What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-28 compared with 2025-07-29 · 133 added, 115 removed, 237 unchanged (51% of the section changed)

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OVERVIEW OF RESULTS OF OPERATIONS

The following table provides a summary of our condensed consolidated financial results for the three and six months ended June 30, 2025 and 2024:

Three Months Ended June 30, Percent Increase/(Decrease) Six Months Ended June 30, Percent Increase/(Decrease)

The following table provides a summary of our condensed consolidated financial results for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30, Percent Increase/(Decrease) Nine Months Ended September 30, Percent Increase/(Decrease)

2025 2024 2025 2024

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** Not meaningful.

THREE MONTHS ENDED JUNE 30, 2025 AND 2024

Net revenues increased $403 million, or 5%, in the three months ended June 30, 2025 compared to the same period of the prior year driven primarily by growth in total payment volume (“TPV”) of 6% and an increase in interest and fee revenue earned on our loans receivable portfolio.

Total operating expenses increased $224 million, or 3%, in the three months ended June 30, 2025 compared to the same period of the prior year due primarily to an increase in transaction and credit losses and sales and marketing expense, partially offset by a decline in general and administrative expense.

Operating income increased $179 million, or 14%, in the three months ended June 30, 2025 compared to the same period of the prior year due to the increase in net revenues partially offset by the increase in operating expenses.

Our operating margin was 18% and 17% in the three months ended June 30, 2025 and 2024, respectively, reflecting the positive impact of lower transaction expense growth rate and general and administrative expense, partially offset by higher transaction and credit losses and sales and marketing expense.

Net income increased $133 million, or 12%, in the three months ended June 30, 2025 compared to the same period of the prior year due to the previously discussed increase in operating income of $179 million, partially offset by a decline in other income (expense), net of $49 million.

SIX MONTHS ENDED JUNE 30, 2025 AND 2024

Net revenues increased $495 million, or 3%, in the six months ended June 30, 2025 compared to the same period of the prior year driven primarily by growth in TPV of 5% and an increase in interest and fee revenue earned on our loans receivable portfolio.

Total operating expenses decreased $46 million in the six months ended June 30, 2025 compared to the same period of the prior year due primarily to a decline in transaction expense and restructuring and other expenses, partially offset by an increase in sales and marketing expense and transaction and credit losses.

Operating income increased $541 million, or 22%, in the six months ended June 30, 2025 compared to the same period of the prior year due to the increase in net revenues and decline in operating expenses.

Our operating margin was 19% and 16% in the six months ended June 30, 2025 and 2024, respectively, reflecting the positive impact of lower transaction expense and restructuring and other expenses, partially offset by higher transaction and credit losses and sales and marketing expense.

Net income increased $532 million, or 26%, in the six months ended June 30, 2025 compared to the same period of the prior year due to the previously discussed increase in operating income of $541 million partially offset by a decrease of $17 million in other income (expense), net.

THREE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

Net revenues increased $570 million, or 7%, in the three months ended September 30, 2025 compared to the same period of the prior year driven primarily by growth in total payment volume (“TPV”) of 8% and an increase in interest and fee revenue earned on our loans receivable portfolio.

Total operating expenses increased $441 million, or 7%, in the three months ended September 30, 2025 compared to the same period of the prior year due primarily to an increase in transaction expense and transaction and credit losses.

Operating income increased $129 million, or 9%, in the three months ended September 30, 2025 compared to the same period of the prior year due to the increase in net revenues partially offset by the increase in operating expenses.

Our operating margin remained consistent at 18% for both the three months ended September 30, 2025 and 2024 reflecting the positive impact of a lower transaction expense growth rate offset by a higher transaction and credit losses growth rate.

Net income increased $238 million, or 24%, in the three months ended September 30, 2025 compared to the same period of the prior year due to the previously discussed increase in operating income of $129 million and an increase in other income (expense), net of $93 million.

NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

Net revenues increased $1.1 billion, or 5%, in the nine months ended September 30, 2025 compared to the same period of the prior year driven primarily by growth in TPV of 6% and an increase in interest and fee revenue earned on our loans receivable portfolio.

Total operating expenses increased $395 million, or 2%, in the nine months ended September 30, 2025 compared to the same period of the prior year due primarily to an increase in transaction and credit losses and sales and marketing expense partially offset by a decline in restructuring and other expenses.

Operating income increased $670 million, or 17%, in the nine months ended September 30, 2025 compared to the same period of the prior year due to the increase in net revenues partially offset by the increase in operating expenses.

Our operating margin was 19% and 17% in the nine months ended September 30, 2025 and 2024, respectively, reflecting the positive impact of a lower transaction expense growth rate.

Net income increased $770 million, or 25%, in the nine months ended September 30, 2025 compared to the same period of the prior year due to the previously discussed increase in operating income of $670 million and an increase of $76 million in other income (expense), net.

IMPACT OF FOREIGN EXCHANGE RATES

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We generated approximately 44% and 43% of our net revenues from customers domiciled outside of the U.S.

in the three and six months ended June 30, 2025 and 2024, respectively.

in the three and nine months ended September 30, 2025, respectively.

We generated approximately 42% of our net revenues from customers domiciled outside of the U.S.

in both the three and nine months ended September 30, 2024.

Because we generate substantial net revenues internationally, we are subject to the risks of doing business outside of the U.S.

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Gains and losses from these foreign exchange contracts are recognized as a component of transaction revenues or operating expenses (as applicable) in the same period the forecasted transactions impact earnings.

In the three and six months ended June 30, 2025, year-over-year foreign exchange rate movements relative to the U.S.

In the three and nine months ended September 30, 2025, year-over-year foreign exchange rate movements relative to the U.S.

dollar had the following impact on our reported results:

Three Months Ended June 30, 2025 Six Months Ended June 30, 2025

Three Months Ended September 30, 2025 Nine Months Ended September 30, 2025

(In millions)

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Hedging impact (49) (84)

Favorable (unfavorable) impact to net revenues

(Unfavorable) favorable impact to operating expense

Net unfavorable impact to operating income

Favorable impact to net revenues

Unfavorable impact to operating expenses

Net favorable (unfavorable) impact to operating income

While we enter into foreign exchange contracts to help reduce the impact on earnings from foreign exchange rate movements, it is impossible to eliminate the total effects of this exposure.

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Net revenue analysis

The components of our net revenues for the three and six months ended June 30, 2025 and 2024 were as follows (in millions):

The components of our net revenues for the three and nine months ended September 30, 2025 and 2024 were as follows (in millions):

Transaction revenues

Transaction revenues increased $288 million, or 4%, and $270 million, or 2%, in the three and six months ended June 30, 2025 compared to the same periods of the prior year.

The increase in the three and six months ended June 30, 2025 was driven primarily by an increase in revenue from PayPal and Venmo products and services of $430 million and $600 million, respectively, which was largely driven by growth in TPV and number of payment transactions, partially offset by a decline in revenues of approximately $50 million and $250 million, respectively, from our Braintree products and services predominantly attributable to a decline in the number of payment transactions.

Transaction revenues for the three and six months ended June 30, 2025 were also impacted unfavorably by net losses from hedging activities in the current periods compared to net gains in the prior periods.

Transaction revenues increased $455 million, or 6%, and $725 million, or 3%, in the three and nine months ended September 30, 2025 compared to the same periods of the prior year.

The increase in the three months ended September 30, 2025 was driven primarily by an increase of approximately $390 million in revenue from PayPal and Venmo products and services, which was largely driven by growth in TPV and number of payment transactions, and an increase in revenue from Braintree products and services of approximately $115 million predominantly attributable to growth in TPV despite a decline in the number of payment transactions over the same period.

The increase in the nine months ended September 30, 2025 was primarily attributable to an increase of approximately $1.0 billion in revenue from PayPal and Venmo products and services, which was largely driven by growth in TPV and number of payment transactions, partially offset by a decline in revenue from Braintree products and services of approximately $140 million resulting from a reduction in number of payment transactions.

The increase in TPV for Braintree products and services despite a decline in the number of payment transactions is due to our strategic shift as we focus on profitable growth.

Transaction revenues in the three and nine months ended September 30, 2025 were also impacted by an unfavorable impact from hedging activities.

As a result of our stronger focus on profitable growth and ongoing negotiations with merchants, we experienced lower volume and transaction revenue from our Braintree offerings in the first half of 2025.

In the second half of 2025, we expect volume from our Braintree offerings to return to growth.

The graphs below present the respective key metrics (in millions) for the three and six months ended June 30, 2025 and 2024:

As noted above, in the third quarter of 2025, revenue and TPV from Braintree offerings grew year-over-year.

In the fourth quarter of 2025, we expect volume from our Braintree offerings to continue to grow.

The graphs below present the respective key metrics (in millions) for the three and nine months ended September 30, 2025 and 2024:

*Reflects active accounts at the end of the applicable period.

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The following table provides a summary of related metrics:

Three Months Ended June 30, Percent Increase/(Decrease) Six Months Ended

June 30, Percent Increase/(Decrease)

Three Months Ended September 30, Percent Increase/(Decrease) Nine Months Ended September 30, Percent Increase/(Decrease)

2025 2024 2025 2024

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** Not meaningful.

We had active accounts of 438 million and 429 million as of June 30, 2025 and 2024, respectively, an increase of 2%.

Our total number of payment transactions was 6.2 billion and 6.6 billion for the three months ended June 30, 2025 and 2024, respectively, a decrease of 5%.

Our total number of payment transactions was 12.3 billion for the six months ended June 30, 2025, compared to 13.1 billion in the six months ended June 30, 2024, a decrease of 6%.

TPV was $444 billion and $417 billion for the three months ended June 30, 2025 and 2024, respectively, an increase of 6%.

TPV was $861 billion for the six months ended June 30, 2025 compared to $821 billion in the six months ended June 30, 2024, an increase of 5%.

Transaction revenues growth was lower than the growth in TPV in the three and six months ended June 30, 2025 compared to the same periods in the prior year due primarily to changes in product mix, merchant mix and unfavorable impact from foreign exchange hedging.

We had active accounts of 438 million and 432 million as of September 30, 2025 and 2024, respectively, an increase of 1%.

Our total number of payment transactions was 6.3 billion and 6.6 billion for the three months ended September 30, 2025 and 2024, respectively, a decrease of 5%.

Our total number of payment transactions was 18.6 billion for the nine months ended September 30, 2025, compared to 19.7 billion in the nine months ended September 30, 2024, a decrease of 6%.

TPV was $458 billion and $423 billion for the three months ended September 30, 2025 and 2024, respectively, an increase of 8%.

TPV was $1.3 trillion for the nine months ended September 30, 2025 compared to $1.2 trillion in the nine months ended September 30, 2024, an increase of 6%.

Transaction revenues growth was lower than the growth in TPV in the three and nine months ended September 30, 2025 compared to the same periods in the prior year due primarily to changes in product mix and unfavorable impact from foreign exchange hedging activities.

Revenues from other value added services

Revenues from other value added services increased $115 million, or 16%, and $225 million, or 16%, in the three and six months ended June 30, 2025 compared to the same periods in the prior year due primarily to an increase of approximately $80 million and $150 million, respectively, in interest and fee revenue earned from our loans receivable portfolios as well as an increase of $50 million in each of those respective periods from revenue earned from an independent chartered financial institution (“partner institution”).

Revenues from other value added services increased $115 million, or 15%, and $340 million, or 16%, in the three and nine months ended September 30, 2025 compared to the same periods in the prior year due primarily to an increase of approximately $65 million and $220 million, respectively, in interest and fee revenue earned from our loans receivable portfolios as well as an increase of approximately $50 million and $100 million, respectively, from revenue earned from an independent chartered financial institution (“partner institution”).

Revenue from the partner institution is earned primarily through revenue share associated with our U.S.

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The following table summarizes our operating expenses and related metrics we use to assess the trends in each:

Three Months Ended June 30, Percent Increase/(Decrease) Six Months Ended June 30, Percent Increase/(Decrease)

Three Months Ended September 30, Percent Increase/(Decrease) Nine Months Ended September 30, Percent Increase/(Decrease)

2025 2024 2025 2024

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Transaction expense

Transaction expense for the three and six months ended June 30, 2025 and 2024 was as follows (in millions):

Transaction expense increased $26 million, or 1%, and decreased $187 million, or 2%, in the three and six months ended June 30, 2025 compared to the same periods of the prior year.

The increase in transaction expense for the three months ended June 30, 2025 was primarily attributable to the increase in TPV of 6%, partially offset by favorable changes in merchant mix to lower cost merchants as well as regional mix within our Braintree products and services.

The decrease in transaction expense for the six months ended June 30, 2025 compared to the same period of the prior year was primarily due to a decline in volume of Braintree products and services, which generally have higher expense rates than other products and services, and favorable changes in merchant mix and regional mix, partially offset by an increase in volume from PayPal products and services.

The decline in transaction expense rate for the three and six months ended June 30, 2025 compared to the same periods of the prior year was primarily attributable to a lower proportion of TPV from Braintree products and services and changes in merchant mix and regional mix.

Transaction expense for the three and nine months ended September 30, 2025 and 2024 was as follows (in millions):

Transaction expense increased $222 million, or 6%, and stayed relatively consistent, in the three and nine months ended September 30, 2025 compared to the same periods of the prior year.

The increase in transaction expense for the three and nine months ended September 30, 2025 was primarily attributable to the increase in TPV of 8% and 6%, respectively, partially offset by favorable changes in merchant mix to lower cost merchants within our Braintree products and services.

The decline in transaction expense rate for the three and nine months ended September 30, 2025 compared to the same periods of the prior year was primarily attributable to a lower proportion of TPV from Braintree products and services and changes in merchant mix.

Our transaction expense rate is impacted by changes in product mix, merchant mix, regional mix, funding mix, and fees paid to payment processors and other financial institutions.

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The cost of funding a transaction is also impacted by the geographic region or country in which a transaction occurs, as we generally pay lower rates for transactions funded with credit or debit cards outside the U.S.

For the three months ended June 30, 2025 and 2024, approximately 38% and 36%, respectively, of TPV was generated outside of the U.S.

For both the six months ended June 30, 2025 and 2024, approximately 36% of TPV was generated outside of the U.S.

For the three months ended September 30, 2025 and 2024, approximately 38% and 37%, respectively, of TPV was generated outside of the U.S.

For the nine months ended September 30, 2025 and 2024, approximately 37% and 36%, respectively, of TPV was generated outside of the U.S.

Transaction and credit losses

The components of our transaction and credit losses for the three and six months ended June 30, 2025 and 2024 were as follows (in millions):

Transaction and credit losses increased $141 million, or 42%, and $191 million, or 29%, in the three and six months ended June 30, 2025 compared to the same periods of the prior year.

Transaction losses increased $124 million, or 48%, and $142 million, or 27%, in three and six months ended June 30, 2025 compared to the same periods of the prior year.

Transaction loss rate (transaction losses divided by TPV) was 0.09% and 0.08% for the three and six months ended June 30, 2025, respectively, compared to 0.06% for both the three and six months ended June 30, 2024.

The increase in transaction losses and the associated transaction loss rate in the three and six months ended June 30, 2025 compared to the same periods of the prior year was primarily due to an increase in losses driven by fraud incidents from our PayPal products and services and, to a lesser extent, from our Venmo products and services.

Credit losses increased $17 million and $49 million in the three and six months ended June 30, 2025, respectively, compared to the same periods of the prior year.

The components of credit losses for the three and six months ended June 30, 2025 and 2024 were as follows (in millions):

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

The components of our transaction and credit losses for the three and nine months ended September 30, 2025 and 2024 were as follows (in millions):

Transaction and credit losses increased $131 million, or 37%, and $322 million, or 32%, in the three and nine months ended September 30, 2025 compared to the same periods of the prior year.

Transaction losses increased $133 million, or 50%, and $275 million, or 35%, in the three and nine months ended September 30, 2025 compared to the same periods of the prior year.

Transaction loss rate (transaction losses divided by TPV) was 0.09% and 0.08% for the three and nine months ended September 30, 2025, respectively, compared to 0.06% for both the three and nine months ended September 30, 2024.

The increase in transaction losses and the associated transaction loss rate in the three and nine months ended September 30, 2025 compared to the same periods of the prior year was primarily due to an increase in losses driven by fraud incidents from our PayPal products and services.

Credit losses decreased $2 million and increased $47 million in the three and nine months ended September 30, 2025, respectively, compared to the same periods of the prior year.

The components of credit losses for the three and nine months ended September 30, 2025 and 2024 were as follows (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2025 (3)

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(2) Reserve build (release) represents change in allowance for principal receivables excluding foreign currency remeasurement.

Credit losses in the three and six months ended June 30, 2025 were primarily attributable to loan originations during the period.

Credit losses in the three and six months ended June 30, 2024 were attributable to loan originations partially offset by improvement in the credit quality of loans outstanding.

(3) Includes the reversal of allowance associated with reclassification of certain loans receivable to held for sale.

Credit losses in the three and nine months ended September 30, 2025 were primarily attributable to loan originations during the period, partially offset by the reclassification of certain loans to held for sale.

Credit losses in the three and nine months ended September 30, 2024 were attributable to loan originations during the period partially offset by improvement in the credit quality of loans outstanding.

Consumer loan portfolio

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 receivables, including a forward-flow arrangement for the sale of future originations of eligible loans over a 24-month commitment period (collectively, “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.

As of June 30, 2025 and 2024, loans and interest receivable, held for sale was $817 million and $369 million, respectively.

The consumer loans and interest receivable balance as of June 30, 2025 and 2024 was $5.8 billion and $4.6 billion, respectively, net of participation interest sold, representing an increase of 27%.

The increase was driven primarily by growth of approximately $590 million and $290 million in our installment credit products driven by growth in Japan and the U.S., respectively, and growth of approximately $370 million in our revolving credit product in the U.K.

We have entered into forward flow arrangements with third-party investors to sell certain loans receivable portfolios.

As of September 30, 2025 and 2024, loans and interest receivable, held for sale was $1.4 billion and $471 million, respectively.

In third quarter of 2025, we reclassified $574 million of U.S.

consumer short-term, non-interest bearing installment loans to held for sale.

The consumer loans and interest receivable balance as of September 30, 2025 and 2024 was $5.2 billion and $5.1 billion, respectively, net of participation interest sold, representing an increase of 1%.

The increase was driven primarily by growth of our installment credit products in the U.S.

and Japan of approximately $225 million and $190 million, respectively, and an increase in our revolving credit product in the United Kingdom (“U.K.”) of approximately $160 million.

The consumer loans and interest receivable balance was also impacted by the reclassification of our U.S.

short-term, non-interest bearing installment loans to held for sale in the third quarter of 2025.

The following table provides information regarding the credit quality of our consumer loans and interest receivable balance:

September 30,

Percent of consumer loans and interest receivable current

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(1) Represents percentage of balances which are 90 days past the billing date or contractual repayment date, as applicable.

(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended June 30, 2025 and 2024, excluding fraud losses, on consumer loans as a percentage of the average daily amount of consumer loans and interest receivable balance during the same period.

(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended September 30, 2025 and 2024, excluding fraud losses, on consumer loans as a percentage of the average daily amount of consumer loans and interest receivable balance during the same period.

In response to changing portfolio performance and macroeconomic environment, we continue to monitor risk and evaluate and modify our acceptable risk parameters.

Modifications to the acceptable risk parameters did not have a material impact on our consumer loans for the three and six months ended June 30, 2025.

Modifications to the acceptable risk parameters did not have a material impact on our consumer loans for the three and nine months ended September 30, 2025.

Merchant loan portfolio

We offer access to merchant finance products for certain small and medium-sized businesses, which we refer to as our merchant finance offerings.

Total merchant loans, advances, and interest and fees receivable outstanding, net of participation interest sold, as of June 30, 2025 and 2024 was $1.7 billion and $1.2 billion, respectively, reflecting an increase of 41%.

The increase was due primarily to growth of approximately $260 million in our PayPal Working Capital product portfolio, primarily from Germany, the U.S., and the U.K.

and growth of approximately $230 million in our PayPal Business Loans (“PPBL”) product in the U.S.

Total merchant loans, advances, and interest and fees receivable outstanding, net of participation interest sold, as of September 30, 2025 and 2024 was $1.7 billion and $1.4 billion, respectively, reflecting an increase of 28%.

The increase was due primarily to growth in our PayPal Business Loans product in the U.S.

of approximately $250 million and growth in our PayPal Working Capital product portfolio, primarily from Germany, the U.S., and the U.K., of approximately $130 million.

The following table provides information regarding the credit quality of our merchant loans, advances, and interest and fees receivable balance:

September 30,

Percent of merchant loans, advances, and interest and fees receivable current 90.2 % 91.3 %

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(1) Represents percentage of balances which are 90 days past the original expected or contractual repayment period, as applicable.

(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended June 30, 2025 and 2024, excluding fraud losses, on merchant loans and advances as a percentage of the average daily amount of merchant loans, advances, and interest and fees receivable balance during the same period.

The decrease in net charge-off rate for merchant receivables at June 30, 2025 as compared to June 30, 2024 was due primarily to the improvement in the credit quality of PPBL loans receivable.

(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended September 30, 2025 and 2024, excluding fraud losses, on merchant loans and advances as a percentage of the average daily amount of merchant loans, advances, and interest and fees receivable balance during the same period.

In response to changing portfolio performance and macroeconomic environment, we continue to monitor risk and evaluate and modify our acceptable risk parameters.

Modifications to the acceptable risk parameters did not have a material impact on our merchant loans for the three and six months ended June 30, 2025.

Modifications to the acceptable risk parameters did not have a material impact on our merchant loans for the three and nine months ended September 30, 2025.

For additional information, see “Note 11—Loans and Interest Receivable” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Customer support and operations

Customer support and operations expenses for the three and six months ended June 30, 2025 and 2024 were as follows (in millions):

Customer support and operations expenses decreased $23 million, or 5%, and $79 million, or 9%, in the three and six months ended June 30, 2025 compared to the same periods of the prior year.

The decline in the three and six months ended June 30, 2025 was due primarily to a decline in employee-related costs, and to a lesser extent, a decline in software expenses.

Customer support and operations expenses for the three and nine months ended September 30, 2025 and 2024 were as follows (in millions):

Customer support and operations expenses increased $20 million, or 5%, and decreased $59 million, or 4%, in the three and nine months ended September 30, 2025 compared to the same periods of the prior year.

The increase in the three months ended September 30, 2025 was due primarily to an increase in other operating charges, partially offset by a decline in employee-related costs and software expenses.

The decrease in the nine months ended September 30, 2025 was primarily attributable to a decline in employee-related costs and software expenses, partially offset by an increase in other operating charges.

Sales and marketing

Sales and marketing expenses for the three and six months ended June 30, 2025 and 2024 were as follows (in millions):

Sales and marketing expenses increased $137 million, or 31%, and $204 million, or 24%, in the three and six months ended June 30, 2025 compared to the same periods of the prior year due primarily to higher spend of approximately $150 million and $240 million, respectively, on marketing and brand advertising, including our PayPal Everywhere and Venmo Everything advertising campaigns, partially offset by lower employee-related costs.

Sales and marketing expenses for the three and nine months ended September 30, 2025 and 2024 were as follows (in millions):

Sales and marketing expenses increased $13 million, or 3%, and $217 million, or 16%, in the three and nine months ended September 30, 2025 compared to the same periods of the prior year.

The increase in the three months ended September 30, 2025 was due primarily to higher spend on marketing and brand advertising, including our Venmo Everything advertising campaign, partially offset by lower costs associated with Honey rewards programs.

The increase in the nine months ended September 30, 2025 was primarily due to higher spend of approximately $265 million on marketing and brand advertising, including our PayPal Everywhere and Venmo Everything advertising campaigns, partially offset by lower employee-related costs and lower costs associated with Honey rewards programs.

Technology and development

Technology and development expenses for the three and six months ended June 30, 2025 and 2024 were as follows (in millions):

Technology and development expenses increased $49 million, or 7%, and $38 million, or 3%, in the three and six months ended June 30, 2025 compared to the same periods of the prior year.

The increase in technology and development expenses in the three months ended June 30, 2025 was primarily due to increases in employee-related costs, contractor and consultant costs, and software maintenance costs, partially offset by a decline in depreciation expense.

The increase in technology and development expenses in the six months ended June 30, 2025 was driven by increases in contractor and consultant costs, software maintenance costs, and costs from cloud computing services utilized in delivering our products and services, partially offset by a decline in depreciation and amortization expense.

Technology and development expenses for the three and nine months ended September 30, 2025 and 2024 were as follows (in millions):

Technology and development expenses increased $55 million, or 7%, and $93 million, or 4%, in the three and nine months ended September 30, 2025 compared to the same periods of the prior year due primarily to increases in contractor and consultant costs, costs from cloud computing services utilized in delivering our products and services, and software maintenance costs.

Technology and development expenses in the nine months ended September 30, 2025 were also impacted by an increase in employee-related costs, partially offset by a decline in depreciation and amortization expense.

General and administrative

General and administrative expenses for the three and six months ended June 30, 2025 and 2024 were as follows (in millions):

General and administrative expenses decreased $109 million, or 19%, and $70 million, or 7%, in the three and six months ended June 30, 2025 compared to the same periods of the prior year due primarily to a decline in indirect tax expense of approximately $80 million and $60 million, respectively, a contingency reserve in the prior periods for which there was no similar activity in the current periods, and a decline in employee-related expenses.

The decline in the six months ended June 30, 2025 was partially offset by increases in professional services expense, costs associated with enterprise software services and facilities expense.

General and administrative expenses for the three and nine months ended September 30, 2025 and 2024 were as follows (in millions):

General and administrative expenses decreased $6 million, or 1%, and $76 million, or 5%, in the three and nine months ended September 30, 2025 compared to the same periods of the prior year.

The decrease in the three months ended September 30, 2025 was due primarily to a decline in employee-related costs, partially offset by an increase in indirect tax expense.

The decrease in the nine months ended September 30, 2025 was primarily attributable to declines in employee-related costs, indirect tax expense, and contingency reserve compared to the prior period, partially offset by increases in professional services expense and costs associated with enterprise software services.

Restructuring and other

Restructuring and other for the three and six months ended June 30, 2025 and 2024 were as follows (in millions):

Restructuring and other increased $3 million and decreased $143 million in the three and six months ended June 30, 2025, respectively, compared to the same periods of the prior year.

The decline in the six months ended June 30, 2025 was due primarily to a decline in restructuring charges compared to the prior period.

Restructuring and other for the three and nine months ended September 30, 2025 and 2024 were as follows (in millions):

Restructuring and other increased $6 million and decreased $137 million in the three and nine months ended September 30, 2025, respectively, compared to the same periods of the prior year.

During the second quarter of 2025, management undertook a large-scale initiative (the “Q2 2025 Plan”) to reengineer our existing technology infrastructure to improve scalability, reduce network latency, decrease operational costs, and optimize our workforce.

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The plan is expected to be executed over a period of 18 to 42 months with the workforce component to be substantially completed in 2027 and the technology infrastructure component to be substantially completed in 2028.

The associated restructuring charges during both the three and six months ended June 30, 2025 were $95 million and included employee severance and benefits costs.

The associated restructuring charges during the three and nine months ended September 30, 2025 were de minimis and $96 million and included employee severance and benefits costs.

In connection with this restructuring, we expect to incur employee severance and benefits costs of approximately $90 million to $100 million, asset impairment and accelerated depreciation charges of approximately $40 million to $60 million, and other restructuring costs of approximately $110 million to $140 million over the term of the Q2 2025 Plan.

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We expect annualized cost savings of approximately $280 million associated with the impacted workforce, including stock-based compensation, and operational costs for our technology infrastructure.

We expect that these cost savings will begin to occur upon the completion of the components of the Q2 2025 Plan and also expect to reinvest a portion of the reduction in annual costs to drive business priorities.

We expect that we will begin to realize these cost savings upon the completion of the components of the Q2 2025 Plan, and also expect to reinvest a portion of the reduction in annual costs to drive business priorities.

The timing of activities, cost, and savings estimates continue to be developed and are subject to change.

During the first quarter of 2025, management initiated a workforce reduction to ensure compliance with a new regulation impacting operations in an international market.

The associated restructuring charges during the six months ended June 30, 2025 were $36 million and included employee severance and benefits costs, which were substantially completed as of June 30, 2025.

The associated restructuring charges during the nine months ended September 30, 2025 were $36 million and included employee severance and benefits costs, which were completed in the third quarter of 2025.

We do not anticipate cost savings in conjunction with this reduction.

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

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

During the three and six months ended June 30, 2025, approximately $27 million and $52 million, respectively, of losses were recorded in restructuring and other, which included net loss on sale of loans and interest receivable previously held for sale and fair value adjustments to measure loans and interest receivable, held for sale, at the lower of cost or fair value.

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

The associated restructuring charges during the three and nine months ended September 30, 2024 were $36 million and $294 million, respectively, and included employee severance and benefits costs and stock-based compensation expense, which were substantially completed in the fourth quarter of 2024.

During the three and nine months ended September 30, 2025, approximately $70 million and $122 million, respectively, of losses were recorded in restructuring and other, which included net loss on sale of loans and interest receivable previously held for sale and fair value adjustments to measure loans and interest receivable, held for sale, at the lower of cost or fair value.

During the three and nine months ended September 30, 2024, approximately $28 million and $92 million, respectively, of losses were recorded in restructuring and other, which included net loss on sale of loans and interest receivable previously held for sale and fair value adjustments to measure loans and interest receivable, held for sale, at the lower of cost or fair value.

Other income (expense), net

Other income (expense), net decreased $49 million and $17 million in the three and six months ended June 30, 2025 compared to the same periods of the prior year due primarily to a decline of approximately $30 million and $50 million, respectively, in interest income resulting from lower average cash balances year over year, an increase in interest expense due to incremental expense from the March 2025 and May 2024 debt issuances, and foreign exchange losses in the current periods compared to foreign exchange gains in the prior periods.

These items unfavorably impacting other income (expense) were partially offset by net gains on strategic investments in the current periods compared to net losses and impairments in the prior periods, which contributed increases of approximately $20 million and $115 million year over year.

Other income (expense), net increased $93 million and $76 million in the three and nine months ended September 30, 2025 compared to the same periods of the prior year due primarily to net gains on strategic investments in the current periods compared to net losses and impairments in the prior periods, which contributed increases of approximately $180 million and $295 million, respectively, partially offset by declines in interest income of approximately $65 million and $115 million, respectively, resulting from lower average cash and investment balances year-over-year and lower interest rates.

The nine months ended September 30, 2025 was also unfavorably impacted by foreign exchange losses in the current period compared to foreign exchange gains in the prior period and an increase in interest expense due to incremental expense from the March 2025 and May 2024 debt issuances.

Income tax expense

Our effective income tax rate was 18% and 19% for the three months ended June 30, 2025 and 2024, respectively, and 19% and 23% for the six months ended June 30, 2025 and 2024, respectively.

The decrease in our effective income tax rate for the three and six months ended June 30, 2025 compared to the same periods of the prior year was due primarily to discrete tax adjustments including tax effects of stock-based compensation partially offset by the impact of foreign income taxed at different rates.

Our effective income tax rate was 19% and 23% for the three months ended September 30, 2025 and 2024, respectively.

The decrease in our effective tax rate for the three months ended September 30, 2025 compared to the same period of the prior year was due primarily to the impact of foreign income taxed at different rates, partially offset by discrete tax adjustments.

Our effective income tax rate was 19% and 23% for the nine months ended September 30, 2025 and 2024, respectively.

The decrease in our effective income tax rate for the nine months ended September 30, 2025 compared to the same period of the prior year was due primarily to discrete tax adjustments including tax effects of stock-based compensation, partially offset by the impact of foreign income taxed at different rates.

LIQUIDITY AND CAPITAL RESOURCES

We require liquidity and access to capital to fund our global operations, including our customer protection programs, credit products, capital expenditures, investments in our business, potential acquisitions and strategic investments, working capital, and other cash needs.

We believe that our existing cash, cash equivalents, and investments, cash expected to be generated from operations, and our expected access to capital markets, together with potential external funding through third-party sources, will be sufficient to meet our cash requirements within the next 12 months and beyond.

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Cash, cash equivalents, and investments

The following table summarizes our cash, cash equivalents, and investments as of June 30, 2025 and December 31, 2024:

June 30, 2025 December 31, 2024

The following table summarizes our cash, cash equivalents, and investments as of September 30, 2025 and December 31, 2024:

September 30, 2025 December 31, 2024

(In millions)

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$ 12,759 $ 13,947

(1) Excludes assets related to funds receivable and customer accounts of $38.9 billion and $37.7 billion at June 30, 2025 and December 31, 2024, respectively.

(2) Excludes total restricted cash of nil and $1 million at June 30, 2025 and December 31, 2024, respectively, and strategic investments of $1.6 billion at both June 30, 2025 and December 31, 2024.

Cash, cash equivalents, and investments held by our foreign subsidiaries were $6.8 billion and $8.5 billion at June 30, 2025 and December 31, 2024, or 56% and 61% of our total cash, cash equivalents, and investments as of those respective dates.

(1) Excludes assets related to funds receivable and customer accounts of $38.7 billion and $37.7 billion at September 30, 2025 and December 31, 2024, respectively.

(2) Excludes total restricted cash of nil and $1 million at September 30, 2025 and December 31, 2024, respectively, and strategic investments of $1.6 billion at both September 30, 2025 and December 31, 2024.

Cash, cash equivalents, and investments held by our foreign subsidiaries were $7.1 billion and $8.5 billion at September 30, 2025 and December 31, 2024, or 56% and 61% of our total cash, cash equivalents, and investments as of those respective dates.

At December 31, 2024, all of our cash, cash equivalents, and investments held by foreign subsidiaries were subject to U.S.

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The following table summarizes our condensed consolidated statements of cash flows:

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions)

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Operating activities

Net cash provided by operating activities declined $1.4 billion in the six months ended June 30, 2025 compared to the same period of the prior year due primarily to changes in working capital of approximately $1.2 billion driven primarily by an increase in current assets and a decline in current liabilities and an increase of approximately $360 million in originations of loans and interest receivable held for sale, net of sales and repayments, partially offset by an increase in operating income of approximately $540 million.

In the six months ended June 30, 2025 and 2024, cash paid for income taxes, net was $837 million and $822 million, respectively.

Net cash provided by operating activities declined $1.0 billion in the nine months ended September 30, 2025 compared to the same period of the prior year due primarily to changes in working capital of approximately $920 million driven primarily by a decline in current liabilities and an increase in actual cash transaction losses incurred during the period, an increase of approximately $870 million in originations of loans and interest receivable held for sale, net of sales and repayments, and an impact of approximately $300 million from net gains on strategic investments, partially offset by an increase of approximately $320 million in transaction and credit losses, and a decrease of $210 million in the accretion of discounts on investments, net of amortization premiums.

In both the nine months ended September 30, 2025 and 2024, cash paid for income taxes, net was $1.0 billion.

Investing activities

Net cash used in investing activities increased $110 million in the six months ended June 30, 2025 compared to the same period of the prior year due primarily to changes related to funds receivable of approximately $1.4 billion and an increase in collateral posted of approximately $390 million, partially offset by a decline of approximately $1.8 billion in purchases of investments, net of maturities and sales.

Net cash provided by investing activities increased $1.9 billion in the nine months ended September 30, 2025 compared to the same period of the prior year due primarily to an increase of approximately $2.7 billion in maturities and sales, net of purchases of investments, and an increase of approximately $700 million in principal repayments of loans receivable, net of purchases and originations, partially offset by changes related to funds receivable of approximately $1.4 billion.

Financing activities

Net cash used in financing activities increased $18 million in the six months ended June 30, 2025 compared to the same period of the prior year due primarily to an increase of approximately $720 million in repayments, net of borrowings under financing arrangements and a decline in collateral received of approximately $220 million, partially offset by an increase of approximately $950 million from changes related to funds payable and amounts due to customers.

Net cash used in financing activities decreased $682 million in the nine months ended September 30, 2025 compared to the same period of the prior year due primarily to cash inflows of approximately $1.4 billion from changes related to funds payable and amounts due to customers partially offset by a decline of approximately $850 million in borrowings under financing arrangements, net of repayments.

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

Foreign currency exchange rates had a positive impact of $289 million and a negative impact of $89 million on cash, cash equivalents, and restricted cash for the six months ended June 30, 2025 and 2024, respectively.

The positive impact on cash, cash equivalents, and restricted cash in the six months ended June 30, 2025 was due primarily to favorable fluctuations in the exchange rate of the U.S.

Foreign currency exchange rates had a positive impact of $245 million and $103 million on cash, cash equivalents, and restricted cash for the nine months ended September 30, 2025 and 2024, respectively.

The positive impact on cash, cash equivalents, and restricted cash in the nine months ended September 30, 2025 was due primarily to favorable fluctuations in the exchange rate of the U.S.

dollar to the British pound and, to a lesser extent, the Euro and Australian dollar.

The negative impact on cash, cash equivalents, and restricted cash in the six months ended June 30, 2024 was due primarily to the unfavorable impact of fluctuations in the exchange rate of the U.S.

dollar to the Australian dollar and the British pound, and to a lesser extent, the Euro and Japanese yen.

The positive impact on cash, cash equivalents, and restricted cash in the nine months ended September 30, 2024 was due primarily to the favorable impact of fluctuations in the exchange rate of the U.S.

dollar to the British pound.

Available credit and debt

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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.

As of June 30, 2025, we had an aggregate principal amount of $10.9 billion in debt outstanding with varying maturity dates.

As of September 30, 2025, we had an aggregate principal amount of $10.9 billion in debt outstanding with varying maturity dates.

Other than as described above, there were no significant changes to the available credit and debt disclosed in our 2024 Form 10‑K.

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Credit ratings

As of June 30, 2025, we continue to be rated investment grade by Standard and Poor’s Financial Services, LLC, Fitch Ratings, Inc., and Moody’s Investors Services, Inc.

As of September 30, 2025, we continue to be rated investment grade by Standard and Poor’s Financial Services, LLC, Fitch Ratings, Inc., and Moody’s Investors Services, Inc.

We expect that these credit rating agencies will continue to monitor our performance, including our capital structure and results of operations.

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Our material cash requirements include funds to support current and potential:

operating activities, credit products, customer protection programs, stock repurchases, strategic investments, acquisitions, other commitments, capital expenditures, and other future obligations.

operating activities, credit products, customer protection programs, stock repurchases, dividend payments, strategic investments, acquisitions, other commitments, capital expenditures, and other future obligations.

Credit products

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credit activities.

As of June 30, 2025 and December 31, 2024, the cumulative amount approved by PayPal to be designated to fund credit activities was $2.0 billion as of those respective dates and represented approximately 26% 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.

As of September 30, 2025 and December 31, 2024, the cumulative amount approved by PayPal to be designated to fund credit activities was $2.0 billion as of those respective dates and represented approximately 26% 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.

We may periodically seek to change the designation of amounts of European customer balances for our credit activities, as we deem necessary, based on utilization of the approved funds and anticipated credit funding requirements.

Under certain exceptional circumstances, corporate liquidity could be called upon to meet our obligations related to our European customer balances.

In June 2023, we entered into a multi-year agreement with a global investment firm to sell our eligible consumer installment receivables portfolio.

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.

During the six months ended June 30, 2025 and 2024, we had net proceeds of $11.6 billion and $9.6 billion, respectively, from loans and interest receivable sold in connection with this agreement.

We have entered into forward flow arrangements with third-party investors to sell certain loans receivable portfolios.

In the third quarter of 2025, we entered into an arrangement with a third-party which has a duration of two years and up to $7.0 billion of loans receivable sales over the term.

During the nine months ended September 30, 2025 and 2024, we had net proceeds of $18.2 billion and $14.7 billion, respectively, from loans and interest receivable sold.

See “Note 11—Loans and Interest Receivable” in the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for additional information.

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Historical loss rates may not be indicative of future results.

Capital return program

Stock repurchases

During the six months ended June 30, 2025, we repurchased approximately $3.0 billion of our common stock in the open market under our stock repurchase program authorized in June 2022.

As of June 30, 2025, a total of approximately $1.9 billion and $15.0 billion remained available for future repurchases of our common stock under our June 2022 and February 2025 stock repurchase programs, respectively.

During the nine months ended September 30, 2025, we repurchased approximately $4.5 billion of our common stock in the open market under our stock repurchase program authorized in June 2022.

As of September 30, 2025, a total of approximately $355 million and $15.0 billion remained available for future repurchases of our common stock under our June 2022 and February 2025 stock repurchase programs, respectively.

Implementation of dividend program

On October 28, 2025, we announced that our Board of Directors approved the initiation of a quarterly cash dividend program and declared a cash dividend of $0.14 per share on our common stock, totaling approximately $130 million.

The dividend will be payable on December 10, 2025, to stockholders of record of our common stock as of the close of business on November 19, 2025.

Dividend payments in future quarters will be subject to and contingent upon market conditions and approval by our Board of Directors in its sole discretion.

Other considerations

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis