What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-28 compared with 2026-05-05 · 147 added, 80 removed, 261 unchanged (47% of the section changed)

1 unchanged sentence

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans, or intentions (such as those relating to future business, future results of operations or financial condition, new or planned features or services, mergers or acquisitions, or management strategies).

These forward-looking statements can be identified by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “continue,” “strategy,” “future,” “opportunity,” “plan,” “project,” “forecast,” “outlook,” and other similar expressions.

These forward-looking statements can be identified by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “continue,” “strategy,” “future,” “opportunity,” “plan,” “guidance,” “project,” “forecast,” “outlook,” and other similar expressions.

These forward-looking statements involve risks and uncertainties that could cause our actual results and financial condition to differ materially from those expressed or implied in our forward-looking statements.

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Cybersecurity and information security risks for global payments and technology companies like us have increased significantly in recent years.

Although we have developed systems and processes designed to protect the data we manage, prevent data loss and other security incidents, and enable us to effectively respond to known and potential risks, and expect to continue to expend significant resources to bolster these protections, we have experienced and expect to continue to experience cybersecurity incidents and remain subject to these risks.

There can be no assurance that our security measures will provide sufficient protection or security to prevent breaches or attacks.

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Recent developments

On April 29, 2026, the Company announced a strategic reorganization of its business and executive leadership team intended to accelerate execution of its long-term growth priorities, simplify its operating structure, streamline decision-making, and drive innovation.

In April 2026, the Company announced a strategic reorganization of its business and executive leadership team intended to accelerate execution of its long-term growth priorities, simplify its operating structure, streamline decision-making, and drive innovation.

This strategic reorganization and business simplification program, which will focus on realigning our operating structure and accelerating the adoption of artificial intelligence and automation across the company, is expected to deliver at least $1.5 billion in gross annualized run-rate savings over the next two to three years.

The Company intends to reinvest a significant portion of these savings back into its highest-priority growth initiatives.

As part of this program, certain actions have been identified that are expected to be completed by the end of this year and which have the potential to generate approximately $400 million of run-rate gross savings, with a portion to be realized in the fourth quarter.

The Company is still finalizing plans but this first phase of actions could result in a transformation related charge within the range of approximately $120 million to $140 million during the second half of 2026.

The Company expects to provide additional details regarding the structure of the program and anticipated phasing of savings realization in future periods as the program is developed and implemented.

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OVERVIEW OF RESULTS OF OPERATIONS

The following table provides a summary of our condensed consolidated financial results for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31, Increase/(Decrease)

The following table provides a summary of our condensed consolidated financial results for the three and six months ended June 30, 2026 and 2025:

Three Months Ended June 30, Increase/(Decrease)

Six Months Ended June 30, Increase/(Decrease)

2026 2025 Dollar Percent

(In millions, except percentages and per share data)

13 unchanged sentences

** Not meaningful.

THREE MONTHS ENDED MARCH 31, 2026 AND 2025

The increase in net revenues was driven primarily by growth in total payment volume (“TPV”) of 11% and growth in revenue earned from an independent chartered financial institution (“partner institution”), partially offset by the unfavorable impact of hedging activities.

The increase in operating expenses was due primarily to an increase in transaction expense.

Our operating margin declined, reflecting the unfavorable impact of a higher transaction expense growth rate.

The decrease in net income was due to a decrease in operating income and a decrease in other income (expense), net, which was primarily attributable to net losses and impairments on strategic investments in the current period compared to net gains in the prior period, partially offset by a decrease in income tax expense driven by a lower level of pre-tax income and tax effects of stock-based compensation.

THREE MONTHS ENDED JUNE 30, 2026 AND 2025

The increase in net revenues was driven primarily by growth in total payment volume (“TPV”) of 10% and favorable impact from hedging activities.

The increase in operating expenses was due primarily to an increase in transaction expense and, to a lesser extent, an increase in technology and development expense, partially offset by a decline in transaction and credit losses.

Our operating margin declined, reflecting the unfavorable impact of a higher transaction expense growth rate, partially offset by the decline in transaction and credit losses.

2Q 2026 FORM 10-Q

SIX MONTHS ENDED JUNE 30, 2026 AND 2025

The increase in net revenues was driven primarily by growth in TPV of 10% and growth in revenue earned from an independent chartered financial institution (“partner institution”).

The increase in operating expenses was due primarily to an increase in transaction expense and, to a lesser extent, increases in technology and development expense and customer support and operations expense, partially offset by a decline in transaction and credit losses.

Our operating margin declined, reflecting the unfavorable impact of a higher transaction expense growth rate.

IMPACT OF FOREIGN EXCHANGE RATES

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We generated approximately 42% and 43% of our net revenues from customers domiciled outside of the U.S.

in the three months ended March 31, 2026 and 2025, respectively.

in the three and six months ended June 30, 2026 and 2025, respectively.

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 months ended March 31, 2026, year-over-year foreign exchange rate movements relative to the U.S.

In the three and six months ended June 30, 2026, year-over-year foreign exchange rate movements relative to the U.S.

dollar had the following impact on our reported results:

Three Months Ended March 31, 2026

Three Months Ended June 30, 2026 Six Months Ended June 30, 2026

(In millions)

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Net favorable impact to operating income $ 55 $ 87

2Q 2026 FORM 10-Q

KEY METRICS AND FINANCIAL RESULTS

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The number of active accounts provides management with additional perspective on the overall scale of our platform, but may not have a direct relationship to our operating results.

1Q 2026 FORM 10-Q

• Number of payment transactions per active account reflects the total number of payment transactions within the previous 12-month period, divided by active accounts at the end of the period.

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Although such adjustments may impact key metrics reported in prior periods, we generally do not update previously reported key metrics to reflect these subsequent adjustments unless the retrospective impact of process improvements or enhancements is determined by management to be material.

2Q 2026 FORM 10-Q

Our revenues are classified into the following two categories:

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Net revenue analysis

The components of our net revenues for the three months ended March 31, 2026 and 2025 were as follows:

The components of our net revenues for the three and six months ended June 30, 2026 and 2025 were as follows:

Three Months Ended

March 31, Increase/(Decrease)

June 30, Increase/(Decrease)

Six Months Ended

June 30, Increase/(Decrease)

2026 2025 Dollar

(In millions, except percentages)

2 unchanged sentences

Total revenues $ 8,682 $ 8,288 $ 394 5 % $ 17,035 $ 16,079 $ 956 6 %

1Q 2026 FORM 10-Q

Transaction revenues

The increase in transaction revenues for the three months ended March 31, 2026 compared to the same period of the prior year was driven primarily by an increase of approximately $410 million, $140 million, and $70 million in revenue from Braintree, PayPal, and Venmo products and services, respectively, which was largely driven by growth in TPV and number of payment transactions, partially offset by approximately $120 million of unfavorable impact from hedging activities resulting from losses in the current period compared to gains in the prior period.

The increase in transaction revenues for the three months ended June 30, 2026 compared to the same period of the prior year was primarily attributable to:

• an increase of approximately $400 million in revenue from Braintree products and services, which was largely driven by growth in TPV and number of payment transactions;

• approximately $80 million of favorable impact from hedging activities resulting from net gains in the current period compared to net losses in the prior period;

• an increase of approximately $60 million in revenue from Venmo products and services, which was largely due to growth in TPV and number of payment transactions;

• partially offset by a decline in revenue from PayPal products and services of approximately $130 million primarily attributable to higher co-marketing campaigns with large merchants, which are recorded as reductions to revenues, and lower foreign exchange fee revenue.

The increase in transaction revenues for the six months ended June 30, 2026 compared to the same period of the prior year was primarily attributable to:

• an increase of approximately $810 million and $130 million in revenue from Braintree and Venmo products and services, respectively, which was largely driven by growth in TPV and number of payment transactions;

• an increase of $130 million in revenue from PayPal products and services, which was offset by a $120 million decline due to higher co-marketing campaigns with large merchants;

• partially offset by approximately $50 million of unfavorable impact from hedging activities resulting from higher net losses in the current period compared to the prior period.

2Q 2026 FORM 10-Q

The following table provides a summary of key metrics:

Three Months Ended

March 31, Percent Increase/(Decrease)

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

June 30, Percent Increase/(Decrease)

2026 2025 2026 2025

(In millions, except percentages and number of payment transactions per active account)

Active accounts (1)

439 438 — % 439 438 — %

Number of payment transactions 6,750 6,226 8 % 13,225 12,271 8 %

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Percent of TPV generated outside of the U.S.

35 % 38 % ** 35 % 36 % **

(1) Reflects active accounts at the end of the applicable period.

** Not meaningful.

Transaction revenues growth was lower than the growth in TPV in the three months ended March 31, 2026 compared to the same period in the prior year due primarily to changes in product mix and unfavorable impact from foreign exchange hedging activities.

Transaction revenues growth was lower than the growth in TPV in the three and six months ended June 30, 2026 compared to the same periods in the prior year due primarily to changes in product mix, higher co-marketing campaigns, lower foreign exchange fee revenue, and lower partner incentives.

Revenues from other value added services

The increase in revenues from other value added services for the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to an increase of approximately $90 million from revenue earned from a partner institution as well as approximately $40 million in interest and fee revenue earned from our loans receivable portfolios.

Revenues from other value added services for the three months ended June 30, 2026 remained relatively consistent compared to the same period in the prior year due to:

• an increase of approximately $40 million from interest and fee revenue earned from our loans receivable portfolios;

• offset by approximately $40 million lower revenues from interest earned on certain assets underlying customer account balances resulting from lower interest rates on higher average cash and investment balances.

The increase in revenues from other value added services for the six months ended June 30, 2026 compared to the same period in the prior year was primarily attributable to:

• an increase of approximately $100 million in revenue earned from a partner institution;

• an increase of approximately $80 million from interest and fee revenue earned from our loans receivable portfolios;

• partially offset by approximately $60 million lower revenues from interest earned on certain assets underlying customer account balances resulting from lower interest rates on higher average cash and investment balances;

• a decline of approximately $40 million from lower revenues from Honey and other value added services.

Revenue from the partner institution is earned primarily through a revenue share arrangement based on the economic performance of the program related to our U.S.

revolving consumer credit product and PayPal and Venmo branded credit cards, when such performance exceeds a minimum threshold.

These factors favorably impacting revenues from other value added services were partially offset by lower revenues from interest earned on certain assets underlying customer account balances resulting from lower interest rates.

2Q 2026 FORM 10-Q

2 unchanged sentences

Three Months Ended

March 31, Increase/(Decrease)

June 30, Increase/(Decrease)

Six Months Ended

June 30, Increase/(Decrease)

2026 2025 Dollar

(In millions, except percentages)

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Transaction expense

The increase in transaction expense for the three months ended March 31, 2026 compared to the same period in the prior year was primarily attributable to the increase in TPV of 11% and a higher proportion of TPV from our Braintree products and services, which generally have higher expense rates than our other products and services.

The increase in transaction expense rate for the three months ended March 31, 2026 compared to the same period in the prior year was primarily attributable to the unfavorable changes in product mix, partially offset by the favorable impact of changes in merchant mix.

The increase in transaction expense for the three and six months ended June 30, 2026 compared to the same periods in the prior year was primarily attributable to the increase in TPV of 10% in each respective period, and a higher proportion of TPV from our Braintree products and services, which generally have higher expense rates than our other products and services.

The increase in transaction expense rate for the three and six months ended June 30, 2026 compared to the same periods in the prior year was primarily attributable to unfavorable changes in funding mix, partially offset by the favorable impact of 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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Transaction and credit losses

The components of our transaction and credit losses for the three months ended March 31, 2026 and 2025 were as follows:

The components of our transaction and credit losses for the three and six months ended June 30, 2026 and 2025 were as follows:

Three Months Ended

March 31, Increase/(Decrease)

June 30, Increase/(Decrease)

Six Months Ended

June 30, Increase/(Decrease)

2026 2025 Dollar

(In millions, except percentages)

6 unchanged sentences

** Not meaningful.

Transaction losses and the associated transaction loss rate in the three months ended March 31, 2026 remained consistent compared to the same period in the prior year.

The increase due to TPV growth was offset by benefits realized from risk mitigation strategies and higher recoveries.

Transaction losses and the associated transaction loss rate in the three and six months ended June 30, 2026 decreased compared to the same periods in the prior year due to lower fraud losses, benefits realized from risk mitigation strategies, and higher recoveries partially offset by an increase due to higher TPV.

2Q 2026 FORM 10-Q

The components of credit losses for the three months ended March 31, 2026 and 2025 were as follows:

Three Months Ended March 31,

The components of credit losses for the three and six months ended June 30, 2026 and 2025 were as follows:

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

2026 2025 2026 2025

(In millions)

Net charge-offs (1)

$ 101 $ 75 $ 175 $ 153

Reserve build (release) (2)

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

Credit losses in the three months ended March 31, 2026 and 2025 were primarily attributable to loan originations during the period.

Credit losses in the three and six months ended June 30, 2026 and 2025 were primarily attributable to loan originations during the periods.

Consumer loan portfolio

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

As of March 31, 2026 and 2025, loans and interest receivable, held for sale were $1.8 billion and $714 million, respectively.

The consumer loans and interest receivable balance as of both March 31, 2026 and 2025 was $5.4 billion, net of participation interest sold.

The balance remained relatively consistent driven by growth in our revolving credit product portfolio in the United Kingdom (“U.K.”) of approximately $270 million as well as an increase in our interest-bearing installment credit product portfolio in the U.S.

of approximately $190 million, offset by the impact of the reclassification of our U.S.

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

As of June 30, 2026 and 2025, loans and interest receivable, held for sale were $1.9 billion and $817 million, respectively.

The consumer loans and interest receivable balance as of June 30, 2026 and 2025 was $5.5 billion and $5.8 billion, respectively, net of participation interest sold, representing a decrease of 6%.

The decline in consumer loans and interest receivable outstanding was primarily driven by the impact of the reclassification of our U.S.

short-term, non-interest bearing installment loans to held for sale in the third quarter of 2025 and the associated forward flow arrangement and a decline of approximately $200 million in our installment credit product portfolio in Japan, partially offset by growth in our revolving credit product portfolio in the United Kingdom (“U.K.”) and our interest-bearing installment credit product portfolio in the U.S.

of approximately $200 million and $180 million, respectively.

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

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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 March 31, 2026 and 2025, 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 June 30, 2026 and 2025, 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 months ended March 31, 2026.

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, 2026.

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 fees receivable outstanding, net of participation interest sold, as of March 31, 2026 and 2025 was $1.9 billion and $1.6 billion, respectively, reflecting an increase of 18%.

Total merchant loans, advances, and fees receivable outstanding, net of participation interest sold, as of June 30, 2026 and 2025 was $1.9 billion and $1.7 billion, respectively, reflecting an increase of 14%.

The increase was due primarily to growth of approximately $140 million in our PayPal Business Loans product portfolio in the U.S.

and growth in our PayPal Working Capital product portfolio of approximately $100 million, primarily in Germany.

2Q 2026 FORM 10-Q

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

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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 March 31, 2026 and 2025, excluding fraud losses, on merchant loans and advances as a percentage of the average daily amount of merchant loans, advances, and fees receivable balance during the same period.

1Q 2026 FORM 10-Q

(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended June 30, 2026 and 2025, excluding fraud losses, on merchant loans and advances as a percentage of the average daily amount of merchant loans, advances, 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 months ended March 31, 2026.

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, 2026.

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

The increase in customer support and operations expenses in the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to an increase in employee-related and contractor and consulting costs.

The increase in customer support and operations expenses in the three and six months ended June 30, 2026 compared to the same periods in the prior year was due primarily to an increase in employee-related costs of approximately $40 million and $60 million, respectively.

The increase in customer support and operations expenses in the six months ended June 30, 2026 compared to the same period in the prior year was also attributable to higher contractor and consulting costs.

Sales and marketing

The increase in sales and marketing expenses in the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to higher spend on marketing and brand advertising, predominantly for Venmo, partially offset by lower amortization expense for acquired intangible assets.

The decrease in sales and marketing expenses in the three months ended June 30, 2026 compared to the same period in the prior year was due primarily to declines in marketing and brand advertising spend and amortization expense for acquired intangible assets, partially offset by an increase in employee-related costs.

The decrease in sales and marketing expenses in the six months ended June 30, 2026 compared to the same period in the prior year was due primarily to a decline in amortization expense for acquired intangible assets, partially offset by an increase in employee-related costs and higher spend on marketing and brand advertising, predominantly for Venmo.

Technology and development

The increase in technology and development expenses in the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to increases in employee-related costs, software maintenance costs, depreciation and amortization expense, and contractor and consulting costs.

The increase in technology and development expenses in the three and six months ended June 30, 2026 compared to the same periods in the prior year was due primarily to increases in employee-related costs, depreciation and amortization expense from internally developed software, and cloud computing costs utilized in delivering our products and services.

General and administrative

The decrease in general and administrative expenses in the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to a decline in indirect tax expense and professional services expense, partially offset by an increase in employee-related costs.

The increase in general and administrative expenses in the three and six months ended June 30, 2026 compared to the same periods in the prior year was due primarily to an increase in indirect tax expense.

The increase in general and administrative expenses in the six months ended June 30, 2026 compared to the same period in the prior year was also attributable to an increase in employee-related costs.

2Q 2026 FORM 10-Q

Restructuring and other

In the three and six months ended June 30, 2026, we recorded $44 million in restructuring charges associated with the strategic reorganization announced in April 2026.

These charges were primarily employee severance and benefits costs including stock-based compensation.

During the second quarter of 2025, management undertook a large-scale initiative (the “2Q 2025 Plan”) to reengineer our existing technology infrastructure to improve scalability, reduce network latency, decrease operational costs, and optimize our workforce.

The 2Q 2025 Plan is a transformative unified program designed to streamline operations and includes exiting certain data centers to migrate to more efficient cloud-based solutions.

The 2Q 2025 Plan is expected to be executed over a period of 18 to 42 months with the workforce component expected to be substantially completed in 2026 and the technology infrastructure component expected to be substantially completed in 2028.

The associated restructuring charges during the three months ended March 31, 2026 were $11 million, consisting of $2 million in employee severance and benefits costs and $9 million in other restructuring costs.

The 2Q 2025 Plan is expected to be executed over a period of 18 to 42 months with the workforce component completed in the second quarter of 2026 and the technology infrastructure component expected to be substantially completed in 2028.

The associated restructuring charges during the three and six months ended June 30, 2026 were $2 million and $13 million, respectively, consisting of employee severance and benefits costs and other restructuring costs.

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

In connection with this restructuring, we expect to incur employee severance and benefits costs of approximately $85 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 2Q 2025 Plan.

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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 three months ended March 31, 2025 were $39 million and included employee severance and benefits costs, which were completed in the third quarter of 2025.

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

For information on the associated restructuring liabilities, see “Note 17—Restructuring and Other” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

1Q 2026 FORM 10-Q

During the three months ended March 31, 2026 and 2025, approximately $61 million and $25 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, 2026, approximately $65 million and $126 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, 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.

Other income (expense), net

The decrease in other income (expense), net in the three months ended March 31, 2026 compared to the same period in the prior year was due primarily to net losses and impairments on strategic investments in the current period compared to net gains in the prior period, which contributed a decrease of approximately $150 million.

The decrease in other income (expense), net in the three and six months ended June 30, 2026 compared to the same periods in the prior year was due primarily to:

• net losses and impairments on strategic investments in the current period compared to net gains in the prior period, which contributed a decrease of approximately $80 million and $230 million, respectively;

• lower interest income due to lower interest rates, which contributed a decrease of approximately $30 million and $70 million, respectively.

Income tax expense

Our effective income tax rate was 20% for both the three months ended March 31, 2026 and 2025.

Our effective tax rate remained consistent compared to the same period in the prior year and was impacted by offsetting factors including:

foreign and U.S.

income taxed at different rates and discrete tax adjustments, including tax effects of stock-based compensation.

Our effective income tax rate was 16% and 18% for the three months ended June 30, 2026 and 2025, respectively.

Our effective tax rate decreased compared to the same period in the prior year primarily due to U.S.

income taxed at different rates.

Our effective income tax rate was 18% and 19% for the six months ended June 30, 2026 and 2025, respectively.

Our effective tax rate decreased compared to the same period in the prior year primarily due to U.S.

income taxed at different rates, partially offset by discrete tax adjustments, including tax effects of stock-based compensation.

2Q 2026 FORM 10-Q

LIQUIDITY AND CAPITAL RESOURCES

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Cash, cash equivalents, and investments

The following table summarizes our cash, cash equivalents, and investments as of March 31, 2026 and December 31, 2025:

March 31, 2026 December 31, 2025

The following table summarizes our cash, cash equivalents, and investments as of June 30, 2026 and December 31, 2025:

June 30, 2026 December 31, 2025

(In millions)

1 unchanged sentence

$ 13,530 $ 12,848

(1) Excludes assets related to funds receivable and customer accounts of $39.5 billion and $38.2 billion at March 31, 2026 and December 31, 2025, respectively.

(2) Excludes total strategic investments of $1.8 billion and $1.9 billion at March 31, 2026 and December 31, 2025, respectively.

Cash, cash equivalents, and investments held by our foreign subsidiaries were $6.7 billion and $7.5 billion at March 31, 2026 and December 31, 2025, or 57% and 58% of our total cash, cash equivalents, and investments as of those respective dates.

(1) Excludes assets related to funds receivable and customer accounts of $39.7 billion and $38.2 billion at June 30, 2026 and December 31, 2025, respectively.

(2) Excludes total strategic investments of $1.7 billion and $1.9 billion at June 30, 2026 and December 31, 2025, respectively.

Cash, cash equivalents, and investments held by our foreign subsidiaries were $6.9 billion and $7.5 billion at June 30, 2026 and December 31, 2025, or 51% and 58% of our total cash, cash equivalents, and investments as of those respective dates.

At December 31, 2025, all of our cash, cash equivalents, and investments held by foreign subsidiaries were subject to U.S.

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Accordingly, not all of our cash is available for general corporate purposes.

1Q 2026 FORM 10-Q

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

Three Months Ended March 31,

Six Months Ended June 30,

(In millions)

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Operating activities

Net cash provided by operating activities remained relatively consistent in the three months ended March 31, 2026 compared to the same period of the prior year due primarily to the impact of changes in deferred income taxes of approximately $280 million and changes in other current and non-current liabilities of approximately $160 million, mostly offset by the impact of changes in other current and non-current assets of approximately $190 million, net losses on strategic investments of approximately $150 million, and changes in accounts receivable of approximately $100 million.

In the three months ended March 31, 2026 and 2025, cash paid for income taxes, net was $7 million and $95 million, respectively.

Net cash provided by operating activities increased $1.1 billion in the six months ended June 30, 2026 compared to the same period of the prior year due primarily to the impact of:

• changes in other current and non-current assets of approximately $450 million predominantly from timing differences in payment partner receivables and income tax receivables;

• changes in other current and non-current liabilities of approximately $240 million resulting from lower annual incentive plan payments;

• an increase of approximately $230 million in net income adjusted primarily for non-cash items;

• changes in accounts receivable of approximately $190 million.

2Q 2026 FORM 10-Q

In the six months ended June 30, 2026 and 2025, cash paid for income taxes, net was $225 million and $837 million, respectively.

The difference between our cash paid for income taxes in the periods presented primarily relates to the final transition tax installment payment paid in the previous period.

Investing activities

Net cash used in investing activities decreased $1.5 billion in the three months ended March 31, 2026 compared to the same period of the prior year due primarily to the positive impact of changes in funds receivable of approximately $2.4 billion, partially offset by a decrease of approximately $900 million in maturities and sales, net of purchases of investments.

Net cash used in investing activities increased $1.3 billion in the six months ended June 30, 2026 compared to the same period of the prior year due primarily to:

• a decrease of approximately $3.4 billion in maturities and sales, net of purchases of investments, partially offset by

• the positive impact of changes in funds receivable of approximately $2.0 billion.

Financing activities

Net cash used in financing activities increased $1.6 billion in the three months ended March 31, 2026 compared to the same period of the prior year due primarily to an increase of approximately $930 million in repayments of borrowings under financing arrangements, a decrease of approximately $560 million in borrowings under financing arrangements, and the negative impact of changes related to funds payable and amounts due to customers of approximately $320 million, partially offset by an increase of $240 million in collateral received related to derivative instruments, net.

Net cash used in financing activities decreased $2.0 billion in the six months ended June 30, 2026 compared to the same period of the prior year due primarily to:

• an increase of approximately $1.6 billion in borrowings under financing arrangements, net of repayments;

• the positive impact of changes related to funds payable and amounts due to customers of approximately $410 million.

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

Foreign currency exchange rates had a negative impact of $50 million and a positive impact of $94 million on cash, cash equivalents, and restricted cash for the three months ended March 31, 2026 and 2025, respectively.

The negative impact on cash, cash equivalents, and restricted cash in the three months ended March 31, 2026 was due primarily to unfavorable fluctuations in the exchange rate of the U.S.

dollar to the British pound.

The positive impact on cash, cash equivalents, and restricted cash in the three months ended March 31, 2025 was due primarily to favorable fluctuations in the exchange rate of the U.S.

Foreign currency exchange rates had a negative impact of $21 million and a positive impact of $289 million on cash, cash equivalents, and restricted cash for the six months ended June 30, 2026 and 2025, respectively.

The negative impact on cash, cash equivalents, and restricted cash in the six months ended June 30, 2026 was due primarily to unfavorable fluctuations in the exchange rate of the U.S.

dollar to the British pound, Indian rupee, and Euro, partially offset by favorability from fluctuations in exchange rate of the U.S.

dollar to the Australian dollar.

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.

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

Available credit and debt

There were no significant changes to the available credit and debt disclosed in our 2025 Form 10‑K.

In May 2026, we issued fixed-rate notes with varying maturity dates for an aggregate principal amount of $2.0 billion.

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, 2026, we had an aggregate principal amount of $12.7 billion in notes outstanding with varying maturity dates.

Other than as described above, there were no significant changes to the available credit and debt disclosed in our 2025 Form 10‑K.

For additional information, see “Note 12—Debt” in the notes to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Depending on market conditions, we may from time to time issue debt, including in private or public offerings, to fund our operating activities, finance acquisitions, make strategic investments, repurchase shares under our stock repurchase program, or reduce our cost of capital.

1Q 2026 FORM 10-Q

Credit ratings

As of March 31, 2026, 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 June 30, 2026, 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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If that were to occur, it could increase our borrowing rates, including the interest rate on borrowings under our credit agreements.

2Q 2026 FORM 10-Q

CURRENT AND FUTURE CASH REQUIREMENTS

6 unchanged sentences

credit activities.

As of March 31, 2026 and December 31, 2025, 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 June 30, 2026 and December 31, 2025, 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.

In July 2026, an additional $500 million was approved by management to fund our credit activities, increasing the aggregate cumulative amount approved by management for this purpose to $2.5 billion.

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.

1 unchanged sentence

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

During the three months ended March 31, 2026 and 2025, we had net proceeds of $7.4 billion and $5.3 billion, respectively, from loans and interest receivable sold under these arrangements.

During the six months ended June 30, 2026 and 2025, we had net proceeds of $15.8 billion and $11.6 billion, respectively, from loans and interest receivable sold under these arrangements.

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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Stock repurchases

During the three months ended March 31, 2026, we repurchased approximately $1.5 billion of our common stock in the open market under our stock repurchase program authorized in February 2025.

As of March 31, 2026, a total of approximately $12.4 billion remained available for future repurchases of our common stock under our February 2025 stock repurchase program.

1Q 2026 FORM 10-Q

During the six months ended June 30, 2026, we repurchased approximately $3.0 billion of our common stock in the open market under our stock repurchase program authorized in February 2025.

As of June 30, 2026, a total of approximately $10.9 billion remained available for future repurchases of our common stock under our February 2025 stock repurchase program.

Dividend program

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The dividend was paid on March 25, 2026, to stockholders of record of our common stock as of the close of business on March 4, 2026.

In May 2026, the Company’s Board of Directors declared a cash dividend of $0.14 per share on our common stock, totaling approximately $125 million.

The dividend was paid on June 25, 2026, to stockholders of record of our common stock as of the close of business on June 4, 2026.

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

2Q 2026 FORM 10-Q

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