PayPal Holdings, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures. Based on the evaluation of our disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), our principal executive officer and our principal financial officer have concluded that as of December 31, 2024, the end of the period covered by this report, our disclosure controls and procedures were effective. Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation under the framework in Internal Control - Integrated Framework , our management concluded that our internal control over financial reporting was effective as of December 31, 2024. 52 Table of Contents The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 15(a) of this Form 10-K. Changes in Internal Controls over Financial Reporting. There were no changes in our internal controls over financial reporting as defined in the Exchange Act Rule 13a-15(f) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION RULE 10B5-1 TRADING PLANS An equity trading plan is a written document that preestablishes the amounts, prices, and dates (or formula for determining the amounts, prices, and dates) of future purchases or sales of the Company’s stock, including sales of shares acquired under the Company’s employee and director equity plans. On December 10, 2024 , Frank Keller , Executive Vice President, General Manager – Large Enterprise and Merchant Platform Group , entered into an equity trading plan that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. The trading plan has a duration of March 11, 2025 to December 5, 2025 with approximately 27,700 shares (vested and net shares expected to vest over the duration of the trading plan) subject to sale under the plan. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Incorporated by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2024. Insider Trading Policies and Procedures The Company has insider trading policies and procedures that govern the purchase, sale, and other dispositions of its securities by directors, officers, employees, and contractors, as well as by the Company itself. We believe these policies and procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations and applicable listing standards. See “Index of Exhibits” within this Annual Report on Form 10-K for our Insider Trading Policy. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2024 (excluding the information under the subheading “Pay Versus Performance”). ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Incorporated by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2024. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Incorporated by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2024. 53 Table of Contents ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Incorporated by reference from our Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2024. 54 Table of Contents PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report: 1. Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 56 Consolidated Balance Sheets 58 Consolidated Statements of Income (Loss) 59 Consolidated Statements of Comprehensive Income (Loss) 60 Consolidated Statements of Stockholders’ Equity 61 Consolidated Statements of Cash Flows 62 Notes to Consolidated Financial Statements 64 2. Financial Statement Schedule Schedule II—Valuation and Qualifying Accounts 120 All other schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. 3. Exhibits Required by Item 601 of Regulation S-K 121 The information required by this Item is set forth in the Index of Exhibits that precedes the signature page of this Annual Report. 55 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of PayPal Holdings, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of PayPal Holdings, Inc. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of income (loss), of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2024, listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 56 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Consumer Loans Receivable As described in Notes 1 and 11 to the consolidated financial statements, the total allowance for loans and interest receivable was $461 million as of December 31, 2024, of which $341 million relates to consumer loans receivable. The allowance for consumer loans receivable is primarily based on expectations of credit losses based on historical lifetime loss data and incorporates macroeconomic forecasts applied to the portfolio. The consumer loss models incorporate various portfolio attributes including geographic region, loan term, delinquency, credit rating, vintage, and for the revolving credit portfolio, macroeconomic factors such as forecasted trends in household disposable income and retail e-commerce sales. The forecasted macroeconomic factors are sourced externally, using a single scenario to reflect the economic conditions applicable to a particular period. The principal considerations for our determination that performing procedures relating to the allowance for consumer loans receivable is a critical audit matter are (i) a high degree of auditor subjectivity and effort in performing procedures and evaluating audit evidence relating to certain consumer loss models, and for the revolving credit portfolio, forecasted macroeconomic factors related to household disposable income and retail e-commerce sales used to estimate expected credit losses; and (ii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the allowance for consumer loans receivable, including controls over certain consumer loss models, and for the revolving credit portfolio, forecasted macroeconomic factors related to household disposable income and retail e-commerce sales used to estimate expected credit losses. These procedures also included, among others (i) testing management’s process for determining the allowance for consumer loans receivable; (ii) testing the completeness and accuracy of certain data used in the estimate; and (iii) the involvement of professionals with specialized skill and knowledge to assist in evaluating (a) the appropriateness of certain methodologies and consumer loss models used by management and (b) for the revolving credit portfolio, the reasonableness of forecasted macroeconomic factors related to household disposable income and retail e-commerce sales. /s/ PricewaterhouseCoopers LLP San Jose, California February 4, 2025 We have served as the Company’s auditor since 2000. 57 Table of Contents PayPal Holdings, Inc. CONSOLIDATED BALANCE SHEETS As of December 31, 2024 2023 (In millions, except par value) ASSETS Current assets: Cash and cash equivalents $ 6,561 $ 9,081 Short-term investments 4,262 4,979 Accounts receivable, net 984 1,069 Loans and interest receivable, held for sale 541 563 Loans and interest receivable, net of allowances of $ 461 and $ 540 as of December 31, 2024 and 2023, respectively 6,422 5,433 Funds receivable and customer accounts 37,671 38,935 Prepaid expenses and other current assets 4,651 2,509 Total current assets 61,092 62,569 Long-term investments 4,583 3,273 Property and equipment, net 1,508 1,488 Goodwill 10,837 11,026 Intangible assets, net 326 537 Other assets 3,265 3,273 Total assets $ 81,611 $ 82,166 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 227 $ 139 Funds payable and amounts due to customers 39,671 41,935 Accrued expenses and other current liabilities 8,478 6,392 Total current liabilities 48,376 48,466 Other long-term liabilities 2,939 2,973 Long-term debt 9,879 9,676 Total liabilities 61,194 61,115 Commitments and contingencies (Note 13) Equity: Common stock, $ 0.0001 par value; 4,000 shares authorized; 993 and 1,072 shares outstanding as of December 31, 2024 and 2023, respectively — — Preferred stock, $ 0.0001 par value; 100 shares authorized, unissued — — Treasury stock at cost, 337 and 245 shares as of December 31, 2024 and 2023, respectively ( 27,085 ) ( 21,045 ) Additional paid-in-capital 20,705 19,642 Retained earnings 27,347 23,200 Accumulated other comprehensive income (loss) ( 550 ) ( 746 ) Total equity 20,417 21,051 Total liabilities and equity $ 81,611 $ 82,166 The accompanying notes are an integral part of these consolidated financial statements. 58 Table of Contents PayPal Holdings, Inc. CONSOLIDATED STATEMENTS OF INCOME (LOSS) Year Ended December 31, 2024 2023 2022 (In millions, except for per share amounts) Net revenues $ 31,797 $ 29,771 $ 27,518 Operating expenses: Transaction expense 15,697 14,385 12,173 Transaction and credit losses 1,442 1,682 1,572 Customer support and operations 1,768 1,919 2,120 Sales and marketing 2,001 1,809 2,257 Technology and development 2,979 2,973 3,253 General and administrative 2,147 2,059 2,099 Restructuring and other 438 ( 84 ) 207 Total operating expenses 26,472 24,743 23,681 Operating income 5,325 5,028 3,837 Other income (expense), net 4 383 ( 471 ) Income before income taxes 5,329 5,411 3,366 Income tax expense 1,182 1,165 947 Net income (loss) $ 4,147 $ 4,246 $ 2,419 Net income (loss) per share: Basic $ 4.03 $ 3.85 $ 2.10 Diluted $ 3.99 $ 3.84 $ 2.09 Weighted average shares: Basic 1,029 1,103 1,154 Diluted 1,039 1,107 1,158 The accompanying notes are an integral part of these consolidated financial statements. 59 Table of Contents PayPal Holdings, Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, 2024 2023 2022 (In millions) Net income (loss) $ 4,147 $ 4,246 $ 2,419 Other comprehensive income (loss), net of reclassification adjustments: Foreign currency translation adjustments (“CTA”) ( 204 ) ( 156 ) ( 305 ) Net investment hedges CTA gains (losses), net 122 192 ( 25 ) Tax (expense) benefit on net investment hedges CTA gains (losses), net ( 29 ) ( 44 ) 6 Unrealized gains (losses) on cash flow hedges, net 203 ( 167 ) ( 88 ) Tax (expense) benefit on unrealized gains (losses) on cash flow hedges, net ( 10 ) 8 4 Unrealized gains (losses) on available-for-sale debt securities, net 148 457 ( 504 ) Tax (expense) benefit on unrealized gains (losses) on available-for-sale debt securities, net ( 34 ) ( 108 ) 120 Other comprehensive income (loss), net of tax 196 182 ( 792 ) Comprehensive income (loss) $ 4,343 $ 4,428 $ 1,627 The accompanying notes are an integral part of these consolidated financial statements. 60 Table of Contents PayPal Holdings, Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Shares Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Equity (In millions) Balances at December 31, 2021 1,168 $ ( 11,880 ) $ 17,208 $ ( 136 ) $ 16,535 $ 21,727 Net income — — — — 2,419 2,419 Foreign CTA — — — ( 305 ) — ( 305 ) Net investment hedge CTA losses, net — — — ( 25 ) — ( 25 ) Tax benefit on net investment hedges CTA losses, net — — — 6 — 6 Unrealized losses on cash flow hedges, net — — — ( 88 ) — ( 88 ) Tax benefit on unrealized losses on cash flow hedges, net — — — 4 — 4 Unrealized losses on available-for-sale debt securities, net — — — ( 504 ) — ( 504 ) Tax benefit on unrealized losses on available-for-sale debt securities, net — — — 120 — 120 Common stock and stock-based awards issued, net of shares withheld for employee taxes 9 — ( 195 ) — — ( 195 ) Common stock repurchased ( 41 ) ( 4,199 ) — — — ( 4,199 ) Stock-based compensation — — 1,313 — — 1,313 Other — — 1 — — 1 Balances at December 31, 2022 1,136 $ ( 16,079 ) $ 18,327 $ ( 928 ) $ 18,954 $ 20,274 Net income — — — — 4,246 4,246 Foreign CTA — — — ( 156 ) — ( 156 ) Net investment hedge CTA gains, net — — — 192 — 192 Tax expense on net investment hedges CTA gains, net — — — ( 44 ) — ( 44 ) Unrealized losses on cash flow hedges, net — — — ( 167 ) — ( 167 ) Tax benefit on unrealized losses on cash flow hedges, net — — — 8 — 8 Unrealized gains on available-for-sale debt securities, net — — — 457 — 457 Tax expense on unrealized gains on available-for-sale debt securities, net — — — ( 108 ) — ( 108 ) Common stock and stock-based awards issued, net of shares withheld for employee taxes 9 — ( 130 ) — — ( 130 ) Common stock repurchased ( 74 ) ( 5,046 ) — — — ( 5,046 ) Treasury stock reissuance 1 80 — — — 80 Stock-based compensation — — 1,445 — — 1,445 Balances at December 31, 2023 1,072 $ ( 21,045 ) $ 19,642 $ ( 746 ) $ 23,200 $ 21,051 Net income — — — — 4,147 4,147 Foreign CTA — — — ( 204 ) — ( 204 ) Net investment hedges CTA gains, net — — — 122 — 122 Tax expense on net investment hedges CTA gains, net — — — ( 29 ) — ( 29 ) Unrealized gains on cash flow hedges, net — — — 203 — 203 Tax expense on unrealized gains on cash flow hedges, net — — — ( 10 ) — ( 10 ) Unrealized gains on available-for-sale debt securities, net — — — 148 — 148 Tax expense on unrealized gains on available-for-sale debt securities, net — — — ( 34 ) — ( 34 ) Common stock and stock-based awards issued, net of shares withheld for employee taxes 13 — ( 263 ) — — ( 263 ) Common stock repurchased ( 92 ) ( 6,053 ) — — — ( 6,053 ) Treasury stock reissuance — 13 — — — 13 Stock-based compensation — — 1,326 — — 1,326 Balances at December 31, 2024 993 $ ( 27,085 ) $ 20,705 $ ( 550 ) $ 27,347 $ 20,417 The accompanying notes are an integral part of these consolidated financial statements. 61 Table of Contents PayPal Holdings, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2024 2023 2022 (In millions) Cash flows from operating activities: Net income (loss) $ 4,147 $ 4,246 $ 2,419 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Transaction and credit losses 1,442 1,682 1,572 Depreciation and amortization 1,032 1,072 1,317 Stock-based compensation 1,230 1,475 1,261 Deferred income taxes 231 ( 668 ) ( 811 ) Net (gains) losses on strategic investments 285 ( 201 ) 304 Gain on divestiture of business, excluding transaction costs — ( 356 ) — Accretion of discounts on investments, net of amortization of premiums ( 335 ) ( 367 ) ( 70 ) Adjustments to loans and interest receivable, held for sale 125 53 — Other ( 3 ) ( 104 ) 275 Originations of loans receivable, held for sale ( 24,498 ) ( 11,470 ) — Proceeds from repayments and sales of loans receivable, originally classified as held for sale 24,352 10,795 — Changes in assets and liabilities: Accounts receivable 85 ( 114 ) ( 163 ) Transaction loss allowance for cash losses, net ( 1,131 ) ( 1,188 ) ( 1,230 ) Other current assets and non-current assets ( 8 ) 203 118 Accounts payable 83 7 ( 35 ) Other current liabilities and non-current liabilities 413 ( 222 ) 856 Net cash provided by operating activities 7,450 4,843 5,813 Cash flows from investing activities: Purchases of reverse repurchase agreements ( 424 ) — — Maturities of reverse repurchase agreements 337 — — Purchases of property and equipment ( 683 ) ( 623 ) ( 706 ) Proceeds from sales of property and equipment 1 45 5 Purchases and originations of loans receivable ( 21,807 ) ( 25,198 ) ( 28,170 ) Proceeds from repayments and sales of loans receivable, originally classified as held for investment 20,272 26,660 24,903 Purchases of investments ( 26,209 ) ( 21,980 ) ( 20,219 ) Maturities and sales of investments 26,962 24,295 23,411 Proceeds from divestiture of business, net of cash divested — 466 — Funds receivable 2,908 ( 2,943 ) ( 2,720 ) Collateral posted related to derivative instruments, net 73 ( 56 ) ( 19 ) Other 159 86 187 Net cash provided by (used in) investing activities 1,589 752 ( 3,328 ) Cash flows from financing activities: Borrowings from repurchase agreements 656 — — Repayments of repurchase agreements ( 656 ) — — Proceeds from issuance of common stock 95 127 143 Purchases of treasury stock ( 6,047 ) ( 5,002 ) ( 4,199 ) Tax withholdings related to net share settlements of equity awards ( 351 ) ( 257 ) ( 336 ) Borrowings under financing arrangements 1,546 1,528 3,475 Repayments under financing arrangements ( 1,661 ) ( 1,053 ) ( 1,686 ) Funds payable and amounts due to customers ( 1,954 ) 1,861 1,405 Collateral received related to derivative instruments and reverse repurchase agreements, net 156 ( 197 ) ( 6 ) Other ( 60 ) — 1 Net cash used in financing activities ( 8,276 ) ( 2,993 ) ( 1,203 ) 62 Table of Contents PayPal Holdings, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued) Year Ended December 31, 2024 2023 2022 (In millions) Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 207 ) 76 ( 155 ) Net change in cash, cash equivalents, and restricted cash 556 2,678 1,127 Cash, cash equivalents, and restricted cash at beginning of period 21,834 19,156 18,029 Cash, cash equivalents, and restricted cash at end of period $ 22,390 $ 21,834 $ 19,156 Supplemental cash flow disclosures: Cash paid for interest $ 366 $ 331 $ 280 Cash paid for income taxes, net $ 1,027 $ 2,118 $ 878 The table below reconciles cash, cash equivalents, and restricted cash as reported in the consolidated balance sheets to the total of the same amounts shown in the consolidated statements of cash flows: Cash and cash equivalents $ 6,561 $ 9,081 $ 7,776 Short-term and long-term investments 1 3 17 Funds receivable and customer accounts 15,828 12,750 11,363 Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 22,390 $ 21,834 $ 19,156 The accompanying notes are an integral part of these consolidated financial statements. 63 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1— OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OVERVIEW AND ORGANIZATION PayPal Holdings, Inc. (“PayPal,” the “Company,” “we,” “us,” or “our”) was incorporated in Delaware in January 2015. At PayPal, our mission is to revolutionize commerce globally. Our products are designed to enable digital payments and simplify commerce experiences for consumers and merchants to make selling, shopping, and sending and receiving money simple, personalized, secure, online or offline, including mobile. Our two-sided platform serves millions of consumers and merchants worldwide. We operate globally and in a rapidly evolving regulatory environment characterized by a heightened focus by regulators globally on all aspects of the payments industry, including anti-money laundering, countering terrorist financing, privacy, cybersecurity, and consumer protection. The laws and regulations applicable to us, including those enacted prior to the advent of digital payments, continue to evolve through legislative and regulatory action and judicial interpretation. New or changing laws and regulations, including changes to their interpretation and implementation, as well as increased penalties and enforcement actions related to non-compliance, could have a material adverse impact on our business, results of operations, and financial condition. We monitor these areas closely and are focused on designing compliant solutions for our customers. SIGNIFICANT ACCOUNTING POLICIES Basis of presentation and principles of consolidation The accompanying consolidated financial statements include the financial statements of PayPal and our wholly- and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Investments in entities where we have the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. For such investments, our share of the investee’s results of operations is included in other income (expense), net on our consolidated statements of income (loss). Investments in entities where we do not have the ability to exercise significant influence over the investee are accounted for at fair value or cost minus impairment, if any, adjusted for changes resulting from observable price changes, which are included in other income (expense), net on our consolidated statements of income (loss). Our investment balances are included in long-term investments on our consolidated balance sheets. We determine at the inception of each investment, and re-evaluate if certain events occur, whether an entity in which we have made an investment is considered a variable interest entity (“VIE”). If we determine an investment is in a VIE, we then assess if we are the primary beneficiary, which would require consolidation. As of December 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 December 31, 2024 and December 31, 2023, the carrying value of our investments in nonconsolidated VIEs was $ 187 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 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 both December 31, 2024 and 2023. Certain amounts for prior years have been reclassified to conform to the financial statement presentation as of and for the year ended December 31, 2024. 64 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Use of estimates The preparation of consolidated financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to provisions for transaction and credit losses, income taxes, loss contingencies, revenue recognition, and the evaluation of strategic investments for impairment. We base our estimates on historical experience and various other assumptions which we believe to be reasonable under the circumstances. Actual results could materially differ from these estimates. Cash and cash equivalents Cash and cash equivalents are short-term, highly liquid investments with original maturities of three months or less when purchased and are comprised of primarily bank deposits, government and agency securities, and commercial paper. Investments Short-term investments include time deposits and available-for-sale debt securities with original maturities of greater than three months but less than one year when purchased or maturities of one year or less on the reporting date. Long-term investments include time deposits and available-for-sale debt securities with maturities exceeding one year on the reporting date, as well as our strategic investments. Our available-for-sale debt securities are reported at fair value using the specific identification method. Unrealized gains and losses are reported as a component of other comprehensive income (loss), net of related estimated tax provisions or benefits. We elect to account for available-for-sale debt securities denominated in currencies other than the functional currency of our subsidiaries, underlying funds receivable and customer accounts, short-term investments, and long-term investments, under the fair value option as further discussed in “Note 9—Fair Value Measurement of Assets and Liabilities.” The changes in fair value related to initial measurement and subsequent changes in fair value are included as a component of other income (expense), net on our consolidated statements of income (loss). Our strategic investments consist of marketable equity securities, which are publicly traded, and non-marketable equity securities, which are primarily investments in privately held companies. Marketable equity securities have readily determinable fair values with changes in fair value recorded in other income (expense), net. Non-marketable equity securities include investments that do not have a readily determinable fair value, as well as equity method investments. Our investments that do not have a readily determinable fair value are measured at cost minus impairment, if any, and are adjusted for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer (the “Measurement Alternative”). Non-marketable equity securities also include our investments where we have the ability to exercise significant influence, but not control, over the investee and these securities are accounted for using the equity method of accounting. All gains and losses on these investments, realized and unrealized, and our share of earnings or losses from investments accounted for using the equity method are recognized in other income (expense), net on our consolidated statements of income (loss). We assess whether an impairment loss on our non-marketable equity securities accounted for under the Measurement Alternative has occurred based on qualitative factors such as the companies’ financial condition and business outlook, industry performance, regulatory, economic or technological environment, and other relevant events and factors affecting the company. We assess whether an other-than-temporary impairment loss on our equity method investments has occurred due to declines in fair value or other market conditions. If any impairment is identified for non-marketable equity securities or impairment is considered other-than-temporary for our equity method investments, we write down the investment to its fair value and record the corresponding charge through other income (expense), net on our consolidated statements of income (loss). 65 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Our available-for-sale debt securities in an unrealized loss position are written down to fair value through a charge to other income (expense), net on our consolidated statements of income (loss) if we intend to sell the security or it is more likely than not we will be required to sell the security before recovery of its amortized cost basis. For the remaining available-for-sale debt securities in an unrealized loss position, if we identify that the decline in fair value has resulted from credit losses, taking into consideration changes to the rating of the security by rating agencies, implied yields versus benchmark yields, and the extent to which fair value is less than amortized cost, among other factors, we estimate the present value of cash flows expected to be collected. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any portion of impairment not related to credit losses is recognized in other comprehensive income (loss). Accounts receivable, net Accounts receivable is primarily related to revenue earned from customers and is reduced by an allowance for credit losses. For the years ended December 31, 2024 and 2023, the allowance for credit losses was not significant. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. Loans and interest receivable, held for sale In June 2023, we entered into a multi-year agreement with a global investment firm to sell United Kingdom (“U.K.”) and other European buy now, pay later loan receivables, consisting of eligible loans and interest receivable and a forward-flow arrangement for the sale of future originations of eligible loans over a 24 -month commitment period (together, “eligible consumer installment receivables”). In December 2024, this agreement was amended and restated to extend the commitment period to December 2026 and to increase the maximum balance of loans that can be sold at a time. Following the sale, the global investment firm becomes the owner of the eligible consumer installment receivables sold and we no longer hold an ownership interest in these receivables. These sales of eligible consumer installment receivables to the global investment firm are accounted for as a true sale based on our determination that these receivables met all the necessary criteria for such accounting including legal isolation for transferred assets, ability of the transferee to pledge or exchange the transferred assets without constraint, and the transfer of control, and thus, we no longer record these receivables on our consolidated financial statements. We also concluded that our continuing involvement in the arrangement does not invalidate this determination. We maintain the servicing rights for the entire pool of the consumer installment receivables sold and receive a market-based service fee for servicing the assets sold. Prior to the decision to sell, this portfolio was reported at outstanding principal balances, including unamortized deferred origination costs and estimated collectible interest and fees, net of allowances for credit losses. At the time of reclassification of eligible consumer installment receivables to loans and interest receivable, held for sale in May 2023, any previously recorded allowance for credit losses for loans and interest receivable outstanding was reversed, resulting in a decrease in transaction and credit losses on our consolidated statements of income (loss) for the year ended December 31, 2023. Loans and interest receivable, held for sale as of December 31, 2024 and 2023 represents installment consumer receivables that we originated and intend to sell to the global investment firm. 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 consolidated statements of income (loss). Interest income on interest bearing held-for-sale loans is accrued and recognized based on the contractual rate of interest. If PayPal no longer intends to sell loans and interest receivable, held for sale, such loans would be reclassified to loans and interest receivable, held for investment. When a loan is reclassified to held for investment, any amounts previously recorded in order to measure the loan at the lower of cost or fair value are reversed on our consolidated statements of income (loss) (recognized within restructuring and other) and the loan is recorded consistent with loans held for investment. Loans and interest receivable, net Loans and interest receivable, net represents consumer loans originated under our revolving credit products (PayPal Credit) and installment credit products and merchant receivables originated under our PayPal Working Capital (“PPWC”) product and PayPal Business Loan (“PPBL”) product. 66 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In the U.S., consumer interest-bearing installment products, PPWC, and PPBL are provided under a program agreement we have with an independent chartered financial institution (“partner institution”). The partner institution extends credit to consumers for interest-bearing installment products and to merchants for the PPWC and PPBL products, and we purchase the related receivables originated by the partner institution. In the U.S., we extend certain short-term, interest-free, installment loans to consumers through a U.S. subsidiary. For our international consumer credit products, we extend credit in the U.K and the rest of Europe through our U.K. subsidiary and Luxembourg banking subsidiary, respectively, and in Australia and Japan, through local subsidiaries. For our merchant finance products outside the U.S., we extend working capital advances and loans in the U.K. and rest of Europe through our U.K. subsidiary and Luxembourg banking subsidiary, respectively, and working capital loans in Australia through an Australian subsidiary. As part of our arrangement with the partner institution in the U.S., we sell back a participation interest in the pool of receivables for the consumer interest-bearing installment products, PPWC, and PPBL. The partner institution has no recourse against us related to their participation interests for failure of debtors to pay when due. The participation interests held by the partner institution have the same priority to the interests held by us and are subject to the same credit, prepayment, and interest rate risk associated with this pool of receivables. All risks of loss are shared pro rata based on participation interests held among all participating stakeholders. We account for the asset transfer as a sale and derecognize the portion of the participation interests for which control has been surrendered. For this arrangement, gains or losses on the sale of the participation interests are not material as the carrying amount of the participation interest sold approximates the fair value at time of transfer. Loans, advances, and interest and fees receivable are reported at their outstanding balances, net of any participation interests sold and unamortized deferred origination costs. We maintain the servicing rights for the entire pool of consumer and merchant receivables outstanding and receive a market-based service fee for servicing the assets underlying the participation interest sold. We offer both revolving and installment credit products to our consumers. The terms of our consumer relationships require us to submit monthly bills to the consumer detailing loan repayment requirements. The terms also allow us to charge the consumer interest and fees in certain circumstances. Due to the relatively small dollar amount of individual loans and interest receivable, we do not require collateral on these balances. In certain instances where a merchant is able to demonstrate that it is experiencing financial difficulty, there may be a modification of the loan or advance and the related interest or fee receivable for which it is probable that, without modification, we would be unable to collect all amounts due. Another partner institution is the exclusive issuer of the PayPal Credit consumer financing program in the U.S. We do not hold an ownership interest in the receivables generated through the program and therefore, do not record these receivables on our consolidated financial statements. PayPal earns a revenue share on the portfolio of consumer receivables owned by the partner institution, which is recorded in revenues from other value added services on our consolidated statements of income (loss). Allowance for loans and interest receivable The allowance for loans and interest receivable represents our estimate of current expected credit losses inherent in our portfolio of loans and interest receivables. Changes to the allowance for loans receivable are reflected as a component of transaction and credit losses on our consolidated statements of income (loss). Changes to the allowance for interest and fees receivable are reflected within revenues from other value added services in net revenues on our consolidated statements of income (loss), or within deferred revenue in accrued expenses and other current liabilities on our consolidated balance sheets, when interest and fees are billed at the inception of a loan or advance. The evaluation process to assess the adequacy of allowances is subject to numerous estimates and judgments. 67 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The allowance for consumer loans and interest receivable not classified as held for sale is primarily based on expectations of credit losses based on historical lifetime loss data and incorporates macroeconomic forecasts applied to the portfolio. The consumer loss models incorporate various portfolio attributes including geographic region, loan term, delinquency, credit rating, vintage, and for the revolving credit portfolio, macroeconomic factors such as forecasted trends in household disposable income and retail e-commerce sales. The forecasted macroeconomic factors are sourced externally, using a single scenario that we believe is most appropriate to the economic conditions applicable to a particular period. For both 2024 and 2023, the reasonable and supportable forecast period for revolving products and installment products (not classified as held for sale) that we have included in our projected loss rates, which approximates the estimated life of the loans, was approximately 5 years and 7 months to 3.5 years, respectively. Projected loss rates (inclusive of historical loss data and for the revolving credit portfolio, macroeconomic factors) are derived based on and applied to the principal amount of our consumer receivables. We also include qualitative adjustments that incorporate incremental information not captured in the quantitative estimates of our current expected credit losses, such as expectations of macroeconomic conditions not captured in the loss models for our installment products (not classified as held for sale). The allowance for current expected credit losses on interest and fees receivable is determined primarily by applying loss curves to each portfolio by geography, delinquency, and period of origination, among other factors. We charge off consumer receivable balances in the month in which a customer’s balance becomes 180 days past the billing date or contractual repayment date, except for the U.S. consumer interest-bearing installment receivables, which are charged off 120 days past the contractual repayment date. 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. Loans receivable continue to accrue interest until they are charged off. In connection with the sale of our eligible consumer installment receivables and the reclassification of that portfolio as held for sale in 2023, we reversed the previously recorded allowances for credit losses associated with those loans and interest receivable balances. Charge-offs and any adjustments to the fair value of loans and interest receivable, held for sale, are recorded in restructuring and other on our consolidated statement of income (loss). The allowance for merchant loans, advances, and interest and fees receivable is primarily based on expectations of credit losses based on historical lifetime loss data as well as macroeconomic forecasts applied to the portfolio. In the third quarter of 2024, we updated our expected credit loss model for our PPWC portfolio to reflect its current risk characteristics. These changes did not have a material impact on our provision recorded in the year ended December 31, 2024. The merchant loss models incorporate various portfolio attributes including geographic region, first borrowing versus repeat borrowing, delinquency, internally developed risk ratings, and vintage, as well as macroeconomic factors such as forecasted trends in unemployment rates and retail e-commerce sales. The forecasted macroeconomic factors are sourced externally, using a single scenario that we believe is most appropriate to the economic conditions applicable to a particular period. The reasonable and supportable forecast period for merchant products that we have included in our projected loss rates for 2024 and 2023, which approximates the estimated life of the loans, was approximately 2.5 to 3.5 years. Projected loss rates, inclusive of historical loss data and macroeconomic factors, are derived based on and applied to the principal amount of our merchant receivables. We also include qualitative adjustments that incorporate incremental information not captured in the quantitative estimates of our current expected credit losses. The allowance for current expected credit losses on interest and fees receivable is determined primarily by applying loss curves to each portfolio by geography, delinquency, and period of origination, among other factors. 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. We charge off the receivables outstanding under our PPBL product when the repayments are 180 days past the contractual repayment date. We charge off the receivables outstanding under our PPWC product when the repayments are 180 days past our expectation of repayments and the merchant has not made a payment in the last 60 days, or when the repayments are 360 days past due regardless of whether the merchant has made a payment in the last 60 days. 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. 68 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Customer accounts We hold all customer balances, both in the U.S. and internationally, as direct claims against us which are reflected on our consolidated balance sheets as a liability classified as amounts due to customers. Certain jurisdictions where PayPal operates require us to hold eligible liquid assets, as defined by applicable regulatory requirements and commercial law in these jurisdictions, equal to at least 100 % of the aggregate amount of all customer balances. Therefore, we restrict the use of the assets underlying the customer balances to meet these regulatory requirements and separately classify the assets as customer accounts on our consolidated balance sheets. We classify the assets underlying the customer balances as current based on their purpose and availability to fulfill our direct obligation under amounts due to customers. Customer funds for which PayPal is an agent and custodian on behalf of our customers are not reflected on our consolidated balance sheets. These funds include U.S. dollar funds which are deposited at one or more third-party financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”) and are eligible for FDIC pass-through insurance (subject to applicable limits). The Luxembourg Commission de Surveillance du Secteur Financier (the “CSSF”) has agreed that PayPal’s management may designate up to 50 % of European customer balances held in our Luxembourg banking subsidiary to fund European, U.K., and U.S. credit activities. As of December 31, 2024 and 2023, the cumulative amount approved by PayPal to be designated to fund credit activities was $ 2.0 billion and $ 3.0 billion, respectively, and represented approximately 26 % and 39 % of European customer balances made available for our corporate use as of those respective dates, as determined by applying financial regulations maintained by the CSSF. At the time PayPal’s management designates the European customer balances held in our Luxembourg banking subsidiary to be used to extend credit, the balances are classified as cash and cash equivalents and no longer classified as customer accounts on our consolidated balance sheets. The remaining assets underlying the customer balances remain separately classified as customer accounts on our consolidated balance sheets. We identify these customer accounts separately from corporate funds and maintain them in interest and non-interest bearing bank deposits, time deposits, and available-for-sale debt securities. Customer balances deposited with our partners on a short-term basis in advance of customer transactions and used to fulfill our direct obligation under amounts due to customers are classified as cash and cash equivalents within our customer accounts classification on our consolidated balance sheets. See “Note 8—Cash and Cash Equivalents, Funds Receivable and Customer Accounts, and Investments” for additional information related to customer accounts. Under applicable accounting standards, we are an agent when facilitating cryptocurrency transactions on behalf of our customers. Cryptocurrencies held on behalf of our customers are not PayPal’s assets and therefore, are not reflected as cryptocurrency assets on our consolidated balance sheets; however, we recognize a crypto asset safeguarding liability with a corresponding safeguarding asset to reflect our obligation to safeguard the cryptocurrencies held on behalf of our customers. Funds receivable and funds payable Funds receivable and funds payable arise due to the time required to initiate collection from and clear transactions through external payment networks. When customers fund their PayPal account using their bank account, credit card, or debit card, or withdraw funds from their PayPal account to their bank account or through a debit card transaction, there is a clearing period before the cash is received or settled, usually one to three business days for U.S. transactions and generally up to five business days for international transactions. In addition, a portion of our customers’ funds are settled directly to their bank account. These funds are also classified as funds receivable and funds payable and arise due to the time required to initiate collection from and clear transactions through external payment networks. We present changes in funds receivable and funds payable and amounts due to customers as cash flows from investing activities and financing activities, respectively, on our consolidated statements of cash flows based on the nature of the activity underlying our customer accounts. Property and equipment Property and equipment consists primarily of computer equipment, software and website development costs, land and buildings, leasehold improvements, and furniture and fixtures. Property and equipment are stated at historical cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets; generally, one to five years for computer equipment and software, including capitalized software and website development costs, three years for furniture and fixtures, up to 30 years for buildings and building improvements, and the shorter of five years or the non-cancelable term of the lease for leasehold improvements. 69 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Direct costs incurred to develop software for internal use and website development costs, including those costs incurred in expanding and enhancing our payments platform, are capitalized and amortized generally over an estimated useful life of three years and are recorded as amortization within the financial statement captions aligned with the internal organizations that are the primary beneficiaries of such assets. We capitalized $ 509 million and $ 445 million of internally developed software and website development costs for the years ended December 31, 2024 and 2023, respectively. Amortization expense for these capitalized costs was $ 498 million, $ 482 million, and $ 426 million for the years ended December 31, 2024, 2023, and 2022, respectively. Costs related to the maintenance of internal use software and website development costs are expensed as incurred. Leases We determine whether an arrangement is a lease for accounting purposes at contract inception. Operating leases are recorded as right-of-use (“ROU”) assets which are included in other assets , and lease liabilities which are included in accrued expenses and other current liabilities and other long-term liabilities on our consolidated balance sheets. ROU assets for finance leases are included in property and equipment, and lease liabilities for finance leases are included in accrued expenses and other current liabilities and other long-term liabilities on our consolidated balance sheets. For sale-leaseback transactions, we evaluate the sale and the lease arrangement based on our conclusion as to whether control of the underlying asset has been transferred, and recognize the sale-leaseback as either a sale transaction or under the financing method. The financing method requires the asset to remain on our consolidated balance sheets throughout the term of the lease and the proceeds to be recognized as a financing obligation. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. A majority of our leases do not provide an implicit rate and therefore we use an incremental borrowing rate for specific terms on a collateralized basis using information available on the commencement date in determining the present value of lease payments. The ROU asset calculation includes lease payments to be made and excludes lease incentives. The ROU asset and lease liability may include amounts attributed to options to extend or terminate the lease when it is reasonably certain we will exercise that option. When we reach a decision to exercise a lease renewal or termination option, we recognize the associated impact to the ROU asset and lease liability. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for finance leases is amortized on a straight-line basis over the lease term, and interest expense for finance lease liabilities is recognized based on the implicit rate or the incremental borrowing rate. We have lease agreements with lease and non-lease components. We have elected to apply the practical expedient and account for the lease and non-lease components as a single lease component for all leases, where applicable. In addition, we have elected to apply the practical expedients related to lease classification, hindsight, and land easement. We apply a single portfolio approach to account for the ROU assets and lease liabilities. We evaluate ROU assets related to leases for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of an ROU asset may not be recoverable. When a decision has been made to exit a lease prior to the contractual term or to sublease that space, we evaluate the asset for impairment and recognize the associated impact to the ROU asset and related expense, if applicable. The evaluation is performed at the asset group level initially and where appropriate, at the lowest level of identifiable cash flows, which is at the individual lease level. Undiscounted cash flows expected to be generated by the related ROU assets are estimated over the ROU assets’ useful lives. If the evaluation indicates that the carrying amount of the ROU assets may not be recoverable, any potential impairment is measured based upon the fair value of the related ROU asset or asset group as determined by appropriate valuation techniques. 70 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Goodwill and intangible assets Goodwill is tested for impairment, at a minimum, on an annual basis at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The fair value of the reporting unit may be estimated using income and market approaches. The discounted cash flow method, a form of the income approach, uses expected future operating results and a market participant discount rate. The market approach uses comparable company prices and other relevant information generated by market transactions (either publicly traded entities or mergers and acquisitions) to develop pricing metrics to be applied to historical and expected future operating results of the reporting unit. Failure to achieve these expected results, changes in the discount rate, or market pricing metrics may cause a future impairment of goodwill at the reporting unit level. We conducted our annual impairment test of goodwill as of August 31, 2024 and 2023. We determined that no adjustment to the carrying value of goodwill of our reporting unit was required. As of December 31, 2024, we determined that no events occurred, or circumstances changed from August 31, 2024 through December 31, 2024 that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Intangible assets consist of acquired customer list and user base intangible assets, marketing related intangibles, developed technology, and other intangible assets. Intangible assets are amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from three to seven years . No significant residual value is estimated for intangible assets. We evaluate long-lived assets (including intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the future undiscounted cash flow the asset is expected to generate. Allowance for transaction losses We are exposed to transaction losses due to credit card and other payment misuse as well as nonperformance from sellers who accept payments through PayPal. We establish an allowance for estimated losses arising from completing customer transactions, such as chargebacks for unauthorized credit card use and merchant-related chargebacks due to non-delivery or unsatisfactory delivery of purchased items, purchase protection program claims, and account takeovers. This allowance represents an accumulation of the estimated amounts of probable transaction losses as of the reporting date. The allowance is monitored regularly and is updated based on actual loss data. The allowance is based on known facts and circumstances, internal factors including experience with similar cases, historical trends involving loss payment patterns, and the mix of transaction and loss types, as appropriate. Additions to the allowance are reflected as a component of transaction and credit losses on our consolidated statements of income (loss). The allowance for transaction losses is included in accrued expenses and other current liabilities on our consolidated balance sheets. Allowance for negative customer balances Negative customer balances occur primarily when there are insufficient funds in a customer’s PayPal account to cover charges applied for bank returns and reversals, debit card transactions, and merchant-related chargebacks due to non-delivery or unsatisfactory delivery of purchased items, which are generally within the scope of our protection programs. Negative customer balances can be cured by the customer by adding funds to their account, receiving payments, or through back-up funding sources. We also utilize third-party collection agencies. For negative customer balances that are not expected to be cured or otherwise collected, we provide an allowance for expected losses. The allowance represents expected losses based on historical trends involving collection and write-off patterns, internal factors including our experience with similar cases, other known facts and circumstances, and reasonable and supportable macroeconomic forecasts, as appropriate. Loss rates are derived using historical loss data for each delinquency bucket using a roll rate model that captures the losses and the likelihood that a negative customer balance will be written off as the delinquency age of such balance increases. The loss rates are then applied to the outstanding negative customer balances. Once the quantitative calculation is performed, we review the adequacy of the allowance and determine if qualitative adjustments need to be considered. We write-off negative customer balances in the month in which the balance becomes outstanding for 120 days. Write-offs that are recovered are recorded as a reduction to our allowance for negative customer balances. Negative customer balances are included in other current assets, net of the allowance on our consolidated balance sheets. Adjustments to the allowance for negative customer balances are recorded as a component of transaction and credit losses on our consolidated statements of income (loss). 71 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Derivative instruments See “Note 10—Derivative Instruments” for information related to the derivative instruments. Repurchase and reverse repurchase agreements We enter into repurchase agreements as a form of secured borrowing and reverse repurchase agreements as a form of secured lending, primarily to provide additional liquidity and to deploy excess cash. These agreements are accounted for as collateralized financing transactions. Repurchase agreements and reverse repurchase agreements are reported in other current liabilities and other current assets, respectively, on our consolidated balance sheet and recorded at amortized cost. Fair value measurements We measure certain financial assets and liabilities at fair value on a recurring basis and certain financial and non-financial assets and liabilities at fair value on a non-recurring basis when a change in fair value or impairment is evidenced. Fair value is defined as the price received to sell an asset or paid to transfer a liability in the principal market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value is estimated by maximizing the use of observable inputs and minimizing the use of unobservable inputs. The categorization within the following three-level fair value hierarchy for our recurring and non-recurring fair value measurements is based upon the lowest level of input that is available and significant to the fair value measurement: • Level 1 - Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities. • Level 2 - Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be market-corroborated. • Level 3 - Unobservable inputs that cannot be directly corroborated by observable market data and that typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. See “Note 9—Fair Value Measurement of Assets and Liabilities” for additional information related to our fair value measurements. Crypto asset safeguarding liability and corresponding safeguarding asset See “Note 7—Other Financial Statement Details” for information related to our crypto asset safeguarding liability and corresponding safeguarding asset. Concentrations of risk Our cash, cash equivalents, short-term investments, accounts receivable, loans and interest receivable, net, funds receivable and customer accounts, long-term investments, and other assets, are potentially subject to concentration of credit risk. Cash, cash equivalents, and customer accounts are placed with financial institutions that management believes are of high credit quality. In addition, funds receivable are generated primarily with financial institutions which management believes are of high credit quality. We invest our cash, cash equivalents, and customer accounts primarily in highly liquid, highly rated instruments which are uninsured. We have corporate deposit balances with financial services institutions which exceed the FDIC insurance limit of $250,000. As part of our cash management process, we perform periodic evaluations of the relative credit standing of these financial institutions. Our accounts receivable are derived from revenue earned from customers located in the U.S. and internationally. Our loans and interest receivable are derived from consumer and merchant financing activities for customers located in the U.S. and internationally. Our long-term notes receivable and contract asset within other assets are associated with the sale of our U.S. consumer credit receivables to a partner institution. Transaction expense is derived from fees paid to payment processors and other financial institutions, located in the U.S. and internationally, when we draw funds from a customer’s credit or debit card, bank account, or other funding source they have stored in their digital wallet. As of December 31, 2024 and 2023, one partner institution accounted for 14 % and 15 % of net accounts receivables, respectively. The same partner institution accounted for our long-term notes receivable and contract asset balance, which represented 17 % and 16 % of other assets at December 31, 2024 and 2023, respectively. No customer accounted for more than 10% of net loans receivable as of December 31, 2024 and 2023. During the years ended December 31, 2024, 2023, and 2022, no customer accounted for more than 10% of net revenues. During the year ended December 31, 2024, two payment processors accounted for 48 % of transaction expense. During the years ended December 31, 2023 and 2022, one payment processor accounted for 60 % and 63 % of transaction expense, respectively. 72 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Revenue recognition See “Note 2—Revenue” for information related to our revenue recognition. Advertising expense We expense the cost of producing advertisements at the time production occurs and expense the cost of communicating advertisements in the period during which the advertising space or airtime is used as sales and marketing expense. Online advertising expenses are recognized based on the terms of the individual agreements, which are generally based on the number of impressions delivered over the total number of contracted impressions, on a pay-per-click basis, or on a straight-line basis over the term of the contract. Advertising expense totaled $ 574 million, $ 364 million, and $ 518 million for the years ended December 31, 2024, 2023, and 2022, respectively. Defined contribution savings plans We have a defined contribution savings plan in the U.S. which qualifies under Section 401(k) of the Internal Revenue Code (“Code”). Our non-U.S. employees are covered by other savings plans. Expenses related to our defined contribution savings plans are recorded when services are rendered by our employees. Stock-based compensation We determine compensation expense associated with restricted stock units, performance based restricted stock units, and restricted stock awards based on the estimated fair value of our common stock on the date of grant. We determine compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes valuation model. We generally recognize compensation expense using a straight-line amortization method over the respective vesting period for awards that are ultimately expected to vest. Accordingly, stock-based compensation expense for the years ended December 31, 2024, 2023, and 2022 has been reduced for estimated forfeitures. When estimating forfeitures, we consider voluntary termination behavior of our employees as well as trends of actual forfeitures. Foreign currency Many of our foreign subsidiaries have designated the local currency of their respective countries as their functional currency. Assets and liabilities of our non-U.S. dollar functional currency subsidiaries are translated into U.S. dollars at exchange rates prevailing at the balance sheet dates. Revenues and expenses of our non-U.S. dollar functional currency subsidiaries are translated into U.S. dollars using daily exchange rates. Gains and losses resulting from these translations are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”). Gains and losses from the remeasurement of foreign currency transactions into the functional currency are recognized as other income (expense), net on our consolidated statements of income (loss). Income taxes We account for income taxes using an asset and liability approach which requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or tax returns. The measurement of current and deferred tax assets and liabilities is based on provisions of enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. If necessary, the measurement of deferred tax assets is reduced by the amount of any tax benefits that are not expected to be realized based on available evidence. We report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. We account for Global Intangible Low-Taxed Income as a current-period expense when incurred. 73 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Other income (expense), net Other income (expense), net includes: • interest income, which consists of interest earned on corporate cash and cash equivalents and short-term and long-term investments, • interest expense, which consists of interest expense, fees, and amortization of debt discount on our long-term debt (including current portion) and credit facilities, • realized and unrealized gains (losses) on strategic investments, and • other, which primarily includes foreign exchange gains and losses due to remeasurement of certain foreign currency denominated monetary assets and liabilities, forward points on derivative contracts designated as net investment hedges, and fair value changes on the derivative contracts not designated as hedging instruments. Recent accounting guidance In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-08, Intangibles – Goodwill and Other – Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets . This amended guidance requires fair value measurement of certain crypto assets each reporting period with the changes in fair value reflected in net income. The amendments also require disclosures of the name, fair value, units held, and cost bases for each significant crypto asset held and annual reconciliations of crypto asset holdings. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024. We adopted this guidance effective January 1, 2025. We have applied the amendments of this guidance as a cumulative-effect adjustment to retained earnings. The adoption of this guidance did not have a significant impact. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The amended guidance enhances income tax disclosures primarily related to the effective tax rate reconciliation and income taxes paid information. This guidance requires disclosure of specific categories in the effective tax rate reconciliation and further information on reconciling items meeting a quantitative threshold. In addition, the amended guidance requires disaggregating income taxes paid (net of refunds received) by federal, state, and foreign taxes. It also requires disaggregating individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amended guidance is effective for annual periods beginning after December 15, 2024. The guidance can be applied either prospectively or retrospectively. We are evaluating the impact this amended guidance may have on the notes to our consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . The amended guidance requires disaggregation of certain expense captions into specified natural expense categories in the disclosures within the notes to the financial statements. In addition, the guidance requires disclosure of selling expenses and its definition. The new guidance is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The guidance can be applied either prospectively or retrospectively. We are evaluating the impact this amended guidance may have on the notes to our consolidated financial statements. In January 2025, the SEC released Staff Accounting Bulletin No. 122 (“SAB 122”) rescinding SAB 121, which required an entity to record a liability to reflect its obligation to safeguard the crypto assets held for its platform users with a corresponding asset and required disclosures related to the entity’s safeguarding obligations. SAB 122 is effective for annual periods beginning after December 15, 2024 and is required to be applied on a fully retrospective basis, with early adoption permitted. Upon adoption we will no longer recognize the crypto asset safeguarding liability and corresponding safeguarding asset on our consolidated financial statements. 74 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Recently adopted accounting guidance In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The amended guidance requires incremental reportable segment disclosures, primarily about significant segment expenses. The amendments also require entities with a single reportable segment to provide all disclosures required by these amendments, and all existing segment disclosures. The amendments will be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted. We adopted this guidance in the fourth quarter of 2024. For additional information, see “Note 18—Segment Information.” There are other new accounting pronouncements issued by the FASB that we have adopted or will adopt, as applicable. We do not believe any of these new accounting pronouncements have had, or will have, a material impact on our consolidated financial statements or disclosures. NOTE 2— REVENUE We enable our customers to send and receive payments. We earn revenue primarily by completing payment transactions for our customers on our payments platform and from other value added services. Our revenues are classified into two categories: transaction revenues and revenues from other value added services. TRANSACTION REVENUES We earn transaction revenues primarily from fees paid by our customers to receive payments on our platform. These fees may have a fixed and variable component. The variable component is generally a percentage of the value of the payment amount and is known at the time the transaction is processed. For a portion of our transactions, the variable component of the fee is eligible for reimbursement when the underlying transaction is approved for a refund. We estimate the amount of fee refunds that will be processed each quarter and record a provision against our transaction revenues. The volume of activity processed on our payments platform, which results in transaction revenue, is referred to as Total Payment Volume (“TPV”). We generate additional revenues from merchants and consumers: on transactions where we perform currency conversion, when we enable cross-border transactions (i.e., transactions where the merchant and consumer are in different countries), to facilitate the instant transfer of funds for our customers from their PayPal or Venmo account to their bank account or debit card, to facilitate the purchase and sale of cryptocurrencies, as contractual compensation from sellers that violate our contractual terms (for example, through fraud or counterfeiting), and other miscellaneous fees. Our transaction revenues are also reduced by certain incentives provided to our customers. Our contracts with our customers are usually open-ended and can be terminated by either party without a termination penalty after the notice period has lapsed. Therefore, our contracts are defined at the transaction level and do not extend beyond the service already provided. Our contracts generally renew automatically without any significant material rights. Some of our contracts include tiered pricing, which are based primarily on volume. The fee charged per transaction is adjusted up or down if the volume processed for a specified period is different from prior period defined volumes. We have concluded that this volume-based pricing approach does not constitute a future material right since the discount is within a range typically offered to a class of customers with similar volume. We do not have any capitalized contract costs. Our primary service comprises a single performance obligation to complete payments on our payments platform for our customers. Using our risk assessment tools, we perform a transaction risk assessment on individual transactions to determine whether a transaction should be authorized for completion on our payments platform. When we authorize a transaction, we become obligated to our customer to complete the payment transaction. We recognize fees charged to our customers primarily on a gross basis as transaction revenue when we are the principal in respect of completing a payment transaction. As a principal to the transaction, we control the service of completing payments on our payments platform. We bear primary responsibility for the fulfillment of the payment service, contract directly with our customers, control the product specifications, and define the value proposal from our services. Further, we have full discretion in determining the fee charged to our customers, which is independent of the costs we incur in instances where we may utilize payment processors or other financial institutions to perform services on our behalf. We therefore bear full margin risk when completing a payment transaction. These fees paid to payment processors and other financial institutions are recognized as transaction expense. We are also responsible for providing customer support. 75 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) To promote engagement and acquire new users on our platform, we may provide incentives to merchants and consumers in various forms including discounts on fees, rebates, rewards, and coupons. Evaluating whether an incentive is a payment to a customer requires judgment. Incentives that are determined to be consideration payable to a customer or paid on behalf of a customer are recognized as a reduction of revenue. Incentives based on performance targets are recorded as a reduction to revenue when earned based on management’s estimate of each customer’s future performance, and incentives not based on performance targets are amortized as a reduction of revenue ratably over the contractual term. Certain incentives paid to users that are not our customers are classified as sales and marketing expense. We provide merchants and consumers with protection programs for certain purchase transactions completed on our payments platform. These protection programs help protect both merchants and consumers from financial loss, resulting from, among other things, counterparty non-performance. These protection programs do not provide a separate service to our customers and we estimate and record associated costs in transaction and credit losses during the period the payment transaction is completed. REVENUES FROM OTHER VALUE ADDED SERVICES We earn revenues from other value added services, which are comprised primarily of revenue earned through partnerships, referral fees, subscription fees, gateway fees, and other services that we provide to our consumers and merchants. These contracts typically have one performance obligation which is provided and recognized over the term of the contract. The transaction price is generally fixed and known at the end of each reporting period; however, for some agreements, it may be necessary to estimate the transaction price using the expected value method. Revenue earned from other value added services is recorded on a net basis when we are considered the agent with respect to processing transactions. We also earn revenues from interest and fees earned on our portfolio of loans receivable, and interest earned on certain assets underlying customer balances. Interest and fees earned on the portfolio of loans receivable are computed and recognized based on the effective interest method and are presented net of any required reserves and amortization of deferred origination costs. We record a contract asset when we have a conditional right to consideration for services we have already transferred to our customer. These contract assets are included in other assets in our consolidated balance sheets and were $ 207 million and $ 185 million as of December 31, 2024 and 2023, respectively. DISAGGREGATION OF REVENUE We believe that the nature, amount, timing, and uncertainty of our revenue and cash flows and how they are affected by economic factors are most appropriately depicted through our primary geographical markets and types of revenue categories (transaction revenues and revenues from other value added services). Revenues recorded within these categories are earned from similar products and services for which the nature of associated fees and the related revenue recognition models are substantially similar. The following table presents our revenue disaggregated by primary geographical market and category: Year Ended December 31, 2024 2023 2022 (In millions) Primary geographical markets U.S. $ 18,267 $ 17,253 $ 15,807 Other countries (1) 13,530 12,518 11,711 Total net revenues (2) $ 31,797 $ 29,771 $ 27,518 Revenue category Transaction revenues $ 28,842 $ 26,857 $ 25,206 Revenues from other value added services 2,955 2,914 2,312 Total net revenues (2) $ 31,797 $ 29,771 $ 27,518 (1) No single country included in the other countries category generated more than 10% of total net revenues. (2) Total net revenues include $ 2.1 billion, $ 1.8 billion, and $ 1.3 billion for the years ended December 31, 2024, 2023, and 2022, 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 76 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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. Net revenues are attributed to the country in which the party paying our fee is located. NOTE 3— NET INCOME (LOSS) PER SHARE Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding for the period. The dilutive effect of outstanding equity incentive awards is reflected in diluted net income (loss) per share by application of the treasury stock method. The calculation of diluted net income (loss) per share excludes all anti-dilutive common shares. During periods when we report net loss, diluted net loss per share is the same as basic net loss per share because the effects of potentially dilutive items would decrease the net loss per share. The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated: Year Ended December 31, 2024 2023 2022 (In millions, except per share amounts) Numerator: Net income (loss) $ 4,147 $ 4,246 $ 2,419 Denominator: Weighted average shares of common stock — basic 1,029 1,103 1,154 Dilutive effect of equity incentive awards 10 4 4 Weighted average shares of common stock — diluted 1,039 1,107 1,158 Net income (loss) per share: Basic $ 4.03 $ 3.85 $ 2.10 Diluted $ 3.99 $ 3.84 $ 2.09 Common stock equivalents excluded from net income (loss) per diluted share because their effect would have been anti-dilutive or potentially dilutive 9 21 13 NOTE 4— BUSINESS COMBINATIONS AND DIVESTITURES There were no acquisitions accounted for as business combinations completed in 2024, 2023, or 2022. There were no divestitures completed in 2024 or 2022. DIVESTITURES COMPLETED IN 2023 On November 1, 2023, we completed the sale of Happy Returns to United Parcel Services, Inc. for approximately $ 466 million in cash, net of cash divested, and derecognized the assets held for sale, consisting primarily of $ 81 million of goodwill and $ 13 million of net intangible assets. The sale of Happy Returns enabled us to focus on our core business and priorities. A pre-tax gain of $ 339 million, net of transaction costs, was included in restructuring and other in the consolidated statements of income (loss) for the year ended December 31, 2023. NOTE 5— GOODWILL AND INTANGIBLE ASSETS GOODWILL The following table presents goodwill balances and adjustments to those balances during the years ended December 31, 2024 and 2023: December 31, 2022 Goodwill Acquired Adjustments December 31, 2023 Goodwill Acquired Adjustments December 31, 2024 (In millions) Total goodwill $ 11,209 $ — $ ( 183 ) $ 11,026 $ — $ ( 189 ) $ 10,837 77 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The adjustments to goodwill during 2024 pertained to foreign currency translation adjustments. The adjustments to goodwill during 2023 pertained to foreign currency translation adjustments and a reduction in goodwill associated with the divestiture of Happy Returns. For additional information, see “Note 4—Business Combinations and Divestitures.” INTANGIBLE ASSETS The components of identifiable intangible assets were as follows: December 31, 2024 December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (In millions, except years) Intangible assets (1) : Customer lists and user base $ 854 $ ( 601 ) $ 253 $ 913 $ ( 507 ) $ 406 Marketing related 60 ( 38 ) 22 67 ( 30 ) 37 Developed technology — — — 77 ( 63 ) 14 All other 182 ( 131 ) 51 188 ( 108 ) 80 Intangible assets, net $ 1,096 $ ( 770 ) $ 326 $ 1,245 $ ( 708 ) $ 537 (1) Excludes intangible assets which have been fully amortized, but are still in use. In the year ended December 31, 2023, we recorded a reduction of approximately $ 36 million of gross intangible assets, with a net carrying amount of $ 13 million, associated with the divestiture of Happy Returns as described in “Note 4—Business Combinations and Divestitures.” In the year ended December 31, 2023, we retired approximately $ 141 million of fully amortized intangible assets, consisting primarily of $ 79 million in customer lists and user base and $ 62 million in developed technology. Amortization expense for intangible assets was $ 207 million, $ 226 million, and $ 471 million for the years ended December 31, 2024, 2023, and 2022, respectively. Expected future intangible asset amortization as of December 31, 2024 was as follows: Fiscal years: (In millions) 2025 $ 144 2026 88 2027 53 2028 41 $ 326 NOTE 6— LEASES PayPal enters into various leases, which are primarily real estate operating leases. We use these properties for executive and administrative offices, customer services and operations centers, product development offices, and data centers. PayPal also enters into computer equipment finance leases. While a majority of our lease agreements do not contain an explicit interest rate, certain of our lease agreements are subject to changes based on the Consumer Price Index or another referenced index. In the event of changes to the relevant index, lease liabilities are not remeasured and instead are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. The short-term lease exemption has been adopted for all leases with a duration of less than 12 months. PayPal’s lease portfolio includes a small number of subleases. A sublease situation can arise when currently leased real estate space is available and is surplus to operational requirements. 78 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The components of lease expense were as follows: Year Ended December 31, 2024 2023 2022 (In millions) Operating lease expense $ 159 $ 156 $ 171 Finance lease expense Amortization of ROU lease assets 8 — — Total finance lease expense 8 — — Sublease income ( 12 ) ( 9 ) ( 8 ) Total lease expense, net $ 155 $ 147 $ 163 Supplemental cash flow information related to leases was as follows: Year Ended December 31, 2024 2023 2022 (In millions) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 169 $ 174 $ 172 Financing cash flows from finance leases $ 60 $ — $ — ROU lease assets obtained in exchange for new operating lease liabilities $ 343 $ ( 1 ) $ 131 ROU lease assets obtained in exchange for new finance lease liabilities $ 82 $ — $ — Other non-cash ROU lease asset activity (1) $ — $ ( 40 ) $ ( 52 ) (1) ROU lease asset impairment. Refer to “Note 17—Restructuring and Other” for further details. Supplemental balance sheet information related to leases was as follows: As of December 31, 2024 2023 (In millions, except weighted-average figures) Operating leases Finance leases Operating leases Finance leases ROU lease assets $ 599 $ 73 $ 390 $ — Current lease liabilities 135 5 144 — Long-term lease liabilities 629 18 416 — Total lease liabilities $ 764 $ 23 $ 560 $ — Weighted-average remaining lease term 5.9 years 4.4 years 5.0 years — Weighted-average discount rate 4 % 5 % 4 % — % Future minimum lease payments for our leases as of December 31, 2024 were as follows: Operating Leases Finance Leases Fiscal years: (In millions) 2025 $ 164 $ 7 2026 171 6 2027 153 6 2028 103 6 2029 88 — Thereafter 198 — Total $ 877 $ 25 Less: present value discount ( 113 ) ( 2 ) Lease liability $ 764 $ 23 79 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Operating lease amounts include minimum lease payments under our non-cancelable operating leases primarily for office and data center facilities. Finance lease amounts include minimum lease payments under our non-cancelable finance leases primarily for computer equipment. The amounts presented are consistent with contractual terms and are not expected to differ significantly from actual results under our existing leases. We recognize rent expense under such agreements on a straight-line basis. NOTE 7— OTHER FINANCIAL STATEMENT DETAILS CRYPTO ASSET SAFEGUARDING LIABILITY AND CORRESPONDING SAFEGUARDING ASSET We allow our customers in certain markets to buy, hold, sell, convert, receive, and send certain cryptocurrencies as well as use the proceeds from sales of cryptocurrencies to pay for purchases at checkout. These cryptocurrencies consist of Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and PayPal USD stablecoin (collectively, “our customers’ crypto assets”). We engage third parties, which are licensed trust companies, to provide certain custodial services, including holding our customers’ cryptographic key information, securing our customers’ crypto assets, and protecting them from loss or theft, including indemnification against certain types of losses such as theft. Our third-party custodians hold the crypto assets in a custodial account in PayPal’s name for the benefit of PayPal’s customers. 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 December 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 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 consolidated balance sheets. We also recognize a corresponding safeguarding asset which is recorded in prepaid expenses and other current assets on our consolidated balance sheets. The crypto asset safeguarding liability and corresponding safeguarding asset are measured and recorded at fair value on a recurring basis using quoted prices for the underlying crypto assets on the active exchange that we have identified as the principal market at the balance sheet date. The corresponding safeguarding asset may be adjusted for loss events, as applicable. As of December 31, 2024 and 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 December 31, 2024 and 2023: As of December 31, 2024 2023 (In millions) Bitcoin $ 2,030 $ 741 Ethereum 731 412 Other 125 88 Crypto asset safeguarding liability $ 2,886 $ 1,241 Crypto asset safeguarding asset $ 2,886 $ 1,241 80 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) PROPERTY AND EQUIPMENT, NET As of December 31, 2024 2023 (In millions) Property and equipment, net: Computer equipment and software $ 3,360 $ 3,377 Internal use software and website development costs 4,714 4,257 Land and buildings 337 333 Leasehold improvements 343 317 Furniture and fixtures 133 118 Development in progress and other 104 34 Total property and equipment, gross 8,991 8,436 Accumulated depreciation and amortization ( 7,483 ) ( 6,948 ) Total property and equipment, net $ 1,508 $ 1,488 Depreciation and amortization expense was $ 825 million in 2024 and $ 846 million for both 2023 and 2022. Net changes in accounts payable on our consolidated statements of cash flows includes non-cash investing activities associated with property and equipment; the impact of which was an increase of $ 14 million and $ 7 million in 2024 and 2023, respectively, and a decrease of $ 36 million in 2022. Geographical information The following table summarizes long-lived assets based on geography, which consist of property and equipment, net and operating lease ROU assets: As of December 31, 2024 2023 (In millions) Long-lived assets: U.S. $ 1,885 $ 1,629 Other countries 222 249 Total long-lived assets $ 2,107 $ 1,878 Long-lived assets attributed to the U.S. and other countries are based upon the country in which the asset is located or owned. 81 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the year ended December 31, 2024: Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Available-for-sale Debt Securities Foreign Currency Translation Adjustment ( “ CTA ”) 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 251 108 ( 204 ) 122 ( 73 ) 204 Less: Amount of net gains (losses) reclassified from AOCI 48 ( 40 ) — — — 8 Net current period other comprehensive income (loss) 203 148 ( 204 ) 122 ( 73 ) 196 Ending balance $ 147 $ 14 $ ( 935 ) $ 313 $ ( 89 ) $ ( 550 ) The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the year ended December 31, 2023: Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Available-for-sale Debt Securities Foreign CTA 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 ( 56 ) 434 ( 156 ) 192 ( 144 ) 270 Less: Amount of net gains (losses) reclassified from AOCI 111 ( 23 ) — — — 88 Net current period other comprehensive income (loss) ( 167 ) 457 ( 156 ) 192 ( 144 ) 182 Ending balance $ ( 56 ) $ ( 134 ) $ ( 731 ) $ 191 $ ( 16 ) $ ( 746 ) The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the year ended December 31, 2022: Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Available-for-sale Debt Securities Foreign CTA Net Investment Hedges CTA Gains (Losses) Estimated Tax (Expense) Benefit Total (In millions) Beginning balance $ 199 $ ( 87 ) $ ( 270 ) $ 24 $ ( 2 ) $ ( 136 ) Other comprehensive income (loss) before reclassifications 374 ( 499 ) ( 305 ) ( 25 ) 130 ( 325 ) Less: Amount of net gains (losses) reclassified from AOCI 462 5 — — — 467 Net current period other comprehensive income (loss) ( 88 ) ( 504 ) ( 305 ) ( 25 ) 130 ( 792 ) Ending balance $ 111 $ ( 591 ) $ ( 575 ) $ ( 1 ) $ 128 $ ( 928 ) 82 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table provides details about reclassifications out of AOCI for the periods presented below: Details about AOCI Components Amount of Gains (Losses) Reclassified from AOCI Affected Line Item in the Statements of Income (Loss) Year Ended December 31, 2024 2023 2022 (In millions) Net gains (losses) on cash flow hedges — foreign exchange contracts $ 48 $ 111 $ 462 Net revenues Net gains (losses) on investments ( 40 ) ( 21 ) — Net revenues Net gains (losses) on investments — ( 2 ) 5 Other income (expense), net 8 88 467 Income before income taxes — — — Income tax expense Total reclassifications for the period $ 8 $ 88 $ 467 Net income (loss) OTHER INCOME (EXPENSE), NET The following table reconciles the components of other income (expense), net for the periods presented below: Year Ended December 31, 2024 2023 2022 (In millions) Interest income $ 662 $ 480 $ 174 Interest expense ( 382 ) ( 347 ) ( 304 ) Net gains (losses) on strategic investments ( 285 ) 201 ( 304 ) Other 9 49 ( 37 ) Other income (expense), net $ 4 $ 383 $ ( 471 ) Refer to “Note 1 — Overview and Summary of Significant Accounting Policies” for details on the composition of these balances. 83 Table of Contents PayPal Holdings, Inc. NOTES TO 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 December 31, 2024 and 2023: December 31, 2024 December 31, 2023 (In millions) Cash and cash equivalents (1) $ 6,561 $ 9,081 Funds receivable and customer accounts: Cash and cash equivalents (2) $ 15,828 $ 12,750 Time deposits 15 82 Available-for-sale debt securities 14,551 15,708 Funds receivable 7,277 10,395 Total funds receivable and customer accounts $ 37,671 $ 38,935 Short-term investments: Time deposits $ 107 $ 128 Available-for-sale debt securities 4,154 4,848 Restricted cash 1 3 Total short-term investments $ 4,262 $ 4,979 Long-term investments: Time deposits $ 22 $ 45 Available-for-sale debt securities 3,002 1,391 Strategic investments 1,559 1,837 Total long-term investments $ 4,583 $ 3,273 (1) Includes nil and $ 777 million of available-for-sale debt securities with original maturities of three months or less as of December 31, 2024 and 2023, respectively. (2) Includes $ 149 million and $ 399 million of available-for-sale debt securities with original maturities of three months or less as of December 31, 2024 and 2023, respectively. 84 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) As of December 31, 2024 and 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: December 31, 2024 (1) Gross Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (In millions) Funds receivable and customer accounts: U.S. government and agency securities $ 5,709 $ 4 $ ( 2 ) $ 5,711 Foreign government and agency securities 77 — — 77 Corporate debt securities 405 — — 405 Mortgage-backed and asset-backed securities 4,039 13 ( 5 ) 4,047 Municipal securities 503 1 — 504 Commercial paper 3,391 1 — 3,392 Short-term investments: U.S. government and agency securities 188 — ( 2 ) 186 Foreign government and agency securities 84 — — 84 Corporate debt securities 1,751 — ( 2 ) 1,749 Mortgage-backed and asset-backed securities 848 5 — 853 Commercial paper 1,281 1 — 1,282 Long-term investments: U.S. government and agency securities 235 — — 235 Foreign government and agency securities 124 — ( 1 ) 123 Corporate debt securities 1,601 3 ( 2 ) 1,602 Mortgage-backed and asset-backed securities 1,042 1 ( 1 ) 1,042 Total available-for-sale debt securities (2) $ 21,278 $ 29 $ ( 15 ) $ 21,292 (1) “—” Denotes gross unrealized gain or unrealized loss of less than $1 million in a given position. (2) Excludes foreign currency denominated available-for-sale debt securities accounted for under the fair value option. Refer to “Note 9 — Fair Value Measurement of Assets and Liabilities.” 85 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) December 31, 2023 (1) Gross Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (In millions) Cash and cash equivalents: U.S. government and agency securities $ 428 $ — $ — $ 428 Commercial paper 349 — — 349 Funds receivable and customer accounts: U.S. government and agency securities 8,549 8 ( 79 ) 8,478 Foreign government and agency securities 620 — ( 8 ) 612 Corporate debt securities 1,507 — ( 18 ) 1,489 Asset-backed securities 1,421 4 ( 2 ) 1,423 Municipal securities 639 1 ( 2 ) 638 Commercial paper 2,846 4 ( 1 ) 2,849 Short-term investments: U.S. government and agency securities 632 — ( 9 ) 623 Foreign government and agency securities 353 — ( 6 ) 347 Corporate debt securities 1,494 1 ( 13 ) 1,482 Asset-backed securities 719 3 ( 4 ) 718 Commercial paper 1,678 1 ( 1 ) 1,678 Long-term investments: U.S. government and agency securities 188 — ( 8 ) 180 Foreign government and agency securities 33 — ( 1 ) 32 Corporate debt securities 424 — ( 6 ) 418 Asset-backed securities 759 2 — 761 Total available-for-sale debt securities (2) $ 22,639 $ 24 $ ( 158 ) $ 22,505 (1) “—” Denotes gross unrealized gain or unrealized loss of less than $1 million in a given position. (2) Excludes foreign currency denominated available-for-sale debt securities accounted for under the fair value option. 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 $ 140 million and $ 101 million at December 31, 2024 and 2023, respectively, and were included in other current assets on our consolidated balance sheets. 86 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) As of December 31, 2024 and 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: December 31, 2024 (1) Less than 12 months 12 months or longer Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses (In millions) Funds receivable and customer accounts: U.S. government and agency securities $ 1,314 $ ( 1 ) $ 517 $ ( 1 ) $ 1,831 $ ( 2 ) Foreign government and agency securities 57 — — — 57 — Corporate debt securities 105 — 50 — 155 — Mortgage-backed and asset-backed securities 1,673 ( 5 ) 2 — 1,675 ( 5 ) Municipal securities 29 — 36 — 65 — Commercial paper 275 — — — 275 — Short-term investments: U.S. government and agency securities — — 186 ( 2 ) 186 ( 2 ) Corporate debt securities 618 ( 2 ) 90 — 708 ( 2 ) Mortgage-backed and asset-backed securities 250 — 18 — 268 — Commercial paper 218 — — — 218 — Long-term investments: U.S. government and agency securities 50 — — — 50 — Foreign government and agency securities 90 — 34 ( 1 ) 124 ( 1 ) Corporate debt securities 347 ( 1 ) 9 ( 1 ) 356 ( 2 ) Mortgage-backed and asset-backed securities 610 ( 1 ) — — 610 ( 1 ) Total available-for-sale debt securities $ 5,636 $ ( 10 ) $ 942 $ ( 5 ) $ 6,578 $ ( 15 ) (1) “—” Denotes gross unrealized loss or fair value of less than $1 million in a given position. 87 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) December 31, 2023 (1) Less than 12 months 12 months or longer Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses (In millions) Cash and cash equivalents: Commercial paper $ 349 $ — $ — $ — $ 349 $ — Funds receivable and customer accounts: U.S. government and agency securities 2,626 ( 8 ) 3,917 ( 71 ) 6,543 ( 79 ) Foreign government and agency securities 36 — 451 ( 8 ) 487 ( 8 ) Corporate debt securities 100 — 1,364 ( 18 ) 1,464 ( 18 ) Asset-backed securities 253 — 473 ( 2 ) 726 ( 2 ) Municipal securities 196 ( 1 ) 156 ( 1 ) 352 ( 2 ) Commercial paper 1,088 ( 1 ) — — 1,088 ( 1 ) Short-term investments: U.S. government and agency securities — — 296 ( 9 ) 296 ( 9 ) Foreign government and agency securities — — 347 ( 6 ) 347 ( 6 ) Corporate debt securities 194 — 797 ( 13 ) 991 ( 13 ) Asset-backed securities 131 — 144 ( 4 ) 275 ( 4 ) Commercial paper 737 ( 1 ) — — 737 ( 1 ) Long-term investments: U.S. government and agency securities — — 180 ( 8 ) 180 ( 8 ) Foreign government and agency securities — — 32 ( 1 ) 32 ( 1 ) Corporate debt securities 120 — 120 ( 6 ) 240 ( 6 ) Asset-backed securities 109 — 195 — 304 — Total available-for-sale debt securities $ 5,939 $ ( 11 ) $ 8,472 $ ( 147 ) $ 14,411 $ ( 158 ) (1) “—” Denotes gross unrealized loss or fair value of less than $1 million in a given position. Unrealized losses have not been recognized into income as we neither intend to sell, nor anticipate that it is more likely than not that we will be required to sell, the securities before recovery of their amortized cost basis. The decline in fair value was due primarily to changes in market interest rates rather than credit losses. We will continue to monitor the performance of the investment portfolio and assess whether impairment due to expected credit losses has occurred. During the years ended December 31, 2024 and 2023, we received $ 33.5 billion and $ 30.3 billion in proceeds from the sales and maturities of available-for-sale debt securities and incurred gross realized losses of $ 44 million and $ 26 million, respectively, and de minimis gross realized gains, which were determined using the specific identification method. 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: December 31, 2024 Amortized Cost Fair Value (In millions) One year or less $ 11,392 $ 11,392 After one year through five years 4,968 4,980 After five years through ten years 3,331 3,337 After ten years 1,587 1,583 Total $ 21,278 $ 21,292 Actual maturities may differ from contractual maturities as certain securities may be prepaid. 88 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Supplemental cash flow information related to investments Non-cash investing transactions that are not reflected in the consolidated statement of cash flows for the year ended December 31, 2024 include the purchase of investments of $ 150 million that have not yet settled. STRATEGIC INVESTMENTS Our strategic investments include marketable equity securities, which are publicly traded, and non-marketable equity securities, which are primarily investments in privately held companies. Our marketable equity securities have readily determinable fair values and are recorded as long-term investments on our consolidated balance sheets at fair value with changes in fair value recorded in other income (expense), net on our consolidated statements of income (loss). Marketable equity securities totaled $ 23 million and $ 24 million as of December 31, 2024 and 2023, respectively. Our non-marketable equity securities are recorded in long-term investments on our consolidated balance sheets. The carrying value of our non-marketable equity securities totaled $ 1.5 billion and $ 1.8 billion as of December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, we had non-marketable equity securities of $ 200 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. The remaining non-marketable equity securities do not have a readily determinable fair value and we measure these equity investments at cost minus impairment, if any, and adjust for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer. All gains and losses on these investments, realized and unrealized, and our share of earnings or losses from investments accounted for using the equity method are recognized in other income (expense), net on our consolidated statements of income (loss). Measurement Alternative adjustments The adjustments to the carrying value of our non-marketable equity securities accounted for under the Measurement Alternative in the years ended December 31, 2024 and 2023 were as follows: Year Ended December 31, 2024 2023 (In millions) Carrying amount, beginning of period $ 1,631 $ 1,687 Adjustments related to non-marketable equity securities: Net (sales) additions (1) ( 2 ) 67 Gross unrealized gains 20 32 Gross unrealized losses and impairments ( 313 ) ( 155 ) Carrying amount, end of period $ 1,336 $ 1,631 (1) Net (sales) 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 December 31, 2024 and 2023, respectively: December 31, 2024 December 31, 2023 (In millions) Cumulative gross unrealized gains $ 1,187 $ 1,168 Cumulative gross unrealized losses and impairments $ ( 562 ) $ ( 283 ) 89 Table of Contents PayPal Holdings, Inc. NOTES TO 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 December 31, 2024 and 2023, respectively: Year Ended December 31, 2024 2023 (In millions) Net unrealized gains (losses) $ ( 270 ) $ ( 128 ) 90 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 9— FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES 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 December 31, 2024 and 2023: December 31, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) (In millions) Assets: Cash and cash equivalents (1) : Money market fund $ 14 $ 14 $ — Short-term investments (2) : U.S. government and agency securities 186 — 186 Foreign government and agency securities 84 — 84 Corporate debt securities 1,749 — 1,749 Mortgage-backed and asset-backed securities 853 — 853 Commercial paper 1,282 — 1,282 Total short-term investments 4,154 — 4,154 Funds receivable and customer accounts (3) : U.S. government and agency securities 5,711 — 5,711 Foreign government and agency securities 379 — 379 Corporate debt securities 667 — 667 Mortgage-backed and asset-backed securities 4,047 — 4,047 Municipal securities 504 — 504 Commercial paper 3,392 — 3,392 Total funds receivable and customer accounts 14,700 — 14,700 Derivatives (4) 243 — 243 Crypto asset safeguarding asset (4) 2,886 — 2,886 Long-term investments (2),(5) : U.S. government and agency securities 235 — 235 Foreign government and agency securities 123 — 123 Corporate debt securities 1,602 — 1,602 Mortgage-backed and asset-backed securities 1,042 — 1,042 Marketable equity securities 23 23 — Total long-term investments 3,025 23 3,002 Total financial assets $ 25,022 $ 37 $ 24,985 Liabilities: Derivatives (4) $ 37 $ — $ 37 Crypto asset safeguarding liability (4) 2,886 — 2,886 Total financial liabilities $ 2,923 $ — $ 2,923 (1) Excludes cash of $ 6.5 billion not measured and recorded at fair value. (2) Excludes restricted cash of $ 1 million and time deposits of $ 129 million not measured and recorded at fair value. (3) Excludes cash, time deposits, and funds receivable of $ 23.0 billion underlying funds receivable and customer accounts not measured and recorded at fair value. (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 consolidated balance sheets. Crypto safeguarding asset and associated liability are recorded within “prepaid expenses and other current assets” and “accrued expenses and other current liabilities,” respectively, on our consolidated balance sheets. (5) Excludes non-marketable equity securities of $ 1.5 billion measured using the Measurement Alternative or equity method accounting. 91 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) December 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) (In millions) Assets: Cash and cash equivalents (1) : U.S. government and agency securities $ 428 $ — $ 428 Commercial paper 349 — 349 Money market fund 160 160 — Total cash and cash equivalents 937 160 777 Short-term investments (2) : U.S. government and agency securities 623 — 623 Foreign government and agency securities 347 — 347 Corporate debt securities 1,482 — 1,482 Asset-backed securities 718 — 718 Commercial paper 1,678 — 1,678 Total short-term investments 4,848 — 4,848 Funds receivable and customer accounts (3) : U.S. government and agency securities 8,478 — 8,478 Foreign government and agency securities 1,118 — 1,118 Corporate debt securities 1,601 — 1,601 Asset-backed securities 1,423 — 1,423 Municipal securities 638 — 638 Commercial paper 2,849 — 2,849 Total funds receivable and customer accounts 16,107 — 16,107 Derivatives (4) 141 — 141 Crypto asset safeguarding asset (4) 1,241 — 1,241 Long-term investments (2), (5) : U.S. government and agency securities 180 — 180 Foreign government and agency securities 32 — 32 Corporate debt securities 418 — 418 Asset-backed securities 761 — 761 Marketable equity securities 24 24 — Total long-term investments 1,415 24 1,391 Total financial assets $ 24,689 $ 184 $ 24,505 Liabilities: Derivatives (4) $ 131 $ — $ 131 Crypto asset safeguarding liability (4) 1,241 — 1,241 Total financial liabilities $ 1,372 $ — $ 1,372 (1) Excludes cash of $ 8.1 billion not measured and recorded at fair value. (2) Excludes restricted cash of $ 3 million and time deposits of $ 173 million not measured and recorded at fair value. (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. (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 consolidated balance sheets. Crypto safeguarding asset and associated liability are recorded within “prepaid expenses and other current assets” and “accrued expenses and other current liabilities,” respectively, on our consolidated balance sheets. (5) Excludes non-marketable equity securities of $ 1.8 billion measured using the Measurement Alternative or equity method accounting. 92 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Our financial assets classified within Level 1 are valued using quoted prices for identical assets in active markets. There are no active markets for our crypto asset safeguarding liability or the corresponding safeguarding asset. Accordingly, we have valued the asset and liability using quoted prices on the active exchange that we have identified as the principal market for the underlying crypto assets (Level 2). All other financial assets and liabilities are valued using quoted prices for identical instruments in less active markets, readily available pricing sources for comparable instruments, or models using market observable inputs (Level 2). 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 December 31, 2024 and 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 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 December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Amortized Cost Fair Value Amortized Cost Fair Value (In millions) Funds receivable and customer accounts $ 566 $ 564 $ 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 years ended December 31, 2024 and 2023 : Year Ended December 31, 2024 2023 (In millions) Funds receivable and customer accounts $ ( 29 ) $ 13 ASSETS MEASURED AND RECORDED AT FAIR VALUE ON A NON-RECURRING BASIS The following tables summarize our assets held as of December 31, 2024 and 2023 for which a non-recurring fair value measurement was recorded during the years ended December 31, 2024 and 2023, respectively: December 31, 2024 Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) (In millions) Loans and interest receivable, held for sale $ 541 $ 541 $ — Non-marketable equity securities measured using the Measurement Alternative (1) 476 131 345 Total $ 1,017 $ 672 $ 345 (1) Excludes non-marketable equity securities of $ 860 million accounted for under the Measurement Alternative for which no observable price changes occurred during the year ended December 31, 2024. 93 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) December 31, 2023 Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) (In millions) Loans and interest receivable, held for sale (1) $ 563 $ — $ 563 Non-marketable equity securities measured using the Measurement Alternative (2) 440 131 309 Other assets (3) 112 112 — Total $ 1,115 $ 243 $ 872 (1) As of December 31, 2023, loans and interest receivable, held for sale were valued using a price-based model. The price was the significant unobservable input and was determined based upon certain loan and risk classifications of the portfolio. Low, high and weighted average prices were all $ 0.99 , measured in relation to $ 1.00 par. (2) Excludes non-marketable equity securities of $ 1.2 billion accounted for under the Measurement Alternative for which no observable price changes occurred during the year ended December 31, 2023. (3) Consists of ROU lease assets recorded at fair value pursuant to impairment charges that occurred during the year ended December 31, 2023. Beginning with the first quarter of 2024, we measure loans and interest receivable, held for sale using observable inputs, such as the most recent executed prices for comparable loans sold to the global investment firm. Accordingly, loans and interest receivable, held for sale are classified within Level 2 in the fair value hierarchy. Refer to “Note 11—Loans and Interest Receivable” for additional information on loans and interest receivable, held for sale. We measure the non-marketable equity securities accounted for under the Measurement Alternative at cost minus impairment, if any, adjusted for observable price changes in orderly transactions for an identical or similar investment in the same issuer. Non-marketable equity securities that have been remeasured during the period based on observable price changes are classified within Level 2 in the fair value hierarchy because we estimate the fair value based on valuation methods which only include significant inputs that are observable, such as the observable transaction price at the transaction date. The fair value of non-marketable equity securities are classified within Level 3 when we estimate fair value using significant unobservable inputs such as when we remeasure due to impairment and use discount rates, forecasted cash flows, and market data of comparable companies, among others. We evaluate ROU assets related to leases for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of an ROU asset may not be recoverable. 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. FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AND RECORDED AT FAIR VALUE Our financial instruments, including cash, restricted cash, time deposits, reverse repurchase agreements, loans and interest receivable, net, certain customer accounts, notes receivable, and long-term debt related to borrowings on our credit facilities are carried at amortized cost, which approximates their fair value. 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 December 31, 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. If these financial instruments were measured at fair value in the financial statements, cash would be classified as Level 1; restricted cash, time deposits, reverse repurchase agreements, certain customer accounts, and term debt (including current portion) would be classified as Level 2; and the remaining financial instruments would be classified as Level 3 in the fair value hierarchy. NOTE 10— DERIVATIVE INSTRUMENTS SUMMARY OF DERIVATIVE INSTRUMENTS Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign exchange rates. Our derivatives expose us to credit risk to the extent that our counterparties may be unable to meet the terms of the arrangement. We seek to mitigate such risk by limiting our counterparties to, and by spreading the risk across, major financial institutions and by entering into collateral security arrangements. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored on an ongoing basis. We do not use any derivative instruments for trading or speculative purposes. 94 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Cash flow hedges We have significant international revenues and expenses denominated in foreign currencies, which subjects us to foreign exchange risk. We have a foreign currency exposure management program in which we designate certain foreign exchange contracts, generally with maturities of 12 months or less, to reduce the volatility of cash flows primarily related to forecasted revenues and expenses denominated in certain foreign currencies. The objective of these foreign exchange contracts is to help mitigate the risk that the U.S. dollar-equivalent cash flows are adversely affected by changes in the applicable U.S. dollar/foreign currency exchange rate. These derivative instruments are designated as cash flow hedges and accordingly, the derivative’s gain or loss is initially reported as a component of AOCI and subsequently reclassified into revenue or applicable expense line item in the consolidated statements of income (loss) in the same period the forecasted transaction affects earnings. We evaluate the effectiveness of our foreign exchange contracts on a quarterly basis by comparing the critical terms of the derivative instruments with the critical terms of the forecasted cash flows of the hedged item; if the critical terms are the same, we conclude the hedge will be perfectly effective. We do not exclude any component of the changes in fair value of the derivative instruments from the assessment of hedge effectiveness. We report cash flows arising from derivative instruments consistent with the classification of cash flows from the underlying hedged items that these derivatives are hedging. Accordingly, the cash flows associated with derivatives designated as cash flow hedges are classified in cash flows from operating activities on our consolidated statements of cash flows. As of December 31, 2024, we estimated that $ 147 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 years ended December 31, 2024, 2023, and 2022, 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. Net investment hedges We use forward foreign exchange contracts to reduce the foreign exchange risk related to our investment in certain foreign subsidiaries. These derivatives are designated as net investment hedges and accordingly, the gains and losses on the portion of the derivatives included in the assessment of hedge effectiveness is recorded in AOCI as part of foreign currency translation. We exclude forward points from the assessment of hedge effectiveness and recognize them in other income (expense), net on a straight-line basis over the life of the hedge. The accumulated gains and losses associated with these instruments will remain in AOCI until the foreign subsidiaries are sold or substantially liquidated, at which point they will be reclassified into earnings. The cash flows associated with derivatives designated as a net investment hedge are classified in cash flows from investing activities on our consolidated statements of cash flows. We have no t reclassified any gains or losses related to net investment hedges from AOCI into earnings for any of the periods presented. Foreign exchange contracts not designated as hedging instruments We have a foreign currency exposure management program in which we use foreign exchange contracts to offset the foreign exchange risk of our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries. These contracts are not designated as hedging instruments and reduce, but do not entirely eliminate, the impact of foreign exchange rate movements on our assets and liabilities. The gains and losses due to remeasurement of certain foreign currency denominated monetary assets and liabilities are recorded in other income (expense), net, which are offset by the gains and losses on these foreign exchange contracts. The cash flows associated with our non-designated derivatives used to hedge foreign currency denominated monetary assets and liabilities are classified in cash flows from operating activities on our consolidated statements of cash flows. 95 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) FAIR VALUE OF DERIVATIVE CONTRACTS The fair value of our outstanding derivative instruments as of December 31, 2024 and 2023 was as follows: Balance Sheet Location As of December 31, 2024 2023 Derivative Assets: (In millions) Foreign exchange contracts designated as hedging instruments Other current assets $ 157 $ 7 Foreign exchange contracts designated as hedging instruments Other assets (non-current) — 77 Foreign exchange contracts not designated as hedging instruments Other current assets 86 57 Total derivative assets $ 243 $ 141 Derivative Liabilities: Foreign exchange contracts designated as hedging instruments Other current liabilities $ 10 $ 64 Foreign exchange contracts not designated as hedging instruments Other current liabilities 27 67 Total derivative liabilities $ 37 $ 131 EFFECT OF DERIVATIVE CONTRACTS ON CONSOLIDATED FINANCIAL STATEMENTS The following table provides the location in the consolidated statements of income (loss) and amount of recognized gains or losses related to our derivative instruments: Year Ended December 31, 2024 2023 2022 (In millions) Net revenues Other income (expense), net Net revenues Other income (expense), net Net revenues Other income (expense), net Total amounts presented in the consolidated statements of income (loss) in which the effects of cash flow hedges and net investment hedges are recorded $ 31,797 $ 4 $ 29,771 $ 383 $ 27,518 $ ( 471 ) Gains (losses) on derivatives in cash flow hedging relationship: Amount of net gains (losses) on foreign exchange contracts reclassified from AOCI 48 — 111 — 462 — Gains (losses) on derivatives in net investment hedging relationship: Amount of net gains (losses) on foreign exchange contracts excluded from the assessment of effectiveness — 67 — 100 — 84 Gains (losses) on derivatives not designated as hedging instruments: Amount of net gains (losses) on foreign exchange contracts — 111 — ( 263 ) — 118 Amount of gains (losses) on equity derivative contracts (1) — — — 44 — ( 174 ) Total net gains (losses) $ 48 $ 178 $ 111 $ ( 119 ) $ 462 $ 28 (1) During the years ended December 31, 2023 and 2022, equity derivative contracts were entered into and matured in association with the sale of marketable equity securities related to strategic investments. The cash flows associated with the equity derivative contracts were classified in cash flows from investing activities on our consolidated statements of cash flows. 96 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) 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): Year Ended December 31, 2024 2023 2022 (In millions) Unrealized net gains (losses) on foreign exchange contracts designated as cash flow hedges $ 251 $ ( 56 ) $ 374 Unrealized net gains (losses) on foreign exchange contracts designated as net investment hedges 122 192 ( 25 ) Total unrealized net gains (losses) recognized from derivative contracts designated as hedging instruments in the consolidated statements of comprehensive income (loss) $ 373 $ 136 $ 349 NOTIONAL AMOUNTS OF DERIVATIVE CONTRACTS Derivative transactions are measured in terms of the notional amount; however, this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the derivative instruments. The notional amount is generally not exchanged, but is used only as the underlying basis on which the value of foreign currency exchange payments under these contracts is determined. The following table provides the notional amounts of our outstanding derivatives: Year Ended December 31, 2024 2023 (In millions) Foreign exchange contracts designated as hedging instruments $ 3,942 $ 6,767 Foreign exchange contracts not designated as hedging instruments 13,317 14,025 Total $ 17,259 $ 20,792 MASTER NETTING AGREEMENTS - RIGHTS OF SET-OFF Under master netting agreements with certain counterparties to our derivative contracts, repurchase agreements, and reverse repurchase agreements, subject to applicable requirements, we are allowed to net settle transactions of the same type with a single net amount payable by one party to the other. PayPal has not elected to offset for balance sheet presentation and we present the derivative assets, derivative liabilities, repurchase agreements and reverse repurchase agreements on a gross basis on our consolidated balance sheets. We have entered into collateral security arrangements with certain counterparties that provide for collateral to be received or posted when the net fair value of certain financial instruments fluctuates from contractually established thresholds. Receivables related to cash collateral posted and payables related to cash collateral received are recognized in other current assets and other current liabilities, respectively, on our consolidated balance sheets. 97 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following tables present the derivative assets, derivative liabilities, repurchase agreements, and reverse repurchase agreements not offset on the consolidated balance sheet but available for offset in the event of default. The tables also present the cash and non-cash collateral received or pledged relating to these positions. The amount of collateral presented is limited to the amount presented on our consolidated balance sheet; therefore, instances of over-collateralization are excluded from the table below. Amounts not Offset on the Consolidated Balance Sheet Amounts Presented on the Consolidated Balance Sheet Financial Instruments (1) Collateral Received (2) Net Amounts (In millions) As of December 31, 2024 Derivative assets (3) $ 243 $ 23 $ 169 $ 51 Reverse repurchase agreements (4) 87 — 87 — Total assets $ 330 $ 23 $ 256 $ 51 As of December 31, 2023 Derivative assets (3) $ 141 $ 38 $ 4 $ 99 Reverse repurchase agreements (4) — — — — Total assets $ 141 $ 38 $ 4 $ 99 Amounts not Offset on the Consolidated Balance Sheet Amounts Presented on the Consolidated Balance Sheet Financial Instruments (1) Collateral Pledged (2) Net Amounts (In millions) As of December 31, 2024 Derivative liabilities (3) $ 37 $ 23 $ 7 $ 7 Repurchase agreements — — — — Total liabilities $ 37 $ 23 $ 7 $ 7 As of December 31, 2023 Derivative liabilities (3) $ 131 $ 38 $ 54 $ 39 Repurchase agreements — — — — Total liabilities $ 131 $ 38 $ 54 $ 39 (1) For derivative positions, this includes any derivative fair value that could be offset in the event of counterparty default. For repurchase or reverse repurchase positions this includes any payable or receivable, respectively, that could be offset in the event of counterparty default. (2) Includes cash and the fair value of securities exchanged with the counterparty. For reverse repurchase agreements, these securities are not included in the consolidated balance sheet unless the counterparty defaults. (3) We received cash collateral from derivative counterparties totaling $ 162 million and $ 6 million as of December 31, 2024 and 2023, respectively, and securities from derivative counterparties with a fair value of $ 30 million and nil as of December 31, 2024 and 2023, respectively. We posted $ 7 million and $ 80 million of cash collateral as of December 31, 2024 and 2023, respectively. (4) PayPal is permitted by contract to sell or repledge collateral relating to its reverse repurchase agreements. The fair value of this collateral was $ 96 million and nil as of December 31, 2024 and 2023, respectively. We have no t sold or repledged as of both December 31, 2024 and 2023. 98 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 11— LOANS AND INTEREST RECEIVABLE LOANS AND INTEREST RECEIVABLE, HELD FOR SALE In June 2023, we entered into a multi-year agreement with a global investment firm to sell our eligible consumer installment receivables portfolio, including a forward-flow arrangement for the sale of future originations. In December 2024, this agreement was amended and restated to extend the commitment period to December 2026 and to increase the maximum balance of loans that can be sold at a time. 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 consolidated statements of income (loss). During the year ended December 31, 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. See “Note 1—Overview and Summary of Significant Accounting Policies” for additional information. As of December 31, 2024 and 2023, loans and interest receivable, held for sale was $ 541 million and $ 563 million, respectively. During the years ended December 31, 2024 and 2023, we sold $ 20.8 billion and $ 5.5 billion of loans and interest receivable, respectively, in connection with the above mentioned agreement. LOANS AND INTEREST RECEIVABLE, NET Consumer receivables We offer revolving and installment credit products as a funding option for consumers in certain checkout transactions on our payments platform. Our revolving credit product consists of PayPal Credit in the U.K., which is made available to consumers as a funding source in their PayPal wallet once they are approved for credit. Additionally, we offer installment credit products at the time of checkout in various markets, including the U.S., several markets across Europe, Australia, and Japan. We offer non interest-bearing installment credit products in these markets as well as interest-bearing installment credit products in the U.S. and Germany. We purchase receivables related to interest-bearing installment loans extended to U.S. consumers by a partner institution and are responsible for the servicing functions related to that portfolio. During the years ended December 31, 2024 and 2023, we purchased approximately $ 690 million and $ 670 million in consumer receivables, respectively. As of December 31, 2024 and 2023, the outstanding balance of consumer receivables, which consisted of revolving and installment loans and interest receivable, was $ 5.4 billion and $ 4.8 billion, respectively, net of the participation interest sold to the partner institution of $ 23 million and $ 14 million, respectively. See “Note 1—Overview and Summary of Significant Accounting Policies” for additional information on this participation arrangement. We closely monitor the credit quality of our consumer receivables to evaluate and manage our related exposure to credit risk. Credit risk management begins with initial underwriting and continues through the full repayment of a loan. To assess a consumer who requests a loan, we use, among other indicators, internally developed risk models using detailed information from external sources, such as credit bureaus where available, and internal data, including the consumer’s prior repayment history with our credit products where available. 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. 99 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Consumer receivables delinquency and allowance The following tables present the delinquency status and gross charge-offs of consumer loans and interest receivable by year of origination. The amounts are based on the number of days past the billing date for revolving loans or contractual repayment date for installment loans. The “current” category represents balances that are within 29 days of the billing date or contractual repayment date, as applicable. December 31, 2024 (In millions, except percentages) Revolving Loans Amortized Cost Basis Installment Loans Amortized Cost Basis 2024 2023 2022 2021 2020 Total Percent Consumer loans and interest receivable: Current $ 2,404 $ 2,427 $ 353 $ 43 $ — $ — $ 5,227 96.6 % 30 - 59 Days 25 28 4 — — — 57 1.1 % 60 - 89 Days 16 19 4 1 — — 40 0.7 % 90 - 179 Days 38 40 9 2 — — 89 1.6 % Total $ 2,483 $ 2,514 $ 370 $ 46 $ — $ — $ 5,413 100 % Gross charge-offs for the year ended December 31, 2024 $ 138 $ 39 $ 133 $ 14 $ — $ — $ 324 December 31, 2023 (In millions, except percentages) Revolving Loans Amortized Cost Basis Installment Loans Amortized Cost Basis 2023 2022 2021 2020 2019 Total Percent Consumer loans and interest receivable: Current $ 2,225 $ 2,045 $ 289 $ — $ — $ — $ 4,559 95.4 % 30 - 59 Days 27 34 4 1 — — 66 1.4 % 60 - 89 Days 20 26 4 — — — 50 1.0 % 90 - 179 Days 41 55 8 1 — — 105 2.2 % Total $ 2,313 $ 2,160 $ 305 $ 2 $ — $ — $ 4,780 100 % Gross charge-offs for the year ended December 31, 2023 $ 125 $ 101 $ 140 $ 5 $ — $ — $ 371 100 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table summarizes the activity in the allowance for consumer loans and interest receivable for the years ended December 31, 2024 and 2023: December 31, 2024 December 31, 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 — — — ( 12 ) — ( 12 ) Provisions 249 7 256 342 26 368 Charge-offs ( 301 ) ( 23 ) ( 324 ) ( 342 ) ( 29 ) ( 371 ) Recoveries 48 — 48 41 — 41 Other (2) ( 12 ) — ( 12 ) 6 1 7 Ending balance $ 341 $ 7 $ 348 $ 357 $ 23 $ 380 (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 allowance for credit losses at December 31, 2024 for our consumer receivable portfolio was $ 348 million, a decrease from $ 380 million at December 31, 2023. The decrease in allowance for credit losses was related to the improvement in credit quality of interest-bearing installment loans in the U.S. offset by the growth of interest-bearing installment loans in the U.S., revolving loans in the U.K., and installment loans in Japan. Merchant receivables We offer access to merchant finance products for certain small and medium-sized businesses through our PPWC and PPBL products, which we collectively refer to as our merchant finance offerings. We purchase receivables related to credit extended to U.S. merchants by a partner institution and are responsible for the servicing functions related to that portfolio. During the years ended December 31, 2024 and 2023, we purchased approximately $ 1.8 billion and $ 1.7 billion in merchant receivables, respectively. As of December 31, 2024 and 2023, the total outstanding balance in our pool of merchant loans, advances, and interest and fees receivable was $ 1.5 billion and $ 1.2 billion, respectively, net of the participation interest sold to the partner institution of $ 53 million and $ 44 million, respectively. See “Note 1—Overview and Summary of Significant Accounting Policies” for additional information on this participation arrangement. 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. Loans and advances are repaid through a fixed percentage of the merchant’s future payment volume that PayPal processes. Through our PPBL product, we provide merchants access to short-term business financing for a fixed fee based on an evaluation of the applying business as well as the business owner. PPBL repayments are collected through periodic payments until the balance has been satisfied. 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 consolidated balance sheets. The fixed interest or fee is amortized into revenues from other value added services based on the amount repaid over the repayment period. We estimate the repayment period for PPWC based on the merchant’s payment processing history with PayPal. For PPWC, there is a general requirement that at least 10 % of the original amount of the loan or advance plus the fixed fee must be repaid every 90 days. We calculate the repayment rate of the merchant’s future payment volume so that repayment of the loan or advance and fixed fee is expected to generally occur within 9 to 12 months from the date of the loan or advance. On a monthly basis, we recalculate the repayment period based on the repayment activity on the receivable. As such, actual repayment periods are dependent on actual merchant payment processing volumes. For PPBL, we receive fixed periodic payments over the contractual term of the loan, which generally ranges from 3 to 12 months. 101 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) We actively monitor receivables with repayment periods greater than the original expected or contractual repayment period, as well as the credit quality of our merchant loans and advances that we extend or purchase, so that we can evaluate, quantify, and manage our credit risk exposure. To assess a merchant seeking a loan or advance, we use, among other indicators, risk models developed internally which utilize information obtained from multiple internal and external data sources to predict the likelihood of timely and satisfactory repayment by the merchant of the loan or advance amount and the related interest or fee. Primary drivers of the models include the merchant’s annual payment volume, payment processing history with PayPal, prior repayment history with PayPal’s credit products where available, information sourced from consumer and business credit bureau reports, and other information obtained during the application process. 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. Merchant receivables delinquency and allowance The following tables present the delinquency status and gross charge-offs of merchant loans, advances, and interest and fees receivable by year of origination. The amounts are based on the number of days past the expected or contractual repayment date for amounts outstanding. The “current” category represents balances that are within 29 days of the expected repayment date or contractual repayment date, as applicable. December 31, 2024 (In millions, except percentages) 2024 2023 2022 2021 2020 Prior Total Percent Merchant loans, advances, and interest and fees receivable: Current $ 1,274 $ 28 $ 13 $ 1 $ 8 $ 4 $ 1,328 90.4 % 30 - 59 Days 55 10 3 — — 1 69 4.7 % 60 - 89 Days 23 6 2 — — — 31 2.1 % 90 - 179 Days 21 11 4 — — — 36 2.4 % 180+ Days 1 4 1 — — — 6 0.4 % Total $ 1,374 $ 59 $ 23 $ 1 $ 8 $ 5 $ 1,470 100 % Gross charge-offs for the year ended December 31, 2024 $ 10 $ 96 $ 42 $ — $ 8 $ — $ 156 December 31, 2023 (In millions, except percentages) 2023 2022 2021 2020 2019 Total Percent Merchant loans, advances, and interest and fees receivable: Current $ 925 $ 74 $ 3 $ 22 $ 14 $ 1,038 87.0 % 30 - 59 Days 37 16 2 2 1 58 4.9 % 60 - 89 Days 16 12 1 1 1 31 2.5 % 90 - 179 Days 27 28 1 1 1 58 4.9 % 180+ Days 2 4 1 — 1 8 0.7 % Total $ 1,007 $ 134 $ 8 $ 26 $ 18 $ 1,193 100 % Gross charge-offs for the year ended December 31, 2023 $ 38 $ 228 $ 14 $ 16 $ 4 $ 300 102 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table summarizes the activity in the allowance for merchant loans, advances, and interest and fees receivable, for the years ended December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Merchant Loans and Advances Interest and Fees Receivable Total Allowance Merchant Loans and Advances Interest and Fees Receivable Total Allowance (In millions) Beginning balance $ 148 $ 12 $ 160 $ 230 $ 18 $ 248 Provisions 79 2 81 162 23 185 Charge-offs ( 148 ) ( 8 ) ( 156 ) ( 271 ) ( 29 ) ( 300 ) Recoveries 28 — 28 27 — 27 Ending balance $ 107 $ 6 $ 113 $ 148 $ 12 $ 160 The allowance for credit losses at December 31, 2024 for our merchant receivable portfolio was $ 113 million, a decrease from $ 160 million at December 31, 2023. The decrease in allowance for credit losses was related to the improvement in credit quality of the PPBL portfolio. NOTE 12— DEBT FIXED RATE 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, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of ¥ 90 billion (approximately $ 574 million as of December 31, 2024). Interest on these notes is payable on June 9 and December 9 of each year, beginning on December 9, 2023. In May 2022, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of $ 3.0 billion. Interest on these notes is payable on June 1 and December 1 of each year, beginning on December 1, 2022. In May 2020, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of $ 4.0 billion. Interest on these notes is payable on June 1 and December 1 of each year, beginning on December 1, 2020. In September 2019, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of $ 5.0 billion. Interest on these notes is payable on April 1 and October 1. 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.” Interest on the Notes is payable in arrears semiannually. 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, and possible acquisitions of businesses, assets, or strategic investments. 103 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) As of both December 31, 2024 and 2023, we had an outstanding aggregate principal amount of $ 10.6 billion related to the Notes. The following table summarizes the Notes outstanding: As of December 31, Maturities Effective Interest Rate 2024 2023 (in millions) September 2019 debt issuance: Fixed-rate 2.400 % notes 10/1/2024 2.52 % $ — $ 1,250 Fixed-rate 2.650 % notes 10/1/2026 2.78 % 1,250 1,250 Fixed-rate 2.850 % notes 10/1/2029 2.96 % 1,500 1,500 May 2020 debt issuance: Fixed-rate 1.650 % notes 6/1/2025 1.78 % 1,000 1,000 Fixed-rate 2.300 % notes 6/1/2030 2.39 % 1,000 1,000 Fixed-rate 3.250 % notes 6/1/2050 3.33 % 1,000 1,000 May 2022 debt issuance: Fixed-rate 3.900 % notes 6/1/2027 4.06 % 500 500 Fixed-rate 4.400 % notes 6/1/2032 4.53 % 1,000 1,000 Fixed-rate 5.050 % notes 6/1/2052 5.14 % 1,000 1,000 Fixed-rate 5.250 % notes 6/1/2062 5.34 % 500 500 June 2023 debt issuance (1) : ¥ 30 billion fixed-rate 0.813 % notes 6/9/2025 0.89 % 191 213 ¥ 23 billion fixed-rate 0.972 % notes 6/9/2026 1.06 % 147 163 ¥ 37 billion fixed-rate 1.240 % notes 6/9/2028 1.31 % 236 262 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 $ 10,574 $ 10,638 Unamortized premium (discount) and issuance costs, net ( 78 ) ( 68 ) Less: current portion of term debt (2) ( 1,191 ) ( 1,249 ) Total carrying amount of term debt $ 9,305 $ 9,321 (1) Principal amounts represent the U.S. dollar equivalent as of December 31, 2024 and 2023, respectively. (2) The current portion of term debt is included within accrued expenses and other current liabilities on our 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, debt issuance costs, and debt extinguishment net gains, was $ 366 million, $ 334 million, and $ 290 million for the years ended December 31, 2024, 2023, and 2022, respectively. 104 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) CREDIT FACILITIES Revolving credit facility In June 2023, we entered into a credit agreement (the “Credit Agreement”) that provides for an unsecured $ 5.0 billion, five-year revolving credit facility. The Credit Agreement includes a $ 150 million letter of credit sub-facility and a $ 600 million swingline sub-facility, with available borrowings under the revolving credit facility reduced by the amount of any letters of credit and swingline borrowings outstanding from time to time. Loans borrowed under the Credit Agreement are available in U.S. dollar, Euro, British pound, and Australian dollar, and in each case subject to the sub-limits and other limitations provided in the Credit Agreement. We may also, subject to the agreement of the applicable lenders and satisfaction of specified conditions, increase the commitments under the revolving credit facility by up to $ 2.0 billion. Subject to specific conditions, we may designate one or more of our subsidiaries as additional borrowers under the Credit Agreement, provided PayPal Holdings, Inc. guarantees the portion of borrowings made available and other obligations of any such subsidiaries under the Credit Agreement. As of December 31, 2024, certain subsidiaries were designated as additional borrowers. Funds borrowed under the Credit Agreement may be used for working capital, capital expenditures, acquisitions, and other purposes not in contravention of the Credit Agreement. We are obligated to pay interest on loans under the Credit Agreement and other customary fees for a credit facility of this size and type, including an upfront fee and an unused commitment fee based on our debt rating. Loans under the Credit Agreement will bear interest at either (i) the applicable term benchmark rate plus a margin (based on the Company’s public debt ratings) ranging from 0.750 % to 1.250 %, (ii) the applicable Risk-Free Rate (Sterling Overnight Index Average for loans denominated in pounds sterling and Euro Short-Term Rate for loans denominated in euros) rate plus a margin (based on the Company’s public debt ratings) ranging from 0.750 % to 1.250 %, (iii) the applicable overnight rate plus a margin (based on the Company’s public debt ratings) ranging from 0.750 % to 1.250 % or (iv) a formula based on the prime rate, the federal funds effective rate or the adjusted term Secured Overnight Financing Rate plus a margin (based on the Company’s public debt ratings) ranging from zero to 0.250 %. Subject to certain conditions stated in the Credit Agreement, the Company and any subsidiaries designated as additional borrowers may borrow, prepay and reborrow amounts under the revolving credit facility at any time during the term of the Credit Agreement. The Credit Agreement will terminate and all amounts owing thereunder will be due and payable on June 7, 2028, unless (a) the commitments are terminated earlier, either at the request of the Company or, if an event of default occurs, by the lenders (or automatically in the case of certain bankruptcy-related events), or (b) the maturity date is extended upon the request of the Company, subject to the agreement of the lenders. The Credit Agreement contains customary representations, warranties, affirmative and negative covenants, including a financial covenant, events of default, and indemnification provisions in favor of the lenders. The negative covenants include restrictions regarding the incurrence of liens and the incurrence of subsidiary indebtedness, in each case subject to certain exceptions. The financial covenant requires the Company to meet a quarterly financial test with respect to a maximum consolidated leverage ratio. As of December 31, 2024 and 2023, no borrowings or letters of credit were outstanding under the Credit Agreement. Accordingly, at December 31, 2024, $ 5.0 billion of borrowing capacity was available for the purposes permitted by the Credit Agreement, subject to customary conditions to borrowing. 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 $ 574 million as of December 31, 2024). Borrowings under the Paidy Credit Agreement are for use by Paidy for working capital, capital expenditures, and other permitted purposes. Loans under the Paidy Credit Agreement bear interest at the Tokyo Interbank Offered Rate plus a margin (based on our public debt rating) ranging from 0.40 % to 0.60 %. The Paidy Credit Agreement will terminate and all amounts owed thereunder will be due and payable in February 2027, unless the commitments are terminated earlier. The Paidy Credit Agreement contains customary representations, warranties, affirmative and negative covenants, including a financial covenant, events of default, and indemnification provisions in favor of the lenders. The negative covenants include restrictions regarding the incurrence of liens and subsidiary indebtedness, in each case subject to certain exceptions. The financial covenant requires us to meet a quarterly financial test with respect to a maximum consolidated leverage ratio. 105 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) As of December 31, 2024 and 2023, ¥ 90.0 billion (approximately $ 574 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 consolidated balance sheets. At December 31, 2024, no borrowing capacity was available for the purposes permitted by the Paidy Credit Agreement. During the years ended December 31, 2024, 2023, and 2022, the total interest expense and fees we recorded related to the Paidy Credit Agreement were de minimis. Other available facilities As of December 31, 2024 and 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 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 year ended December 31, 2024. The total interest expense and fees we recorded related to the borrowings were de minimis. We also maintain uncommitted credit facilities in various regions throughout the world, which had a borrowing capacity of approximately $ 80 million in the aggregate, as of December 31, 2024 and 2023. This available credit includes facilities where we can withdraw and utilize the funds at our discretion for general corporate purposes. Interest rate terms for these facilities vary by region and reflect prevailing market rates for companies with strong credit ratings. As of December 31, 2024, substantially all of the borrowing capacity under these credit facilities was available, subject to customary conditions to borrowing. FUTURE PRINCIPAL PAYMENTS As of December 31, 2024, the future principal payments associated with our term debt were as follows (in millions): 2025 $ 1,191 2026 1,397 2027 500 2028 236 2029 1,500 Thereafter 5,750 Total $ 10,574 NOTE 13— COMMITMENTS AND CONTINGENCIES LITIGATION AND REGULATORY MATTERS Overview We are involved in legal and regulatory proceedings on an ongoing basis. Certain of these proceedings are in early stages and may seek an indeterminate amount of damages or penalties or may require us to change or adopt certain business practices. If we believe that a loss arising from such matters is probable and can be reasonably estimated, we accrue the estimated liability in our financial statements at that time. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range. For those proceedings in which an unfavorable outcome is reasonably possible but not probable, we have disclosed an estimate of the reasonably possible loss or range of losses or we have concluded that an estimate of the reasonably possible loss or range of losses arising directly from the proceeding (i.e., monetary damages or amounts paid in judgment or settlement) are not material. If we cannot estimate the probable or reasonably possible loss or range of losses arising from a legal proceeding, we have disclosed that fact. In assessing the materiality of a legal proceeding, we evaluate, among other factors, the amount of monetary damages claimed, as well as the potential impact of non-monetary remedies sought by plaintiffs (e.g., injunctive relief) that may require us to change our business practices in a manner that could have a material adverse impact on our business. 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. 106 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Amounts accrued for legal and regulatory proceedings for which we believe a loss is probable and reasonably estimable were not material for the year ended December 31, 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. Determining legal reserves or possible losses from such matters involves judgment and may not reflect the full range of uncertainties and unpredictable outcomes. We may be exposed to losses in excess of the amount recorded, and such amounts could be material. If any of our estimates and assumptions change or prove to have been incorrect, it could have a material adverse effect on our business, financial position, results of operations, or cash flows. Regulatory proceedings PayPal Australia Pty Limited (“PPAU”) self-reported a potential violation to the Australian Transaction Reports and Analysis Centre (“AUSTRAC”) on May 22, 2019. This self-reported matter relates to PPAU incorrectly filing required international funds transfer instructions over a period of time under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (“AML/CTF Act”). On September 23, 2019, PPAU received a notice from AUSTRAC requiring that PPAU appoint an external auditor (a partner of a firm which is not our independent auditor) to review certain aspects of PPAU’s compliance with its obligations under the AML/CTF Act. The external auditor was appointed on November 1, 2019. AUSTRAC had notified PPAU that its enforcement team was investigating the matters reported upon by the external auditor in its August 31, 2020 final report. As a resolution of this investigation, on March 17, 2023, AUSTRAC’s Chief Executive Officer accepted an enforceable undertaking from PPAU in relation to the self-reported issues. The enforceable undertaking does not include a monetary penalty. The entry into and compliance with the enforceable undertaking will not require a change to our business practices in a manner that could result in a material loss, require significant management time, result in the diversion of significant operational resources, or otherwise adversely affect our business. PPAU is required to deliver an Assurance Action Plan (“AAP”) under the enforceable undertaking to demonstrate that the governance and oversight arrangements following the remedial work completed by PPAU are sustainable and appropriate. The enforceable undertaking requires PPAU to appoint an external auditor. The external auditor was appointed on June 22, 2023 to assess and report on the appropriateness, sustainability and efficacy of the actions to be taken under the AAP. PPAU provided the external auditor’s final report to AUSTRAC on April 16, 2024. The successful completion of the enforceable undertaking is subject to AUSTRAC’s ultimate review and decision based on the external auditor’s final report. 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. 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. We are cooperating with the FTC in connection with this CID. In January 2023, we received notice of an administrative proceeding and a related request for information from the German Federal Cartel Office (“FCO”) related to terms in PayPal (Europe) S.à.r.l. et Cie, S.C.A.’s contractual terms with merchants in Germany prohibiting surcharging and requiring parity presentation of PayPal relative to other payment methods. We are cooperating with the FCO in connection with this proceeding. 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. We are cooperating with the CFPB in connection with these CIDs. In November 2023, we received a subpoena from the U.S. SEC Division of Enforcement relating to PayPal USD stablecoin. The subpoena requests the production of documents. We are cooperating with the SEC in connection with this request. 107 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) In August 2024, we received a CID from the CFPB related to PayPal Credit. The CID also relates to backup payment options in a digital wallet to pay for goods or services. The CID requests the production of documents and answers to written questions. We are cooperating with the CFPB in connection with this CID. Legal proceedings On October 4, 2022, a putative securities class action captioned Defined Benefit Plan of the Mid-Jersey Trucking Industry and Teamsters Local 701 Pension and Annuity Fund v. PayPal Holdings, Inc., et al. , Case No. 22-cv-5864, was filed in the U.S. District Court for the District of New Jersey. On January 11, 2023, the Court appointed Caisse de dépôt et placement du Québec as lead plaintiff and renamed the action In re PayPal Holdings, Inc. Securities Litigation (“PPH Securities Action”). On March 13, 2023, the lead plaintiff filed an amended and consolidated complaint. 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 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. The PPH Securities Action seeks unspecified compensatory damages on behalf of the putative class members. Defendants have filed a motion to dismiss the PPH Securities Action. On January 29, 2025, the Court dismissed all of the claims without prejudice. The lead plaintiff has until March 17, 2025 to file an amended complaint. On November 2, 2022, a putative shareholder derivative action captioned Shah v. Daniel Schulman, et al. , Case No. 22-cv-1445, was filed in the U.S. District Court for the District of Delaware (the “Shah Action”), purportedly on behalf of the Company. On April 4, 2023, a putative shareholder derivative action captioned Nelson v. Daniel Schulman, et. al. , Case No. 23-cv-01913, was filed in the U.S. District Court for the District of New Jersey (the “Nelson Action”) purportedly on behalf of the Company. On January 31, 2025, a putative shareholder derivative action captioned Spathias v. Daniel Schulman, et al. , Case No. 25-cv-1007, was filed in the U.S. District Court for the Northern District of California (the “Spathias Action,” and collectively, the “Derivative Actions”). The Derivative Actions are based on the same alleged facts and circumstances as the PPH Securities Action, and name certain of our officers, including our former Chief Executive Officer and former Chief Financial Officer, and members of our Board of Directors, as defendants. The Derivative Actions allege claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, waste of corporate assets, gross mismanagement and violations of the Exchange Act, and seek to recover damages on behalf of the Company. The Shah and Nelson Actions have been stayed pending further developments in the PPH Securities Action. On December 20, 2022, a civil lawsuit captioned State of Hawai‘i, by its Office of Consumer Protection, v. PayPal, Inc., and PayPal Holdings, Inc. , Case No. 1CCV-22-0001610, was filed in the Circuit Court of the First Circuit of the State of Hawai‘i (the “Hawai‘i Action”). The Hawai‘i Action asserts claims for unfair and deceptive acts and practices under Hawai‘i Revised Statutes Sections 480-2(a) and 481A-3(a). Plaintiff seeks injunctive relief as well as unspecified penalties and other monetary relief. On July 14, 2023, the court denied Defendants’ motion to dismiss the complaint. Trial is scheduled to begin in October 2025. 108 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) General matters Other third parties have from time to time claimed, and others may claim in the future, that we have infringed their intellectual property rights. We are subject to patent disputes and expect that we will increasingly be subject to additional patent infringement claims involving various aspects of our business as our products and services continue to expand in scope and complexity. Such claims may be brought directly or indirectly against our companies and/or against our customers (who may be entitled to contractual indemnification under their contracts with us), and we are subject to increased exposure to such claims as a result of our acquisitions, particularly in cases where we are introducing new products or services in connection with such acquisitions. We have in the past been forced to litigate such claims, and we believe that additional lawsuits alleging such claims will be filed against us. 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 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 together 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. Further, the number and significance of these disputes and inquiries are increasing as our business has grown and expanded in scale and scope, including the number of active accounts and payments transactions on our platform, the range and increasing complexity of the products and services that we offer, and our geographical operations. Any claims or regulatory actions against us, whether meritorious or not, could be time consuming, result in costly litigation, settlement payments, damage awards (including statutory damages for certain causes of action in certain jurisdictions), fines, penalties, injunctive relief, or increased costs of doing business through adverse judgment or settlement, require us to change our products, services or business practices in expensive ways, require significant amounts of management time, result in the diversion of significant operational resources, or otherwise harm our business. INDEMNIFICATION PROVISIONS Our agreements with eBay governing our separation from eBay provide for specific indemnity and liability obligations for both eBay and us. Disputes between eBay and us have arisen and others may arise in the future, and an adverse outcome in such matters could materially and adversely impact our business, results of operations, and financial condition. In addition, the indemnity rights we have against eBay under the agreements may not be sufficient to protect us, and our indemnity obligations to eBay may be significant. In the ordinary course of business, we include indemnification provisions in certain of our agreements with parties with whom we have commercial relationships. Under these contracts, we generally indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with claims by any third party with respect to our domain names, trademarks, logos, and other branding elements to the extent that such marks are related to the subject agreement. These indemnification provisions generally include indemnity for other types of third-party claims, which may be related to intellectual property rights, confidentiality, willful misconduct, data privacy obligations, and certain breach of contract claims, among others. These indemnification provisions generally also include indemnity to our payments processors in the event of card association fines against the processor arising out of conduct by us or our customers. It is not possible to determine the maximum potential loss under these indemnification provisions due to our limited history of prior indemnification claims and the unique facts and circumstances involved in each particular situation. PayPal has participated in the U.S. Government’s Paycheck Protection Program administered by the U.S. Small Business Administration. 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. 109 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) As part of the agreement to sell a portion of our consumer installment receivables portfolio, in certain circumstances such as breaches in loan warranties, we may be required to indemnify the global investment firm that purchased the loans or repurchase the loans. The estimate of the maximum potential amount of future payments we may be required to make is equal to the current outstanding balances of the loans sold; however, the maximum potential amount of the indemnification is not, in our view, representative of the expected future exposure. As of December 31, 2024 and 2023, the current outstanding balances of the loans sold was $ 2.9 billion and $ 2.2 billion, respectively. The terms of the indemnification align to the maturities of the loans sold. To date, no significant costs have been incurred, either individually or collectively, in connection with our indemnification provisions. OFF-BALANCE SHEET ARRANGEMENTS As of December 31, 2024 and 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 In addition to the protections afforded by applicable law, we provide consumers and merchants with protection programs for certain purchase transactions completed on our payments platform. Our protection programs help protect both consumers and merchants from financial loss resulting from, among other things, counterparty non-performance. These programs are designed to promote confidence on the part of both consumers, who will be reimbursed in certain circumstances, such as not receiving their purchased item in the condition significantly as described, as well as merchants, who will receive payment in certain circumstances, such as establishing proof of shipment or delivery of an item to the customer. 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 December 31, 2024 and 2023, the allowance for transaction losses was $ 86 million and $ 64 million, respectively. The allowance for negative customer balances was $ 256 million and $ 218 million at December 31, 2024 and 2023, respectively. The following table shows changes in the allowance for transaction losses and negative customer balances related to our protection programs for the years ended December 31, 2024 and 2023: As of December 31, 2024 2023 (In millions) Beginning balance $ 282 $ 278 Provision 1,114 1,192 Realized losses ( 1,218 ) ( 1,313 ) Recoveries 164 125 Ending balance $ 342 $ 282 110 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 14— STOCK REPURCHASE PROGRAMS In July 2018, our Board of Directors authorized a stock repurchase program that provided for the repurchase of up to $ 10.0 billion of our common stock, with no expiration from the date of authorization. In June 2022, our Board of Directors authorized an additional stock repurchase program that provides for the repurchase of up to $ 15.0 billion of our common stock, with no expiration from the date of authorization. This program became effective in the first quarter of 2023 upon completion of the July 2018 stock repurchase program. In February 2025, our Board of Directors authorized an additional stock repurchase program that provides for the repurchase of up to $ 15.0 billion of our common stock, with no expiration from the date of authorization. Our stock repurchase programs are intended to offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, may also be used to make opportunistic repurchases of our common stock to reduce outstanding share count. Any share repurchases under our stock repurchase programs may be made through open market transactions, block trades, privately negotiated transactions, including accelerated share repurchase agreements, or other means at times and in such amounts as management deems appropriate and will be funded from our working capital or other financing alternatives. Moreover, any stock repurchases are subject to market conditions and other uncertainties, and we cannot predict if or when any stock repurchases will be made. We may terminate our stock repurchase programs at any time without prior notice. During the year ended December 31, 2024, we repurchased approximately 92 million shares of our common stock for approximately $ 6.0 billion at an average cost of $ 65.55 , excluding excise tax. These shares were purchased in the open market under our stock repurchase program authorized in June 2022. As of December 31, 2024, a total of approximately $ 4.9 billion remained available for future repurchases of our common stock under our June 2022 stock repurchase program. The Inflation Reduction Act of 2022 imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. Beginning in the first quarter of 2023, we have reflected the applicable excise tax in treasury stock on our consolidated balance sheets. During the years ended December 31, 2024 and 2023, we recorded $ 50 million and $ 44 million in excise tax within treasury stock on our consolidated balance sheets, respectively. The payable associated with the excise tax is a non-cash financing activity which is not reflected on the consolidated statement of cash flows until settled. During the year ended December 31, 2023, we repurchased approximately 74 million shares of our common stock for approximately $ 5.0 billion at an average cost of $ 67.72 , excluding excise tax. These shares were purchased in the open market under our stock repurchase programs authorized in July 2018 and June 2022. As of December 31, 2023, a total of approximately $ 10.9 billion remained available for future repurchases of our common stock under our June 2022 stock repurchase program. During the year ended December 31, 2022, we repurchased approximately 41 million shares of our common stock for approximately $ 4.2 billion at an average cost of $ 103.47 . These shares were purchased in the open market under our stock repurchase program authorized in July 2018. As of December 31, 2022, a total of approximately $ 861 million and $ 15.0 billion remained available for future repurchases of our common stock under our July 2018 and June 2022 stock repurchase programs, respectively. Shares of common stock repurchased for the periods presented were recorded as treasury stock for the purposes of calculating net income (loss) per share and were accounted for under the cost method. No repurchased shares of common stock have been retired. NOTE 15— STOCK-BASED AND EMPLOYEE SAVINGS PLANS EQUITY INCENTIVE PLAN Under the terms of the Amended and Restated PayPal Holdings, Inc. 2015 Equity Incentive Award Plan (the “Plan”), equity awards, including restricted stock units (“RSUs”), restricted stock awards, performance based restricted stock units (“PBRSUs”), stock options, deferred stock units, and stock payments, may be granted to our directors, officers, and employees. In May 2024, our stockholders approved the authorization of an additional 20 million shares to the Plan. At December 31, 2024, approximately 76 million shares were authorized under the Plan and approximately 46 million shares were available for future grant. Shares issued as a result of stock option exercises and the release of stock awards were funded primarily with the issuance of new shares of common stock. 111 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) RSUs are granted to eligible employees under the Plan. RSUs issued prior to January 1, 2022 generally vest in equal annual installments over a period of three years . RSUs issued on or after January 1, 2022 generally vest over three years at a rate of 33 % after one year , then in equal quarterly installments thereafter. RSUs are subject to an employee’s continuing service to us, and do not have an expiration date. The cost of RSUs granted is determined using the fair market value of PayPal’s common stock on the date of grant. Certain of our executives and non-executives are eligible to receive PBRSUs, which are equity awards that may be earned based upon the Company’s performance relative to pre-established market or performance targets over performance periods of one to three years . We estimate the fair value of market-based PBRSU awards at the date of grant using a Monte Carlo valuation methodology that incorporates into the valuation the possibility that the market condition might not be satisfied. The total estimated fair value is amortized over each award’s performance period regardless of whether the condition is satisfied. The number of shares that vest at the end of each performance period will vary based on the performance against specified market conditions. PBRSUs that are subject to a performance condition may vest and settle depending on the Company’s performance against pre-established performance metrics over a predefined performance period. PBRSUs with only a performance condition generally are cliff vested following the completion of the performance period, subject to the Compensation Committee’s approval of the level of achievement against the pre-established performance targets. Over the performance period, the number of PBRSUs with only a performance condition that may be issued, and related stock-based compensation expense that is recognized, is adjusted upward or downward based upon the probability of achieving the approved performance targets. Depending on the probability of achieving the pre-established performance targets, the number of PBRSUs with only a performance condition issued could range from 0 % to 200 % of the target amount. All stock options under the Plan were assumed in connection with acquisitions on the same terms and conditions (including vesting) applicable to such acquired companies’ equity awards. The cost of stock options was determined using the Black-Scholes option pricing model. EMPLOYEE STOCK PURCHASE PLAN Under the terms of the Employee Stock Purchase Plan (“ESPP”), shares of our common stock may be purchased over an offering period with a maximum duration of two years at 85 % of the lower of the fair market value on the first day of the applicable offering period or on the last business day of each six-month purchase period within the offering period. Employees may contribute between 2 % and 10 % of their gross compensation during an offering period to purchase shares, but not more than the statutory limitation of $25,000 per year. All company stock purchased through the ESPP is considered outstanding and is included in the weighted-average outstanding shares for purposes of computing basic and diluted net income (loss) per share. For the years ended December 31, 2024, 2023, and 2022, our employees purchased 2.1 million, 2.3 million, and 1.9 million shares under the ESPP at an average per share price of $ 44.16 , $ 55.34 , and $ 73.20 , respectively. As of December 31, 2024, approximately 42 million shares were reserved for future issuance under the ESPP. 112 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) RSU, PBRSU, AND RESTRICTED STOCK ACTIVITY The following table summarizes RSU, PBRSU, and restricted stock activity under the Plan as of December 31, 2024 and changes during the year ended December 31, 2024: Units Weighted Average Grant-Date Fair Value (per share) (In thousands, except per share amounts) Outstanding at January 1, 2024 30,164 $ 88.10 Awarded and assumed (1) 24,138 $ 63.49 Vested (1) ( 16,654 ) $ 92.40 Forfeited/cancelled ( 6,360 ) $ 85.96 Outstanding at December 31, 2024 31,288 $ 67.35 Expected to vest 26,244 (1) Includes approximately 1.1 million of additional PBRSUs issued during 2024 due to the achievement of company performance metrics on awards granted in previous years. During the years ended December 31, 2024, 2023, and 2022, the aggregate intrinsic value of RSUs and PBRSUs vested under the Plan was $ 1.1 billion, $ 752 million, and $ 935 million, respectively. In the year ended December 31, 2024, the Company granted 1.9 million PBRSUs with a three-year performance period. In the year ended December 31, 2023, the Company granted 2.3 million PBRSUs with a one-year performance period (fiscal 2023), which became fully vested following the completion of the performance period in February 2024 ( one year from the annual incentive award cycle grant date), and 1.8 million PBRSUs with a three-year performance period. STOCK OPTION ACTIVITY The following table summarizes stock option activity of our employees under the Plan for the year ended December 31, 2024: Shares (1) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (In thousands, except per share amounts and years) Outstanding at January 1, 2024 72 $ 15.18 Exercised ( 34 ) $ 16.50 Forfeited/expired/cancelled ( 2 ) $ 11.19 Outstanding at December 31, 2024 36 $ 14.08 2.92 $ 2,660 Expected to vest — $ 114.09 6.28 $ 1 Options exercisable 36 $ 13.90 2.92 $ 2,659 (1) “—” Denotes shares of less than a thousand. No options were granted or assumed during the years ended December 31, 2024 and 2023. The weighted average grant date fair value of options assumed from acquisitions during the year ended December 31, 2022 was $ 147.92 . The aggregate intrinsic value was calculated as the difference between the exercise price of the underlying options and the quoted price of our common stock at December 31, 2024. During the years ended December 31, 2024, 2023, and 2022, the aggregate intrinsic value of options exercised under the Plan was $ 2 million, $ 4 million, and $ 16 million, respectively, determined as of the date of option exercise. At December 31, 2024, substantially all outstanding options were in-the-money. STOCK-BASED COMPENSATION EXPENSE Stock-based compensation expense for the Plan is measured based on their estimated fair value at the time of grant, and recognized over the award’s vesting period. 113 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) T he impact on our results of operations of recording stock-based compensation expense under the Plan for the years ended December 31, 2024, 2023, and 2022 was as follows: Year Ended December 31, 2024 2023 2022 (In millions) Customer support and operations $ 233 $ 305 $ 269 Sales and marketing 143 179 151 Technology and development 478 612 512 General and administrative 339 434 383 Restructuring and other 100 — — Total stock-based compensation expense $ 1,293 $ 1,530 $ 1,315 Capitalized as part of internal use software and website development costs $ 109 $ 52 $ 52 Income tax benefit on total stock-based compensation expense $ 238 $ 260 $ 209 Income tax benefit realized related to awards vested or exercised $ 205 $ 136 $ 182 As of December 31, 2024, there was approximately $ 1.3 billion of unearned stock-based compensation that is expected to be recognized over a weighted average period of 1.83 years. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase, or cancel all or a portion of the remaining unearned stock-based compensation expense. Future unearned stock-based compensation will increase to the extent we grant additional equity awards, change the mix of equity awards we grant, or assume unvested equity awards in connection with acquisitions. EMPLOYEE SAVINGS PLANS Under the terms of the PayPal Holdings, Inc. Deferred Compensation Plan, which also qualifies under Section 401(k) of the Code, participating U.S. employees may contribute up to 50 % of their eligible compensation, but not more than statutory limits. Under the PayPal plan, eligible employees received one dollar for each dollar contributed, up to 4 % of each employee’s eligible salary, subject to a maximum employer contribution per employee of $ 13,800 in 2024, $ 13,200 in 2023, and $ 12,200 in 2022. Our non-U.S. employees are covered by other savings plans. For the years ended December 31, 2024, 2023, and 2022, the matching contribution expense for our U.S. and international savings plans was approximately $ 74 million, $ 80 million, and $ 83 million, respectively. NOTE 16— INCOME TAXES The components of income before income taxes were as follows: Year Ended December 31, 2024 2023 2022 (In millions) United States $ 946 $ 993 $ ( 155 ) International 4,383 4,418 3,521 Income before income taxes $ 5,329 $ 5,411 $ 3,366 114 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The income tax expense was composed of the following: Year Ended December 31, 2024 2023 2022 (In millions) Current: Federal $ 342 $ 1,031 $ 688 State and local 107 145 104 Foreign 502 657 966 Total current portion of income tax expense (benefit) $ 951 $ 1,833 $ 1,758 Deferred: Federal $ 278 $ ( 490 ) $ ( 563 ) State and local ( 29 ) ( 79 ) ( 101 ) Foreign ( 18 ) ( 99 ) ( 147 ) Total deferred portion of income tax expense (benefit) 231 ( 668 ) ( 811 ) Income tax expense $ 1,182 $ 1,165 $ 947 The following is a reconciliation of the difference between the effective income tax rate and the federal statutory rate: Year Ended December 31, 2024 2023 2022 Federal statutory rate 21.0 % 21.0 % 21.0 % Domestic income taxed at different rates 0.1 % ( 1.5 ) % ( 0.6 ) % State taxes, net of federal benefit 1.1 % 1.1 % — % Foreign income taxed at different rates ( 4.3 ) % ( 5.1 ) % ( 12.2 ) % Stock-based compensation expense 2.6 % 3.5 % 4.1 % Tax credits 0.6 % ( 0.7 ) % ( 0.4 ) % Change in valuation allowances 0.6 % — % 2.2 % Intra-group transfer of intellectual property — % — % 10.0 % Other 0.5 % 3.2 % 4.0 % Effective income tax rate 22.2 % 21.5 % 28.1 % 115 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis using enacted tax rates in effect for the year in which the differences are expected to reverse. Significant deferred tax assets and liabilities consist of the following: As of December 31, 2024 2023 (In millions) Deferred tax assets: Net operating loss and credit carryforwards $ 265 $ 305 Accruals and allowances 546 761 Lease liabilities 194 138 Stock-based compensation 93 168 Net unrealized losses 1 36 Safeguarded crypto liabilities 743 319 Capitalized research and development 1,077 1,207 Other items 89 114 Total deferred tax assets 3,008 3,048 Valuation allowance ( 240 ) ( 276 ) Net deferred tax assets $ 2,768 $ 2,772 Deferred tax liabilities: ROU lease assets $ ( 153 ) $ ( 96 ) Capitalized software development costs ( 176 ) ( 187 ) Net unrealized gains ( 97 ) ( 170 ) Safeguarded crypto assets ( 743 ) ( 319 ) Other items ( 101 ) ( 161 ) Total deferred tax liabilities ( 1,270 ) ( 933 ) Net deferred tax assets $ 1,498 $ 1,839 As of December 31, 2024, our foreign net operating loss carryforwards for income tax purposes were approximately $ 733 million, and certain of these amounts are subject to an annual limitation. If not utilized, a portion of these losses will begin to expire in 2025. It is more likely than not that most of these net operating loss carryforwards will not be realized; therefore, we have recorded a valuation allowance against them. As of December 31, 2024, our California research and development tax credit carryforwards for income tax purposes were approximately $ 270 million, which may be carried forward indefinitely. Repatriation of our foreign earnings for use in the U.S. is generally not expected to result in a significant amount of income taxes; as a result, the corresponding deferred tax liability we have accrued is not material. We benefit from agreements concluded in certain jurisdictions, most significantly Singapore. The Singapore agreement is effective through 2030, results in significantly lower rates of taxation on certain classes of income and requires various thresholds of investment and employment in that jurisdiction. We review our compliance on an annual basis to ensure we continue to meet our obligations under this agreement. This agreement resulted in tax savings of approximately $ 473 million, $ 441 million, and $ 510 million in 2024, 2023, and 2022, respectively. Excluding the effect of U.S. and foreign tax legislation the benefit of this agreement on our net income (loss) per share (diluted) was approximately $ 0.46 , $ 0.40 , and $ 0.44 in 2024, 2023, and 2022, respectively. These results may further vary based on our overall tax profile. The Organization for Economic Co-operation and Development (“OECD”) has published model rules, which include the implementation of a global minimum tax rate of 15%, commonly referred to as Pillar Two. Certain countries in which we do business have enacted implementing legislation effective January 1, 2024. Based on the Company’s analysis of such enacted legislation for jurisdictions in which we operate, there was not a material impact to the Company’s 2024 income tax provision. 116 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The following table reflects changes in unrecognized tax benefits for the periods presented below: Year Ended December 31, 2024 2023 2022 (In millions) Gross amounts of unrecognized tax benefits as of the beginning of the period $ 2,236 $ 1,877 $ 1,678 Increases related to prior period tax positions 44 178 52 Decreases related to prior period tax positions ( 201 ) ( 30 ) ( 185 ) Increases related to current period tax positions 280 235 337 Settlements — — ( 2 ) Statute of limitation expirations ( 39 ) ( 24 ) ( 3 ) Gross amounts of unrecognized tax benefits as of the end of the period $ 2,320 $ 2,236 $ 1,877 If the remaining balance of unrecognized tax benefits were realized in a future period, it would result in a tax benefit of $ 1.5 billion. For the years ended December 31, 2024, 2023, and 2022, we recognized net interest and penalties of $ 50 million, $ 151 million, and $ 119 million, respectively, related to uncertain tax positions in income tax expense. This expense is reflected in the “Other” line of our effective income tax rate schedule. The amount of interest and penalties accrued as of December 31, 2024 and 2023 was approximately $ 556 million and $ 520 million, respectively. We are subject to taxation in the U.S. and various state and foreign jurisdictions. We are currently under examination by certain tax authorities for the 2013 to 2023 tax years. The material jurisdictions in which we are subject to examination by tax authorities for tax years after 2012 primarily include the U.S. (Federal and California), India, Israel, and Singapore. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from our open examinations. 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. It is reasonably possible that within the next twelve months, we may receive additional tax adjustments by various tax authorities or possibly reach resolution of audits in one or more jurisdictions. These adjustments or settlements could result in changes to our unrecognized tax benefits related to positions on prior year tax filings. Given the number of years remaining subject to examination and the number of matters being examined, we were unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits. In connection with our separation from eBay in 2015, we entered into various agreements that govern the relationship between the parties going forward, including a tax matters agreement. Under the tax matters agreement, eBay is generally responsible for all additional taxes (and will be entitled to all related refunds of taxes) imposed on eBay and its subsidiaries (including subsidiaries that were transferred to PayPal pursuant to the separation) arising after the separation date with respect to the taxable periods (or portions thereof) ended on or prior to July 17, 2015, except for those taxes for which PayPal has reflected an unrecognized tax benefit in its financial statements on the separation date. 117 Table of Contents PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 17— RESTRUCTURING AND OTHER RESTRUCTURING 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 year ended December 31, 2024 were $ 307 million, and included employee severance and benefits costs and stock-based compensation expense, all of which were substantially completed by the fourth quarter of 2024. The following table summarizes the restructuring reserve activity during the year ended December 31, 2024: Employee Severance and Benefits Costs (In millions) Accrued liability as of January 1, 2024 $ — Charges (1) 207 Payments ( 196 ) Accrued liability as of December 31, 2024 $ 11 (1) Excludes stock-based compensation expense of $ 100 million. (2) Accrued restructuring liability is included in “accrued expenses and other current liabilities” on our consolidated balance sheets. 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 in 2023 were $ 122 million. We primarily incurred employee severance and benefits costs, which were substantially completed by the fourth quarter of 2023. During the first quarter of 2022, management initiated a strategic reduction of the existing global workforce intended to streamline and optimize our global operations to enhance operating efficiency. This effort focused on reducing redundant operations and simplifying our organizational structure. The associated restructuring charges in 2022 were $ 121 million. We primarily incurred employee severance and benefits costs, as well as associated consulting costs under this strategic reduction. The strategic actions associated with this plan were substantially completed by the fourth quarter of 2022. 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 in 2024 and $ 61 million and $ 81 million in 2023 and 2022, respectively, due to exiting certain leased properties, which resulted in a reduction of ROU lease assets and related leasehold improvements. Additionally, we recognized a gain of $ 17 million due to the sale of an owned property and incurred a loss of $ 14 million related to another owned property held for sale in the year ended December 31, 2023. OTHER During the years ended December 31, 2024 and 2023, approximately $ 129 million and $ 74 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 (inclusive of transactions costs) and fair value adjustments to measure loans and interest receivable, held for sale, at the lower of cost or fair value. In the fourth quarter of 2023, we completed the sale of Happy Returns and recorded a pre-tax gain of $ 339 million, net of transaction costs, in restructuring and other. For additional information on the divestiture, see “Note 4—Business Combinations and Divestitures”. 118 PayPal Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) NOTE 18— SEGMENT INFORMATION Our chief operating decision maker (“CODM”), our Chief Executive Officer, manages the business and evaluates operating performance based on consolidated net income. Our CODM uses consolidated net income to monitor budget versus actual results. We operate as one segment and have one reportable segment that constitutes consolidated results. The following table sets forth our segment information for revenue, segment profit (loss), and significant expenses: Year Ended December 31, 2024 2023 2022 (In millions, except for per share amounts) Net revenues $ 31,797 $ 29,771 $ 27,518 Less (add): Transaction expense 15,697 14,385 12,173 Transaction losses 1,114 1,192 1,170 Credit losses 328 490 402 Customer support and operations (1) 1,768 1,919 2,120 Sales and marketing (1) 2,001 1,809 2,257 Technology and development (1) 2,979 2,973 3,253 General and administrative (1) 2,147 2,059 2,099 Restructuring and other 438 ( 84 ) 207 Other income (expense), net ( 4 ) ( 383 ) 471 Income tax expense 1,182 1,165 947 Segment net income (loss) $ 4,147 $ 4,246 $ 2,419 (1) Includes depreciation and amortization expense. Total depreciation and amortization expense was $ 1.0 billion, $ 1.1 billion, and $ 1.3 billion for the years ended December 31, 2024, 2023, and 2022. There are no reconciling items or adjustments between segment net revenues, net income, total assets and consolidated net revenues, net income, and total assets. For disclosure of geographical information, please refer to “Note 2—Revenue” and “Note 7—Other Financial Statement Details”. 119 Table of Contents FINANCIAL STATEMENT SCHEDULE The Financial Statement Schedule II—VALUATION AND QUALIFYING ACCOUNTS is filed as part of this Annual Report on Form 10-K. Balance at Beginning of Period Charged/ (Credited) to Net Income Charges Utilized/ (Write-offs) Balance at End of Period (In millions) Allowance for Transaction Losses and Negative Customer Balances Year Ended December 31, 2022 $ 355 $ 1,170 $ ( 1,247 ) $ 278 Year Ended December 31, 2023 $ 278 $ 1,192 $ ( 1,188 ) $ 282 Year Ended December 31, 2024 $ 282 $ 1,114 $ ( 1,054 ) $ 342 Allowance for Loans and Interest Receivable Year Ended December 31, 2022 $ 491 $ 437 $ ( 330 ) $ 598 Year Ended December 31, 2023 $ 598 $ 539 $ ( 597 ) $ 540 Year Ended December 31, 2024 $ 540 $ 337 $ ( 416 ) $ 461 120 Table of Contents ITEM 16. FORM 10-K SUMMARY None. INDEX OF EXHIBITS Incorporated by Reference Exhibit Number Exhibit Description Filed with this Form 10-K Form Date Filed 2.01 Separation and Distribution Agreement by and between eBay Inc. and PayPal Holdings, Inc. 10-12B/A 6/26/2015 3.01 PayPal Holdings, Inc. Restated Certificate of Incorporation 10-Q 7/27/2017 3.02 PayPal Holdings, Inc. Amended and Restated Bylaws effective September 27, 2023 8-K 10/2/2023 4.01 Description of Securities 10-K 2/6/2020 4.02 Indenture, dated as of September 26, 2019, by and between PayPal Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee 8-K 9/26/2019 4.03 Officer’s Certificate, dated as of September 26, 2019, pursuant to the Indenture, dated as of September 26, 2019, by and between PayPal Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee, containing Forms of 2024 Note, 2026 Note, and 2029 Note 8-K 9/26/2019 4.04 Officer’s Certificate, dated as of May 18, 2020, pursuant to the Indenture, dated as of September 26, 2019, by and between PayPal Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee, containing Forms of 2025 Note, 2030 Note, and 2050 Note 8-K 5/18/2020 4.05 Officer’s Certificate, dated as of May 23, 2022, pursuant to the Indenture, dated as of September 26, 2019, by and between PayPal Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee, containing Forms of 2027 Note, 2032 Note, 2052 Note, and 2062 Note 8-K 5/23/2022 4.06 Officer’s Certificate pursuant to the Indenture, dated as of June 9, 2023, containing Forms of Note for 0.813% Notes due 2025, 0.972% Notes due 2026, and 1.240% Notes due 2026 8-K 6/9/2023 4.07 Officer’s Certificate pursuant to the Indenture, dated as of May 28, 2024, containing Forms of Note for 5.150% Notes due 2034 and 5.500% Notes due 2054 8-K 5/28/2024 10.01 Tax Matters Agreement by and between eBay Inc. and PayPal Holdings, Inc. dated July 17, 2015 8-K 7/20/2015 10.02+ PayPal Employee Incentive Plan, as amended and restated DEF 14A 4/14/2016 10.03+ PayPal Holdings, Inc. 2015 Equity Incentive Award Plan, as Amended and Restated 8-K 5/28/2024 10.04+ PayPal Holdings, Inc. Amended and Restated Deferred Compensation Plan effective November 6, 2018 10-K 2/7/2019 10.05+ PayPal Holdings, Inc. Executive Change in Control and Severance Plan, as amended and restated, effective as of July 24, 2024 8-K 7/25/2024 10.06+ Form of Indemnity Agreement between PayPal Holdings, Inc. and individual directors and officers 10-12B/A 5/14/2015 10.07+ Form of Global Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan 10-12B/A 5/14/2015 10.08+ Form of Global Performance Based Restricted Stock Unit Award Grant Notice and Performance Based Restricted Stock Unit Award Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan, as amended and restated 10-Q 4/30/2024 121 Table of Contents Incorporated by Reference Exhibit Number Exhibit Description Filed with this Form 10-K Form Date Filed 10.09+ Form of Global Notice of Grant of Stock Option and Stock Option Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan 10-12B/A 5/14/2015 10.10+ Form of Director Annual Award Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan 10-12B/A 5/14/2015 10.11+ Form of Electing Director Quarterly Award Agreement under the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan 10-12B/A 5/14/2015 10.12+ PayPal Holdings, Inc. Amended and Restated Employee Stock Purchase Plan 8-K 5/25/2018 10.13+ Amendment to PayPal Holdings, Inc. Amended and Restated Employee Stock Purchase Plan 10-Q 11/9/2021 10.14+ PayPal Holdings, Inc. 2022 Inducement Plan 10-Q 8/3/2022 10.15+ Letter Agreement by and between PayPal Holdings, Inc. and Alex Chriss, dated August 10, 2023 8-K 8/14/2023 10.16+ Offer Letter, dated October 29, 2023, by and between PayPal Holdings, Inc. and Jamie Miller 8-K 11/1/2023 10.17 Credit Agreement, dated as of June 7, 2023, among PayPal Holdings, Inc. the Designated Borrowers party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A. and J.P. Morgan Securities Australia Limited, as the Administrative Agents 8-K 6/13/2023 10.18† Deed of Amendment in relation to Receivables Purchase Agreement dated as of December 12, 2024 and Amended and Restated Receivables Purchase Agreement dated as of June 16, 2023 (as amended and restated as of December 12, 2024), by and between PayPal (Europe) S.à r.l. et Cie, SCA (as Seller and Receivables Manager), PayPal UK Ltd (as Receivables Manager), Alps Partners S.à r.l. (as Purchaser), BNY Mellon Corporate Trustee Services Limited (as Security Agent), Avega S.à r.l. (as Back-Up Receivables Manager Facilitator) and Alps Partners (Holding) S.à r.l. (as Class C Lender) X 10.19† Receivables Management Agreement, dated as of June 16, 2023 in the form as amended and restated as of October 13, 2023 by and between PayPal (Europe) S.à r.l. et Cie, SCA (as Seller and Receivables Manager), Alps Partners S.à r.l. (as Purchaser), Avega S.à r.l. (as Back-Up Receivables Manager Facilitator) and Alps Partners (Holding) S.à r.l. (as Class C Lender) 10-Q 11/2/2023 10.20† Deed of Amendment in relation to Receivables Purchase Agreement and the Receivables Management Agreement dated as of December 12, 2023, by and between PayPal (Europe) S.à r.l. et Cie, SCA (as Receivables Manager and Seller), PayPal UK Ltd (as Receivables Manager), Alps Partners S.à r.l. (as Purchaser), BNY Mellon Corporate Trustee Services Limited (as Security Agent), Avega S.à r.l. (as Back-Up Receivables Manager Facilitator) and Alps Partners (Holding) S.à r.l. (as Class C Lender) X 10.21 Deed of Amendment in relation to Receivables Management Agreement dated as of July 8, 2024, by and between PayPal (Europe) S.à r.l. et Cie, SCA (as Receivables Manager and Seller), PayPal UK Ltd (as Receivables Manager), Alps Partners S.à r.l. (as Purchaser), BNY Mellon Corporate Trustee Services Limited (as Security Agent), Avega S.à r.l. (as Back-Up Receivables Manager Facilitator) and Alps Partners (Holding) S.à r.l. (as Class C Lender) X 10.22+ Offer Letter, dated October 23, 2023, by and between PayPal Holdings, Inc. and Michelle Gill 10-K 2/8/2024 10.23+ Offer Letter, dated October 23, 2023, by and between PayPal Holdings, Inc. and Diego Scotti 10-K 2/8/2024 122 Table of Contents Incorporated by Reference Exhibit Number Exhibit Description Filed with this Form 10-K Form Date Filed 10.24+ Offer Letter, dated December 4, 2023, by and between PayPal Holdings, Inc. and Suzan Kereere 10-K 2/8/2024 10.25+ Offer Letter, dated May 28, 2024, by and between PayPal Holdings, Inc. and Christopher Natali 8-K 6/3/2024 10.26+ Letter agreement by and between PayPal Holdings, Inc. and Aaron Webster, dated February 5, 2024 10-Q 4/30/2024 10. 2 7 + Independent Director Compensation Policy X 19.01 ^ PayPal Holdings, Inc. Insider Trading Policy X 21.01 List of Subsidiaries X 23.01 PricewaterhouseCoopers LLP consent X 2 4 .01 Power of Attorney (see signature page) X 31.01 Certification of PayPal Holdings, Inc.’s Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 X 31.02 Certification of PayPal Holdings, Inc.’s Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 X 32.01 Certification of PayPal Holdings, Inc.’s Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 X 32.02 Certification of PayPal Holdings, Inc.’s Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 X 97. 0 1 + PayPal Holdings, Inc. Mandatory Recovery Policy for Executive Officers X 101 The following financial information related to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income (Loss), (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows; and (vi) the related Notes to Consolidated Financial Statements X 104 Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101 X + Indicates a management contract or compensatory plan or arrangement. † Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S‑K. ^ Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. 123 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 4, 2025. PayPal Holdings, Inc. By: /s/ Alex Chriss Name: Title: Alex Chriss President, Chief Executive Officer and Director Table of Contents POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Alex Chriss, Jamie Miller, Bimal Patel, Brian Y. Yamasaki and Christopher Natali, and each or any one of them, each with the power of substitution, his or her attorney-in-fact, to sign any amendments to this report, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 4, 2025. Principal Executive Officer: Principal Financial Officer: By: /s/ Alex Chriss By: /s/ Jamie Miller Alex Chriss Jamie Miller President, Chief Executive Officer and Director Executive Vice President, Chief Financial Officer Principal Accounting Officer: By: /s/ Christopher Natali Christopher Natali Vice President, Chief Accounting Officer Additional Directors By: /s/ Rodney C. Adkins By: /s/ Jonathan Christodoro Rodney C. Adkins Jonathan Christodoro Director Director By: /s/ Carmine Di Sibio By: /s/ David W. Dorman Carmine Di Sibio David W. Dorman Director Director By: /s/ Enrique Lores By: /s/ Gail J. McGovern Enrique Lores Gail J. McGovern Director Director By: /s/ Deborah M. Messemer By: /s/ David M. Moffett Deborah M. Messemer David M. Moffett Director Director By: /s/ Ann M. Sarnoff By: /s/ Frank D. Yeary Ann M. Sarnoff Frank D. Yeary Director Director