-based compensation expense, substantially all of which were accrued for as of June 30, 2024.

PayPal Holdings, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the restructuring reserve activity during the three months ended March 31, 2024:

The following table summarizes the restructuring reserve activity during the six months ended June 30, 2024:

Employee Severance and Benefits Costs

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Payments ( 135 )

Accrued liability as of March 31, 2024 (2)

Accrued liability as of June 30, 2024 (2)

(1) Excludes stock-based compensation expense of $ 60 million.

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During the first quarter of 2023, management initiated a global workforce reduction intended to focus resources on core strategic priorities, and improve our cost structure and operating efficiency.

The associated restructuring charges during the three months ended March 31, 2023 were $ 117 million.

The associated restructuring charges during the three and six months ended June 30, 2023 were nil and $ 117 million, respectively.

We primarily incurred employee severance and benefits costs, which were substantially completed by the fourth quarter of 2023.

We continue to review our real estate and facility capacity requirements due to our new and evolving work models.

We incurred asset impairment charges of nil and $ 39 million in the three months ended March 31, 2024 and 2023, respectively, due to exiting of certain leased properties, which resulted in a reduction of ROU lease assets and related leasehold improvements.

We also incurred a loss of $ 8 million upon designation of an owned property as held for sale in the three months ended March 31, 2023.

During the three months ended March 31, 2024, approximately $ 37 million of losses were recorded in restructuring and other, which included net loss on sale of loans and interest receivable previously held for sale and fair value adjustments in order to measure loans and interest receivable, held for sale, at the lower of cost or fair value.

We incurred asset impairment charges of nil in the three and six months ended June 30, 2024 and $ 4 million and $ 43 million in the three and six months ended June 30, 2023, respectively, due to exiting of certain leased properties, which resulted in a reduction of ROU lease assets and related leasehold improvements.

We recognized a gain of $ 14 million due to the sale of an owned property in the three and six months ended June 30, 2023.

We also incurred a loss of $ 8 million upon designation of an owned property as held for sale in the six months ended June 30, 2023.

During the three and six months ended June 30, 2024, approximately $ 27 million and $ 64 million, respectively, of losses were recorded in restructuring and other, which included net loss on sale of loans and interest receivable previously held for sale and fair value adjustments in order to measure loans and interest receivable, held for sale, at the lower of cost or fair value.

During the three and six months ended June 30, 2023, approximately $ 34 million of losses were recorded in restructuring and other, which included fair value adjustments in order to measure loans and interest receivable, held for sale, at the lower of cost or fair value.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements