PayPal Holdings, Inc. 10-Q

ITEM 1: FINANCIAL STATEMENTS PayPal Holdings, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 2026 December 31, 2025 (In millions, except par value) (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 8,306 $ 8,049 Short-term investments 2,950 2,373 Accounts receivable, net 763 840 Loans and interest receivable, held for sale 1,914 1,726 Loans and interest receivable, net of allowances of $ 533 and $ 539 as of June 30, 2026 and December 31, 2025, respectively 6,847 6,746 Funds receivable and customer accounts 39,743 38,198 Prepaid expenses and other current assets 1,823 1,827 Total current assets 62,346 59,759 Long-term investments 4,009 4,330 Property and equipment, net 1,731 1,700 Goodwill 10,929 10,864 Intangible assets, net 178 208 Other assets 3,544 3,312 Total assets $ 82,737 $ 80,173 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 208 $ 240 Funds payable and amounts due to customers 41,743 40,198 Short-term debt 2,505 1,596 Accrued expenses and other current liabilities 3,950 4,409 Total current liabilities 48,406 46,443 Other long-term liabilities 3,616 3,487 Long-term debt 10,895 9,987 Total liabilities 62,917 59,917 Commitments and contingencies (Note 13) Equity: Common stock, $ 0.0001 par value; 4,000 shares authorized; 862 and 920 shares outstanding as of June 30, 2026 and December 31, 2025, respectively — — Preferred stock, $ 0.0001 par value; 100 shares authorized, unissued — — Treasury stock at cost, 490 and 423 shares as of June 30, 2026 and December 31, 2025, respectively ( 36,165 ) ( 33,138 ) Additional paid-in-capital 22,056 21,582 Retained earnings 34,432 32,470 Accumulated other comprehensive income (loss) ( 503 ) ( 658 ) Total equity 19,820 20,256 Total liabilities and equity $ 82,737 $ 80,173 The accompanying notes are an integral part of these condensed consolidated financial statements. 2Q 2026 FORM 10-Q 4 Table of Contents PayPal Holdings, Inc. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions, except per share amounts) (Unaudited) Net revenues $ 8,682 $ 8,288 $ 17,035 $ 16,079 Operating expenses: Transaction expense 4,385 3,968 8,550 7,672 Transaction and credit losses 397 476 775 847 Customer support and operations 462 413 908 811 Sales and marketing 546 583 1,064 1,071 Technology and development 849 767 1,642 1,498 General and administrative 503 461 994 964 Restructuring and other 113 116 187 182 Total operating expenses 7,255 6,784 14,120 13,045 Operating income 1,427 1,504 2,915 3,034 Other income (expense), net ( 117 ) 25 ( 212 ) 98 Income before income taxes 1,310 1,529 2,703 3,132 Income tax expense 206 268 486 584 Net income (loss) $ 1,104 $ 1,261 $ 2,217 $ 2,548 Net income (loss) per share: Basic $ 1.26 $ 1.30 $ 2.48 $ 2.61 Diluted $ 1.25 $ 1.29 $ 2.46 $ 2.58 Weighted average shares: Basic 877 969 895 977 Diluted 882 977 901 988 The accompanying notes are an integral part of these condensed consolidated financial statements. 2Q 2026 FORM 10-Q 5 Table of Contents PayPal Holdings, Inc. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) (Unaudited) Net income (loss) $ 1,104 $ 1,261 $ 2,217 $ 2,548 Other comprehensive income (loss), net of reclassification adjustments: Foreign currency translation adjustments (“CTA”), net 7 125 ( 27 ) 234 Tax benefit (expense) on foreign CTA, net 1 3 5 ( 4 ) Unrealized gains (losses) on cash flow hedges, net 19 ( 248 ) 211 ( 424 ) Tax (expense) benefit on unrealized gains (losses) on cash flow hedges, net ( 19 ) 11 ( 32 ) 20 Unrealized gains (losses) on available-for-sale debt securities, net 2 ( 11 ) ( 3 ) ( 20 ) Tax benefit on unrealized losses on available-for-sale debt securities, net — 3 1 5 Other comprehensive income (loss), net of tax 10 ( 117 ) 155 ( 189 ) Comprehensive income (loss) $ 1,114 $ 1,144 $ 2,372 $ 2,359 The accompanying notes are an integral part of these condensed consolidated financial statements. 2Q 2026 FORM 10-Q 6 Table of Contents PayPal Holdings, Inc. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Shares Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Equity (In millions) (Unaudited) Balances at December 31, 2025 920 $ ( 33,138 ) $ 21,582 $ ( 658 ) $ 32,470 $ 20,256 Net income — — — — 1,113 1,113 Foreign CTA, net — — — ( 34 ) — ( 34 ) Tax benefit on foreign CTA, net — — — 4 — 4 Unrealized gains on cash flow hedges, net — — — 192 — 192 Tax expense on unrealized gains on cash flow hedges, net — — — ( 13 ) — ( 13 ) Unrealized losses on available-for-sale debt securities, net — — — ( 5 ) — ( 5 ) Tax benefit on unrealized losses on available-for-sale debt securities, net — — — 1 — 1 Common stock and stock-based awards issued, net of shares withheld for employee taxes 6 — ( 139 ) — — ( 139 ) Common stock repurchased ( 34 ) ( 1,513 ) — — — ( 1,513 ) Cash dividends declared ($ 0.14 per share) — — — — ( 130 ) ( 130 ) Stock-based compensation — — 292 — — 292 Balances at March 31, 2026 892 $ ( 34,651 ) $ 21,735 $ ( 513 ) $ 33,453 $ 20,024 Net income — — — — 1,104 1,104 Foreign CTA, net — — — 7 — 7 Tax benefit on foreign CTA, net — — — 1 — 1 Unrealized gains on cash flow hedges, net — — — 19 — 19 Tax expense on unrealized gains on cash flow hedges, net — — — ( 19 ) — ( 19 ) Unrealized gains on available-for-sale debt securities, net — — — 2 — 2 Common stock and stock-based awards issued, net of shares withheld for employee taxes 3 — 15 — — 15 Common stock repurchased ( 33 ) ( 1,514 ) — — — ( 1,514 ) Cash dividends declared ($ 0.14 per share) — — — — ( 125 ) ( 125 ) Stock-based compensation — — 306 — — 306 Balances at June 30, 2026 862 $ ( 36,165 ) $ 22,056 $ ( 503 ) $ 34,432 $ 19,820 2Q 2026 FORM 10-Q 7 Table of Contents PayPal Holdings, Inc. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—(continued) Common Stock Shares Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Equity (In millions) (Unaudited) Balances at December 31, 2024 993 $ ( 27,085 ) $ 20,705 $ ( 550 ) $ 27,347 $ 20,417 Adoption of crypto asset accounting standard — — — — 20 20 Net income — — — — 1,287 1,287 Foreign CTA, net — — — 109 — 109 Tax expense on foreign CTA, net — — — ( 7 ) — ( 7 ) Unrealized losses on cash flow hedges, net — — — ( 176 ) — ( 176 ) Tax benefit on unrealized losses on cash flow hedges, net — — — 9 — 9 Unrealized losses on available-for-sale-debt securities, net — — — ( 9 ) — ( 9 ) Tax benefit on unrealized losses on available-for-sale-debt securities, net — — — 2 — 2 Common stock and stock-based awards issued, net of shares withheld for employee taxes 5 — ( 171 ) — — ( 171 ) Common stock repurchased ( 19 ) ( 1,512 ) — — — ( 1,512 ) Stock-based compensation — — 285 — — 285 Balances at March 31, 2025 979 $ ( 28,597 ) $ 20,819 $ ( 622 ) $ 28,654 $ 20,254 Net income — — — — 1,261 1,261 Foreign CTA, net — — — 125 — 125 Tax benefit on foreign CTA, net — — — 3 — 3 Unrealized losses on cash flow hedges, net — — — ( 248 ) — ( 248 ) Tax benefit on unrealized losses on cash flow hedges, net — — — 11 — 11 Unrealized losses on available-for-sale debt securities, net — — — ( 11 ) — ( 11 ) Tax benefit on unrealized losses on available-for-sale debt securities, net — — — 3 — 3 Common stock and stock-based awards issued, net of shares withheld for employee taxes 3 — ( 2 ) — — ( 2 ) Common stock repurchased ( 22 ) ( 1,514 ) — — — ( 1,514 ) Stock-based compensation — — 319 — — 319 Balances at June 30, 2025 960 $ ( 30,111 ) $ 21,136 $ ( 739 ) $ 29,915 $ 20,201 The accompanying notes are an integral part of these condensed consolidated financial statements. 2Q 2026 FORM 10-Q 8 Table of Contents PayPal Holdings, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 2026 2025 (In millions) (Unaudited) Cash flows from operating activities: Net income (loss) $ 2,217 $ 2,548 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Transaction and credit losses 775 847 Depreciation and amortization 484 484 Stock-based compensation 534 535 Deferred income taxes ( 175 ) ( 89 ) Net (gains) losses on strategic investments 175 ( 59 ) Accretion of discounts on investments, net of amortization of premiums ( 19 ) ( 57 ) Adjustments to loans and interest receivable, held for sale 126 52 Other 79 ( 297 ) Originations of loans receivable, held for sale ( 23,779 ) ( 14,358 ) Proceeds from repayments and sales of loans receivable, originally classified as held for sale 23,373 14,112 Changes in assets and liabilities: Accounts receivable 78 ( 115 ) Transaction loss allowance for cash losses, net ( 602 ) ( 655 ) Other current assets and non-current assets 57 ( 389 ) Accounts payable 2 ( 50 ) Other current liabilities and non-current liabilities ( 208 ) ( 451 ) Net cash provided by operating activities 3,117 2,058 Cash flows from investing activities: Purchases of reverse repurchase agreements — ( 201 ) Maturities of reverse repurchase agreements — 288 Purchases of property and equipment ( 439 ) ( 402 ) Proceeds from sales of property and equipment 19 3 Purchases and originations of loans receivable ( 8,026 ) ( 11,490 ) Proceeds from repayments and sales of loans receivable, originally classified as held for investment 7,595 11,210 Purchases of investments ( 12,983 ) ( 11,564 ) Maturities and sales of investments 9,659 11,595 Acquisitions, net of cash acquired ( 122 ) — Funds receivable ( 824 ) ( 2,785 ) Collateral posted related to derivative instruments, net 136 ( 316 ) Other — ( 15 ) Net cash used in investing activities ( 4,985 ) ( 3,677 ) Cash flows from financing activities: Borrowings from repurchase agreements — 405 Repayments of repurchase agreements — ( 405 ) Proceeds from issuance of common stock 60 74 Purchases of treasury stock ( 3,052 ) ( 3,051 ) Tax withholdings related to net share settlements of equity awards ( 185 ) ( 249 ) Borrowings under financing arrangements 3,514 1,491 Repayments under financing arrangements ( 1,676 ) ( 1,207 ) Funds payable and amounts due to customers 1,323 913 Collateral received related to derivative instruments and reverse repurchase agreements, net 118 ( 145 ) Payments of dividends to stockholders ( 252 ) — Other ( 6 ) ( 6 ) Net cash used in financing activities ( 156 ) ( 2,180 ) 2Q 2026 FORM 10-Q 9 Table of Contents PayPal Holdings, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—(continued) Six Months Ended June 30, 2026 2025 (In millions) (Unaudited) Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 21 ) 289 Net change in cash, cash equivalents, and restricted cash ( 2,045 ) ( 3,510 ) Cash, cash equivalents, and restricted cash at beginning of period 24,018 22,490 Cash, cash equivalents, and restricted cash at end of period $ 21,973 $ 18,980 Supplemental cash flow disclosures: Cash paid for interest $ 212 $ 191 Cash paid for income taxes, net $ 225 $ 837 The table below reconciles cash, cash equivalents, and restricted cash as reported in the condensed consolidated balance sheets to the total of the same amounts shown in the condensed consolidated statements of cash flows: Cash and cash equivalents $ 8,306 $ 6,688 Funds receivable and customer accounts 13,667 12,292 Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows $ 21,973 $ 18,980 The accompanying notes are an integral part of these condensed consolidated financial statements. 2Q 2026 FORM 10-Q 10 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1— OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OVERVIEW AND ORGANIZATION PayPal Holdings, Inc. (“PayPal,” the “Company,” “we,” “us,” or “our”) was incorporated in Delaware in January 2015. At PayPal, our mission is to revolutionize commerce globally. Our products are designed to enable digital payments and simplify commerce experiences for consumers and merchants to make selling, shopping, and sending and receiving money simple, personalized, and secure, whether online or in-person. Our two-sided platform serves millions of consumers and merchants worldwide. SIGNIFICANT ACCOUNTING POLICIES Basis of presentation and principles of consolidation The accompanying condensed consolidated financial statements include the financial statements of PayPal and our wholly- and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. We determine at the inception of each investment, and re-evaluate if certain events occur, whether an entity in which we have made an investment is considered a variable interest entity (“VIE”). If we determine an investment is in a VIE, we then assess if we are the primary beneficiary, which would require consolidation. As of June 30, 2026 and December 31, 2025, no VIEs qualified for consolidation as the structures of these entities do not provide us with both the ability to direct activities that would significantly impact their economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. As of June 30, 2026 and December 31, 2025, the carrying value of our investments in nonconsolidated VIEs that are primarily investments in funds that are limited partnerships or similar structures which are focused on increasing access to capital for underserved communities was $ 193 million and $ 202 million, respectively, and is included as non-marketable equity securities applying the equity method of accounting in long-term investments on our condensed consolidated balance sheets. Our maximum exposure to loss related to these nonconsolidated VIEs, which represents funded commitments and any future funding commitments, was $ 246 million as of both June 30, 2026 and December 31, 2025. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) filed with the United States (“U.S.”) Securities and Exchange Commission on February 3, 2026. In the opinion of management, these condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the condensed consolidated financial statements for all interim periods presented. Certain amounts for prior periods have been reclassified to conform to the financial statement presentation as of and for the three and six months ended June 30, 2026. Use of estimates The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to provisions for transaction and credit losses, income taxes, loss contingencies, revenue recognition, and the evaluation of strategic investments for impairment. We base our estimates on historical experience and various other assumptions which we believe to be reasonable under the circumstances. Actual results could materially differ from these estimates. 2Q 2026 FORM 10-Q 11 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Recently issued accounting guidance In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amended guidance requires disaggregation of certain expense captions into specified natural expense categories in the disclosures within the notes to the financial statements. In addition, the guidance requires disclosure of selling expenses and its definition. The new guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The guidance can be applied either prospectively or retrospectively. We are evaluating the impact this amended guidance may have on the notes to our condensed consolidated financial statements. In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amended guidance modernizes the accounting for costs related to internal-use software to more closely align with current software development methods. The guidance removes references to project stages and clarifies when we are required to start capitalizing eligible costs. The new guidance is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years, with early adoption permitted. The guidance can be applied on a prospective basis, a modified basis for in-process projects, or a retrospective basis. We are evaluating the impact this amended guidance may have on our condensed consolidated financial statements. There are other new accounting pronouncements issued by the FASB that we have adopted or will adopt, as applicable. We do not believe any of these new accounting pronouncements have had, or will have, a material impact on our condensed consolidated financial statements or disclosures. NOTE 2— REVENUE We enable our customers to send and receive payments. We earn revenue primarily by completing payment transactions for our customers on our payments platform and from other value added services. Our revenues are classified into two categories: transaction revenues and revenues from other value added services. We record a contract asset when we have a conditional right to consideration for services we have already transferred to our customer. These contract assets are included in other assets in our condensed consolidated balance sheets and were $ 248 million and $ 238 million as of June 30, 2026 and December 31, 2025, respectively. DISAGGREGATION OF REVENUE We believe that the nature, amount, timing, and uncertainty of our revenue and cash flows and how they are affected by economic factors are most appropriately depicted through our primary geographical markets and types of revenue categories (transaction revenues and revenues from other value added services). Revenues recorded within these categories are earned from similar products and services for which the nature of associated fees and the related revenue recognition models are substantially similar. 2Q 2026 FORM 10-Q 12 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The following table presents our revenue disaggregated by primary geographical market and category: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Primary geographical markets U.S. $ 5,048 $ 4,709 $ 9,930 $ 9,172 Other countries (1) 3,634 3,579 7,105 6,907 Total net revenues (2) $ 8,682 $ 8,288 $ 17,035 $ 16,079 Revenue category Transaction revenues $ 7,832 $ 7,441 $ 15,333 $ 14,457 Revenues from other value added services 850 847 1,702 1,622 Total net revenues (2) $ 8,682 $ 8,288 $ 17,035 $ 16,079 (1) No single country included in the other countries category generated more than 10% of total net revenues. (2) Total net revenues include $ 589 million and $ 506 million for the three months ended June 30, 2026 and 2025, respectively, and $ 1.1 billion for both the six months ended June 30, 2026 and 2025, which do not represent revenues recognized in the scope of Accounting Standards Codification Topic 606, Revenue from contracts with customers . Such revenues relate to interest and fees earned on loans and interest receivable, including loans and interest receivable held for sale, hedging gains or losses, and interest earned and gains or losses on certain assets underlying customer balances. Net revenues are attributed to the country in which the party paying our fee is located. NOTE 3— NET INCOME (LOSS) PER SHARE Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding for the period. The dilutive effect of outstanding equity incentive awards is reflected in diluted net income (loss) per share by application of the treasury stock method. The calculation of diluted net income (loss) per share excludes all anti-dilutive common shares. During periods when we report net loss, diluted net loss per share is the same as basic net loss per share because the effects of potentially dilutive items would decrease the net loss per share. The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions, except per share amounts) Numerator: Net income (loss) $ 1,104 $ 1,261 $ 2,217 $ 2,548 Denominator: Weighted average shares of common stock - basic 877 969 895 977 Dilutive effect of equity incentive awards 5 8 6 11 Weighted average shares of common stock - diluted 882 977 901 988 Net income (loss) per share: Basic $ 1.26 $ 1.30 $ 2.48 $ 2.61 Diluted $ 1.25 $ 1.29 $ 2.46 $ 2.58 Common stock equivalents excluded from net income (loss) per diluted share because their effect would have been anti-dilutive or potentially dilutive 31 14 26 8 2Q 2026 FORM 10-Q 13 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) NOTE 4— BUSINESS COMBINATIONS In the first quarter of 2026, we completed an acquisition with a total purchase price of $ 134 million, consisting primarily of cash consideration, which was accounted for as a business combination. In the second quarter of 2025, we completed an acquisition with a total purchase price of $ 19 million, consisting of cash consideration, which was accounted for as a business combination. NOTE 5— GOODWILL AND INTANGIBLE ASSETS GOODWILL The following table presents goodwill balances and adjustments to those balances during the six months ended June 30, 2026: December 31, 2025 Goodwill Acquired Foreign CTA June 30, 2026 (In millions) Total goodwill $ 10,864 $ 104 $ ( 39 ) $ 10,929 The goodwill acquired during the six months ended June 30, 2026 was associated with one acquisition as described in “Note 4—Business Combinations.” INTANGIBLE ASSETS The components of identifiable intangible assets were as follows: June 30, 2026 December 31, 2025 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (In millions) Intangible assets (1) : Customer lists and user base $ 372 $ ( 243 ) $ 129 $ 372 $ ( 224 ) $ 148 Marketing related 58 ( 54 ) 4 60 ( 50 ) 10 Developed technology 23 ( 5 ) 18 9 ( 2 ) 7 All other 215 ( 188 ) 27 208 ( 165 ) 43 Intangible assets, net $ 668 $ ( 490 ) $ 178 $ 649 $ ( 441 ) $ 208 (1) Excludes intangible assets which have been fully amortized, but are still in use. Amortization expense for intangible assets was $ 33 million and $ 48 million for the three months ended June 30, 2026 and 2025, respectively. Amortization expense for intangible assets was $ 65 million and $ 95 million for the six months ended June 30, 2026 and 2025, respectively. Expected future intangible asset amortization as of June 30, 2026 was as follows: Fiscal years: (In millions) Remaining 2026 $ 50 2027 67 2028 53 2029 2 2030 2 Thereafter 4 Total $ 178 2Q 2026 FORM 10-Q 14 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) NOTE 6— LEASES PayPal enters into various leases, which are primarily real estate operating leases. We use these properties for executive and administrative offices, customer services and operations centers, product development offices, and data centers. PayPal also enters into computer equipment finance leases. While a majority of our lease agreements do not contain an explicit interest rate, certain of our lease agreements are subject to changes based on the Consumer Price Index or another referenced index. In the event of changes to the relevant index, lease liabilities are not remeasured and are instead treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. The short-term lease exemption has been adopted for all leases with a duration of less than 12 months. PayPal’s lease portfolio includes a small number of subleases. A sublease situation can arise when currently leased real estate space is available and is surplus to operational requirements. The components of lease expense were as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Operating lease expense $ 45 $ 40 $ 85 $ 81 Finance lease expense - amortization of right-of-use (“ROU”) lease assets 4 4 8 8 Sublease income ( 2 ) ( 2 ) ( 4 ) ( 4 ) Total lease expense, net $ 47 $ 42 $ 89 $ 85 Supplemental cash flow information related to leases during 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) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 46 $ 46 $ 91 $ 88 Financing cash flows from finance leases $ 4 $ 4 $ 6 $ 6 ROU lease assets obtained in exchange for operating lease liabilities $ 154 $ — $ 149 $ 5 Supplemental balance sheet information related to leases was as follows: June 30, 2026 December 31, 2025 (In millions, except weighted-average figures) Operating leases Finance leases Operating leases Finance leases ROU lease assets $ 619 $ 48 $ 539 $ 56 Current lease liabilities 142 5 148 7 Long-term lease liabilities 668 6 548 10 Total lease liabilities $ 810 $ 11 $ 696 $ 17 Weighted-average remaining lease term 6.6 years 2.9 years 5.4 years 3.4 years Weighted-average discount rate 5 % 5 % 4 % 5 % 2Q 2026 FORM 10-Q 15 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Future minimum lease payments for our leases as of June 30, 2026 were as follows: Operating leases Finance leases Fiscal years: (In millions) Remaining 2026 $ 79 $ 2 2027 174 6 2028 142 4 2029 125 — 2030 110 — Thereafter 348 — Total $ 978 $ 12 Less: present value discount ( 168 ) ( 1 ) Lease liability $ 810 $ 11 Operating lease amounts include minimum lease payments under our non-cancelable operating leases primarily for office and data center facilities. Finance lease amounts include minimum lease payments under our non-cancelable finance leases primarily for computer equipment. The amounts presented are consistent with contractual terms and are not expected to differ significantly from actual results under our existing leases. NOTE 7— OTHER FINANCIAL STATEMENT DETAILS ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended June 30, 2026: Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Available-for-sale Debt Securities Foreign CTA Net Investment Hedges CTA Gains (Losses) Estimated Tax (Expense) Benefit Total (In millions) Beginning balance $ 82 $ 8 $ ( 866 ) $ 313 $ ( 50 ) $ ( 513 ) Other comprehensive income (loss) before reclassifications 20 2 7 — ( 18 ) 11 Less: Amount of net gains (losses) reclassified from accumulated other comprehensive income (loss) (“AOCI”) 1 — — — — 1 Net current period other comprehensive income (loss) 19 2 7 — ( 18 ) 10 Ending balance $ 101 $ 10 $ ( 859 ) $ 313 $ ( 68 ) $ ( 503 ) 2Q 2026 FORM 10-Q 16 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the three months ended June 30, 2025: Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Available-for-sale Debt Securities Foreign CTA Net Investment Hedges CTA Gains (Losses) Estimated Tax (Expense) Benefit Total (In millions) Beginning balance $ ( 29 ) $ 5 $ ( 840 ) $ 313 $ ( 71 ) $ ( 622 ) Other comprehensive income (loss) before reclassifications ( 318 ) ( 10 ) 125 — 17 ( 186 ) Less: Amount of net gains (losses) reclassified from AOCI ( 70 ) 1 — — — ( 69 ) Net current period other comprehensive income (loss) ( 248 ) ( 11 ) 125 — 17 ( 117 ) Ending balance $ ( 277 ) $ ( 6 ) $ ( 715 ) $ 313 $ ( 54 ) $ ( 739 ) The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30, 2026: Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Available-for-sale Debt Securities Foreign CTA Net Investment Hedges CTA Gains (Losses) Estimated Tax (Expense) Benefit Total (In millions) Beginning balance $ ( 110 ) $ 13 $ ( 832 ) $ 313 $ ( 42 ) $ ( 658 ) Other comprehensive income (loss) before reclassifications 124 ( 3 ) ( 27 ) — ( 26 ) 68 Less: Amount of net gains (losses) reclassified from AOCI ( 87 ) — — — — ( 87 ) Net current period other comprehensive income (loss) 211 ( 3 ) ( 27 ) — ( 26 ) 155 Ending balance $ 101 $ 10 $ ( 859 ) $ 313 $ ( 68 ) $ ( 503 ) The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30, 2025: Unrealized Gains (Losses) on Cash Flow Hedges Unrealized Gains (Losses) on Available-for-sale Debt Securities Foreign CTA Net Investment Hedges CTA Gains (Losses) Estimated Tax (Expense) Benefit Total (In millions) Beginning balance $ 147 $ 14 $ ( 949 ) $ 313 $ ( 75 ) $ ( 550 ) Other comprehensive income (loss) before reclassifications ( 461 ) ( 18 ) 234 — 21 ( 224 ) Less: Amount of net gains (losses) reclassified from AOCI ( 37 ) 2 — — — ( 35 ) Net current period other comprehensive income (loss) ( 424 ) ( 20 ) 234 — 21 ( 189 ) Ending balance $ ( 277 ) $ ( 6 ) $ ( 715 ) $ 313 $ ( 54 ) $ ( 739 ) 2Q 2026 FORM 10-Q 17 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The following table provides details about reclassifications from AOCI for the periods presented below: Details about AOCI Components Amount of Gains (Losses) Reclassified from AOCI Affected Line Item in the Statements of Income (Loss) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Net gains (losses) on cash flow hedges — foreign exchange contracts $ 6 $ ( 70 ) $ ( 80 ) $ ( 35 ) Net revenues Net gains (losses) on cash flow hedges—foreign exchange contracts ( 2 ) — ( 3 ) ( 1 ) Customer support and operations Net gains (losses) on cash flow hedges—foreign exchange contracts ( 2 ) — ( 3 ) ( 1 ) Technology and development Net gains (losses) on cash flow hedges—foreign exchange contracts ( 1 ) — ( 1 ) — General and administrative Net gains (losses) on investments — — — 1 Net revenues Net gains (losses) on investments — 1 — 1 Other income (expense), net 1 ( 69 ) ( 87 ) ( 35 ) Income before income taxes — — — — Income tax expense Total reclassifications for the period $ 1 $ ( 69 ) $ ( 87 ) $ ( 35 ) Net income (loss) OTHER INCOME (EXPENSE), NET The following table reconciles the components of other income (expense), net for the periods presented below: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Interest income $ 104 $ 135 $ 211 $ 280 Interest expense ( 126 ) ( 114 ) ( 237 ) ( 217 ) Net gains (losses) on strategic investments ( 74 ) 11 ( 175 ) 59 Other ( 21 ) ( 7 ) ( 11 ) ( 24 ) Other income (expense), net $ ( 117 ) $ 25 $ ( 212 ) $ 98 2Q 2026 FORM 10-Q 18 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) NOTE 8— CASH AND CASH EQUIVALENTS, FUNDS RECEIVABLE AND CUSTOMER ACCOUNTS, AND INVESTMENTS The following table summarizes the assets underlying our cash and cash equivalents, funds receivable and customer accounts, short-term investments, and long-term investments as of June 30, 2026 and December 31, 2025: June 30, 2026 December 31, 2025 (In millions) Cash and cash equivalents $ 8,306 $ 8,049 Funds receivable and customer accounts: Cash and cash equivalents (1) $ 13,667 $ 15,969 Time deposits 110 94 Available-for-sale debt securities 17,353 14,457 Funds receivable 8,613 7,678 Total funds receivable and customer accounts $ 39,743 $ 38,198 Short-term investments: Time deposits $ 87 $ 88 Available-for-sale debt securities 2,863 2,285 Total short-term investments $ 2,950 $ 2,373 Long-term investments: Time deposits $ 5 $ 5 Available-for-sale debt securities 2,269 2,421 Strategic investments 1,735 1,904 Total long-term investments $ 4,009 $ 4,330 (1) Includes $ 12 million and $ 374 million of available-for-sale debt securities with original maturities of three months or less as of June 30, 2026 and December 31, 2025, respectively. 2Q 2026 FORM 10-Q 19 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) As of June 30, 2026 and December 31, 2025, the estimated fair value of our available-for-sale debt securities included within cash and cash equivalents, funds receivable and customer accounts, short-term investments, and long-term investments was as follows: June 30, 2026 (1) Gross Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (In millions) Funds receivable and customer accounts: U.S. government and agency securities $ 4,786 $ 1 $ — $ 4,787 Foreign government and agency securities 87 — — 87 Corporate debt securities 2,626 4 ( 1 ) 2,629 Mortgage-backed and asset-backed securities 4,486 6 ( 3 ) 4,489 Municipal securities 81 — — 81 Commercial paper 4,607 1 — 4,608 Short-term investments: U.S. government and agency securities 50 — — 50 Foreign government and agency securities 100 — — 100 Corporate debt securities 788 1 ( 1 ) 788 Mortgage-backed and asset-backed securities 289 — — 289 Commercial paper 1,636 — — 1,636 Long-term investments: U.S. government and agency securities 521 — — 521 Corporate debt securities 632 1 — 633 Mortgage-backed and asset-backed securities 1,114 1 — 1,115 Total available-for-sale debt securities (2) $ 21,803 $ 15 $ ( 5 ) $ 21,813 (1) “—” Denotes gross unrealized gain or unrealized loss of less than $1 million in a given position. (2) Excludes foreign currency denominated available-for-sale debt securities accounted for under the fair value option. Refer to “Note 9 — Fair Value Measurement of Assets and Liabilities.” 2Q 2026 FORM 10-Q 20 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) December 31, 2025 (1) Gross Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (In millions) Funds receivable and customer accounts: U.S. government and agency securities $ 3,529 $ 1 $ — $ 3,530 Foreign government and agency securities 81 — — 81 Corporate debt securities 2,438 4 ( 1 ) 2,441 Mortgage-backed and asset-backed securities 3,825 7 ( 1 ) 3,831 Municipal securities 98 — — 98 Commercial paper 4,229 1 — 4,230 Short-term investments: U.S. government and agency securities 443 — — 443 Foreign government and agency securities 60 — — 60 Corporate debt securities 985 1 ( 2 ) 984 Mortgage-backed and asset-backed securities 448 — — 448 Commercial paper 350 — — 350 Long-term investments: U.S. government and agency securities 400 — — 400 Foreign government and agency securities 50 — — 50 Corporate debt securities 648 2 — 650 Mortgage-backed and asset-backed securities 1,320 2 ( 1 ) 1,321 Total available-for-sale debt securities (2) $ 18,904 $ 18 $ ( 5 ) $ 18,917 (1) “—” Denotes gross unrealized gain or unrealized loss of less than $1 million in a given position. (2) Excludes foreign currency denominated available-for-sale debt securities accounted for under the fair value option. Refer to “Note 9 — Fair Value Measurement of Assets and Liabilities.” Gross amortized cost and estimated fair value balances exclude accrued interest receivable on available-for-sale debt securities, which totaled $ 107 million and $ 101 million at June 30, 2026 and December 31, 2025, respectively, and were included in other current assets on our condensed consolidated balance sheets. 2Q 2026 FORM 10-Q 21 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) As of June 30, 2026 and December 31, 2025, the gross unrealized losses and estimated fair value of our available-for-sale debt securities included within cash and cash equivalents, funds receivable and customer accounts, short-term investments, and long-term investments for which an allowance for credit losses was not deemed necessary in the current period, aggregated by the length of time those individual securities have been in a continuous loss position, was as follows: June 30, 2026 (1) Less than 12 months 12 months or longer Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses (In millions) Funds receivable and customer accounts: U.S. government and agency securities $ 2,672 $ — $ — $ — $ 2,672 $ — Foreign government and agency securities 50 — — — 50 — Corporate debt securities 587 ( 1 ) 75 — 662 ( 1 ) Mortgage-backed and asset-backed securities 1,723 ( 3 ) 47 — 1,770 ( 3 ) Commercial paper 1,145 — — — 1,145 — Short-term investments: U.S. government and agency securities 50 — — — 50 — Foreign government and agency securities 25 — — — 25 — Corporate debt securities 195 — 49 ( 1 ) 244 ( 1 ) Mortgage-backed and asset-backed securities 210 — 35 — 245 — Commercial paper 996 — — — 996 — Long-term investments: U.S. government and agency securities 310 — — — 310 — Corporate debt securities 222 — — — 222 — Mortgage-backed and asset-backed securities 331 — 5 — 336 — Total available-for-sale debt securities $ 8,516 $ ( 4 ) $ 211 $ ( 1 ) $ 8,727 $ ( 5 ) (1) “—” Denotes gross unrealized loss or fair value of less than $1 million in a given position. December 31, 2025 (1) Less than 12 months 12 months or longer Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses (In millions) Funds receivable and customer accounts: U.S. government and agency securities $ 1,261 $ — $ 50 $ — $ 1,311 $ — Foreign government and agency securities 56 — — — 56 — Corporate debt securities 309 ( 1 ) — — 309 ( 1 ) Mortgage-backed and asset-backed securities 1,000 ( 1 ) 206 — 1,206 ( 1 ) Commercial paper 1,375 — — — 1,375 — Short-term investments: U.S. government and agency securities 443 — — — 443 — Foreign government and agency securities — — 20 — 20 — Corporate debt securities 94 ( 1 ) 109 ( 1 ) 203 ( 2 ) Mortgage-backed and asset-backed securities 354 — 6 — 360 — Commercial paper 200 — — — 200 — Long-term investments: Foreign government and agency securities 25 — — — 25 — Corporate debt securities 20 — — — 20 — Mortgage-backed and asset-backed securities 368 ( 1 ) 35 — 403 ( 1 ) Total available-for-sale debt securities $ 5,505 $ ( 4 ) $ 426 $ ( 1 ) $ 5,931 $ ( 5 ) (1) “—” Denotes gross unrealized loss or fair value of less than $1 million in a given position. 2Q 2026 FORM 10-Q 22 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Unrealized losses have not been recognized into income as we neither intend to sell, nor anticipate that it is more likely than not that we will be required to sell, the securities before recovery of their amortized cost basis. The decline in fair value was due primarily to changes in market interest rates, rather than credit losses. We will continue to monitor the performance of the investment portfolio and assess whether impairment due to expected credit losses has occurred. The table below presents cash inflows related to available-for-sale debt securities: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Proceeds from sales and maturities of available-for-sale debt securities $ 5,458 $ 7,069 $ 10,737 $ 12,541 During the three and six months ended June 30, 2026 and 2025, we incurred gross realized gains and losses which were de minimis. Gross realized gains and losses were determined using the specific identification method. Our available-for-sale debt securities included within cash and cash equivalents, funds receivable and customer accounts, short-term investments, and long-term investments classified by date of contractual maturity were as follows: June 30, 2026 Amortized Cost Fair Value (In millions) One year or less $ 10,528 $ 10,530 After one year through five years 5,630 5,634 After five years through ten years 2,606 2,604 After ten years 3,039 3,045 Total $ 21,803 $ 21,813 Actual maturities may differ from contractual maturities as certain securities may be prepaid. STRATEGIC INVESTMENTS Our strategic investments include marketable equity securities, which are publicly traded, and non-marketable equity securities, which are primarily investments in privately held companies. Our marketable equity securities have readily determinable fair values and are recorded as long-term investments on our condensed consolidated balance sheets at fair value with changes in fair value recorded in other income (expense), net on our condensed consolidated statements of income (loss). Our non-marketable equity securities are recorded as long-term investments on our condensed consolidated balance sheets. We have non-marketable equity securities for which we have the ability to exercise significant influence, but not control, over the investee. We account for these equity securities using the equity method of accounting. The remaining non-marketable equity securities do not have a readily determinable fair value and we measure these equity investments at cost minus impairment, if any, and adjust for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer (the “Measurement Alternative”). All gains and losses on these investments, realized and unrealized, and our share of earnings or losses from investments accounted for using the equity method are recognized in other income (expense), net on our condensed consolidated statements of income (loss). The following table summarizes our strategic investments as of June 30, 2026 and December 31, 2025: June 30, 2026 December 31, 2025 (In millions) Marketable equity securities $ 106 $ 180 Non-marketable equity securities: Equity Method 205 215 Measurement Alternative 1,424 1,509 Total non-marketable equity securities 1,629 1,724 Total strategic investments $ 1,735 $ 1,904 2Q 2026 FORM 10-Q 23 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Measurement Alternative adjustments The adjustments to the carrying value of our non-marketable equity securities accounted for under the Measurement Alternative in the three and six months ended June 30, 2026 and 2025 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Carrying amount, beginning of period $ 1,485 $ 1,413 $ 1,509 $ 1,336 Adjustments related to non-marketable equity securities: Net additions (reductions) (1) 2 ( 76 ) 1 ( 54 ) Gross unrealized gains — 28 45 83 Gross unrealized losses and impairments ( 63 ) ( 6 ) ( 131 ) ( 6 ) Carrying amount, end of period $ 1,424 $ 1,359 $ 1,424 $ 1,359 (1) Net additions (reductions) include purchases, reductions due to sales of securities, and reclassifications when the Measurement Alternative is subsequently elected or no longer applies. The following table summarizes the cumulative gross unrealized gains and cumulative gross unrealized losses and impairment related to non-marketable equity securities accounted for under the Measurement Alternative held at June 30, 2026 and December 31, 2025, respectively: June 30, 2026 December 31, 2025 (In millions) Cumulative gross unrealized gains $ 917 $ 872 Cumulative gross unrealized losses and impairments $ ( 479 ) $ ( 353 ) Unrealized gains (losses) on strategic investments, excluding those accounted for using the equity method The following table summarizes the net unrealized gains (losses) on marketable and non-marketable equity securities, excluding those accounted for using the equity method, held at June 30, 2026 and 2025, respectively: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Net unrealized gains (losses) $ ( 63 ) $ 20 $ ( 160 ) $ 68 Supplemental cash flow information related to investments Non-cash investing transactions that were not reflected in the condensed consolidated statement of cash flows for the six months ended June 30, 2026 and 2025 include the purchase of investments, net of maturities and sales, of $ 200 million and $ 29 million, respectively, that have not yet settled. 2Q 2026 FORM 10-Q 24 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) NOTE 9— FAIR VALUE MEASUREMENT OF ASSETS AND LIABILITIES FINANCIAL ASSETS AND LIABILITIES MEASURED AND RECORDED AT FAIR VALUE ON A RECURRING BASIS The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025: June 30, 2026 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) (In millions) Assets: Cash and cash equivalents (1) Money market fund $ 49 $ 49 $ — Short-term investments (2) : U.S. government and agency securities 50 — 50 Foreign government and agency securities 100 — 100 Corporate debt securities 788 — 788 Mortgage-backed and asset-backed securities 289 — 289 Commercial paper 1,636 — 1,636 Total short-term investments 2,863 — 2,863 Funds receivable and customer accounts (3) : U.S. government and agency securities 4,787 — 4,787 Foreign government and agency securities 336 — 336 Corporate debt securities 3,064 — 3,064 Mortgage-backed and asset-backed securities 4,489 — 4,489 Municipal securities 81 — 81 Commercial paper 4,608 — 4,608 Total funds receivable and customer accounts 17,365 — 17,365 Derivatives (4) 148 — 148 Long-term investments (2),(5) : U.S. government and agency securities 521 — 521 Corporate debt securities 633 — 633 Mortgage-backed and asset-backed securities 1,115 — 1,115 Marketable equity securities 106 106 — Total long-term investments 2,375 106 2,269 Total financial assets $ 22,800 $ 155 $ 22,645 Liabilities: Derivatives (4) $ 52 $ — $ 52 (1) Excludes cash and cash equivalents of $ 8.3 billion not measured and recorded at fair value. (2) Excludes time deposits of $ 92 million not measured and recorded at fair value. (3) Excludes cash, time deposits, and funds receivable of $ 22.4 billion underlying funds receivable and customer accounts not measured and recorded at fair value. (4) Derivative assets and liabilities are included within “prepaid expenses and other current assets” and “other assets” and “accrued expenses and other current liabilities” and “other long-term liabilities,” respectively, on our condensed consolidated balance sheets. (5) Excludes non-marketable equity securities of $ 1.6 billion measured using the Measurement Alternative or equity method accounting. 2Q 2026 FORM 10-Q 25 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) December 31, 2025 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) (In millions) Assets: Cash and cash equivalents (1) Money market fund $ 4 $ 4 $ — Short-term investments (2) : U.S. government and agency securities 443 — 443 Foreign government and agency securities 60 — 60 Corporate debt securities 984 — 984 Mortgage-backed and asset-backed securities 448 — 448 Commercial paper 350 — 350 Total short-term investments 2,285 — 2,285 Funds receivable and customer accounts (3) : U.S. government and agency securities 3,530 — 3,530 Foreign government and agency securities 371 — 371 Corporate debt securities 2,736 — 2,736 Mortgage-backed and asset-backed securities 3,831 — 3,831 Municipal securities 98 — 98 Commercial paper 4,265 — 4,265 Total funds receivable and customer accounts 14,831 — 14,831 Derivatives (4) 20 — 20 Long-term investments (2), (5) : U.S. government and agency securities 400 — 400 Foreign government and agency securities 50 — 50 Corporate debt securities 650 — 650 Mortgage-backed and asset-backed securities 1,321 — 1,321 Marketable equity securities 180 180 — Total long-term investments 2,601 180 2,421 Total financial assets $ 19,741 $ 184 $ 19,557 Liabilities: Derivatives (4) $ 158 $ — $ 158 (1) Excludes cash and cash equivalents of $ 8.0 billion not measured and recorded at fair value. (2) Excludes time deposits of $ 93 million not measured and recorded at fair value. (3) Excludes cash, time deposits, and funds receivable of $ 23.4 billion underlying funds receivable and customer accounts not measured and recorded at fair value. (4) Derivative assets and liabilities are included within “prepaid expenses and other current assets” and “other assets” and “accrued expenses and other current liabilities” and “other long-term liabilities,” respectively, on our condensed consolidated balance sheets. (5) Excludes non-marketable equity securities of $ 1.7 billion measured using the Measurement Alternative or equity method accounting. Our financial assets classified within Level 1 are valued using quoted prices for identical assets in active markets. All other financial assets and liabilities are valued using quoted prices for identical instruments in less active markets, readily available pricing sources for comparable instruments, or models using market observable inputs (Level 2). A majority of our derivative instruments are valued using pricing models that take into account the contractual terms as well as multiple observable inputs where applicable, such as currency rates, interest rate yield curves, option volatility, and equity prices (Level 2). 2Q 2026 FORM 10-Q 26 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) As of June 30, 2026 and December 31, 2025, we did not have any assets or liabilities requiring measurement at fair value on a recurring basis with significant unobservable inputs that would require a high level of judgment to determine fair value (Level 3). We elect to account for available-for-sale debt securities denominated in currencies other than the functional currency of our subsidiaries under the fair value option. Election of the fair value option allows us to recognize any gains and losses from fair value changes on such investments in other income (expense), net on the condensed consolidated statements of income (loss) to significantly reduce the accounting asymmetry that would otherwise arise when recognizing the corresponding foreign exchange gains and losses relating to customer liabilities. The following table summarizes the estimated fair value and amortized cost of our available-for-sale debt securities under the fair value option as of June 30, 2026 and December 31, 2025: June 30, 2026 December 31, 2025 Amortized Cost Fair Value Amortized Cost Fair Value (In millions) Funds receivable and customer accounts $ 685 $ 684 $ 621 $ 620 The following table summarizes the gains (losses) from fair value changes recognized in other income (expense), net related to the available-for-sale debt securities under the fair value option for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Funds receivable and customer accounts $ ( 5 ) $ 61 $ ( 20 ) $ 92 ASSETS MEASURED AND RECORDED AT FAIR VALUE ON A NON-RECURRING BASIS The following tables summarize our assets held as of June 30, 2026 and December 31, 2025 for which a non-recurring fair value measurement was recorded during the six months ended June 30, 2026 and the year ended December 31, 2025, respectively: June 30, 2026 Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) (In millions) Loans and interest receivable, held for sale $ 1,395 $ 1,142 $ 253 Non-marketable equity securities measured using the Measurement Alternative (1) 271 117 154 Total $ 1,666 $ 1,259 $ 407 (1) Excludes non-marketable equity securities of $ 1.2 billion accounted for under the Measurement Alternative for which no observable price changes occurred during the six months ended June 30, 2026. December 31, 2025 Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) (In millions) Loans and interest receivable, held for sale $ 1,223 $ 1,182 $ 41 Non-marketable equity securities measured using the Measurement Alternative (1) 690 679 11 Total $ 1,913 $ 1,861 $ 52 (1) Excludes non-marketable equity securities of $ 819 million accounted for under the Measurement Alternative for which no observable price changes occurred during the year ended December 31, 2025. We measure loans and interest receivable, held for sale that are comparable to loans receivable sold to third-party investors using observable inputs, such as the most recent executed prices. These loans and interest receivable, held for sale are classified within Level 2 in the fair value hierarchy. 2Q 2026 FORM 10-Q 27 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The fair value of certain loans and interest receivables held for sale is classified within Level 3 when we estimate fair value using significant unobservable inputs. The significant unobservable input is the price at which the Company expects to sell the loans and is determined based upon certain loan and risk classifications of the portfolio. The following table presents the valuation techniques covering the majority of Level 3 non-recurring fair value measurements and the most significant unobservable inputs used in those measurements as of June 30, 2026: Fair Value (In millions) Methodology Input Low (1) High (1) Weighted Average (1)(2) Loans and interest receivable, held for sale $ 253 Price-based Price $ 0.01 $ 1.00 $ 0.89 (1) Prices are measured in relation to $ 1.00 par. (2) Weighted average is calculated based on the fair value of the loans. Refer to “Note 11—Loans and Interest Receivable” for additional information on loans and interest receivable, held for sale. We measure the non-marketable equity securities accounted for under the Measurement Alternative at cost minus impairment, if any, adjusted for observable price changes in orderly transactions for an identical or similar investment in the same issuer. Non-marketable equity securities that have been remeasured during the period based on observable price changes are classified within Level 2 in the fair value hierarchy because we estimate the fair value based on valuation methods which only include significant inputs that are observable, such as the observable transaction price at the transaction date. The fair value of non-marketable equity securities are classified within Level 3 when we estimate fair value using significant unobservable inputs, such as when we remeasure due to impairment and use discount rates, forecasted cash flows, and market data of comparable companies, among others. FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AND RECORDED AT FAIR VALUE Our financial instruments, including cash, PayPal USD stablecoin (“PYUSD”), time deposits, certain loans and interest receivable, held for sale, loans and interest receivable, net, notes receivable, commercial paper, and debt related to borrowings on our credit facilities are carried at amortized cost, which approximates their fair value. Our term debt (including current portion) had a carrying value of approximately $ 12.6 billion and fair value of approximately $ 11.9 billion as of June 30, 2026. Our term debt (including current portion) had a carrying value of approximately $ 10.8 billion and fair value of approximately $ 10.3 billion as of December 31, 2025. If these financial instruments were measured at fair value in the financial statements, cash and PYUSD would be classified as Level 1; time deposits, certain loans and interest receivable, held for sale, commercial paper, and term debt (including current portion) would be classified as Level 2; and the remaining financial instruments would be classified as Level 3 in the fair value hierarchy. NOTE 10— DERIVATIVE INSTRUMENTS SUMMARY OF DERIVATIVE INSTRUMENTS Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign exchange rates. Our derivatives expose us to credit risk to the extent that our counterparties may be unable to meet the terms of the arrangement. We seek to mitigate such risk by limiting our counterparties to, and by spreading the risk across, major financial institutions and by entering into collateral security arrangements. In addition, we monitor the potential risk of loss with any one counterparty resulting from this type of credit risk on an ongoing basis. We do not use any derivative instruments for trading or speculative purposes. 2Q 2026 FORM 10-Q 28 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Cash flow hedges We have significant international revenues and expenses denominated in foreign currencies, which subjects us to foreign exchange risk. We have a foreign currency exposure management program in which we designate certain foreign exchange contracts, generally with maturities of 12 months or less, to reduce the volatility of cash flows primarily related to forecasted revenues and expenses denominated in certain foreign currencies. The objective of these foreign exchange contracts is to help mitigate the risk that the U.S. dollar-equivalent cash flows are adversely affected by changes in the applicable U.S. dollar/foreign currency exchange rate. These derivative instruments are designated as cash flow hedges and accordingly, the derivative’s gain or loss is initially reported as a component of AOCI and subsequently reclassified into revenue or the applicable expense line item in the condensed consolidated statements of income (loss) in the same period the forecasted transaction affects earnings. We evaluate the effectiveness of our foreign exchange contracts on a quarterly basis by comparing the critical terms of the derivative instruments with the critical terms of the forecasted cash flows of the hedged item; if the critical terms are the same, we conclude the hedge will be perfectly effective. We do not exclude any component of the changes in fair value of the derivative instruments from the assessment of hedge effectiveness. We report cash flows arising from derivative instruments consistent with the classification of cash flows from the underlying items that these derivatives are hedging. Accordingly, the cash flows associated with derivatives designated as cash flow hedges are classified in cash flows from operating activities on our condensed consolidated statements of cash flows. As of June 30, 2026, we estimated that $ 101 million of net derivative gains related to our cash flow hedges included in AOCI are expected to be reclassified into earnings within the next 12 months. During the three and six months ended June 30, 2026 and 2025, we did not discontinue any cash flow hedges because it was probable that the original forecasted transaction would not occur and as such, did not reclassify any gains or losses to earnings prior to the occurrence of the hedged transaction. If we elect to discontinue our cash flow hedges and it is probable that the original forecasted transaction will occur, we will continue to report the derivative’s gain or loss in AOCI until the forecasted transaction affects earnings, at which point we will also reclassify it into earnings. Gains and losses on derivatives held after we discontinue our cash flow hedges and on derivative instruments that are not designated as cash flow hedges are recorded in the same financial statement line to which the derivative relates. Net investment hedges Prior to 2025, we used foreign exchange contracts to reduce the foreign exchange risk related to our investment in certain foreign subsidiaries. These derivatives were designated as net investment hedges and accordingly, the gains and losses on the portion of the derivatives included in the assessment of hedge effectiveness were recorded in AOCI as part of foreign currency translation. The accumulated gains and losses associated with these instruments will remain in AOCI until the foreign subsidiaries are sold or substantially liquidated, at which point they will be reclassified into earnings. We have no t reclassified any gains or losses related to net investment hedges from AOCI into earnings for any of the periods presented. Foreign exchange contracts not designated as hedging instruments We have a foreign currency exposure management program in which we use foreign exchange contracts to offset the foreign exchange risk of our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries. These contracts are not designated as hedging instruments and reduce, but do not entirely eliminate, the impact of foreign exchange rate movements on our assets and liabilities. The gains and losses due to remeasurement of certain foreign currency denominated monetary assets and liabilities are recorded in other income (expense), net, which are offset by the gains and losses on these foreign exchange contracts. The cash flows associated with our non-designated derivatives used to hedge foreign currency denominated monetary assets and liabilities are classified in cash flows from operating activities on our condensed consolidated statements of cash flows. 2Q 2026 FORM 10-Q 29 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) FAIR VALUE OF DERIVATIVE CONTRACTS The fair value of our outstanding derivative instruments as of June 30, 2026 and December 31, 2025 was as follows: Balance Sheet Location June 30, 2026 December 31, 2025 (In millions) Derivative Assets: Foreign exchange contracts designated as hedging instruments Other current assets $ 116 $ 7 Foreign exchange contracts not designated as hedging instruments Other current assets 32 13 Total derivative assets $ 148 $ 20 Derivative Liabilities: Foreign exchange contracts designated as hedging instruments Other current liabilities $ 15 $ 118 Foreign exchange contracts not designated as hedging instruments Other current liabilities 37 40 Total derivative liabilities $ 52 $ 158 EFFECT OF DERIVATIVE CONTRACTS ON CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following tables provide the location in the condensed consolidated statements of income (loss) and amount of recognized gains or losses related to our derivative instruments for the three months ended June 30, 2026 and 2025: Three Months Ended June 30, 2026 (In millions) Net revenues Customer support and operations Technology and development General and administrative Other income (expense), net Total amounts presented in the condensed consolidated statements of income (loss) in which the gains (losses) on derivatives are recorded $ 8,682 $ 462 $ 849 $ 503 $ ( 117 ) Gains (losses) on derivatives in cash flow hedging relationship: Amount of net gains (losses) on foreign exchange contracts reclassified from AOCI 6 ( 2 ) ( 2 ) ( 1 ) — Gains (losses) on derivatives not designated as hedging instruments: Amount of net gains (losses) on foreign exchange contracts — — — — ( 42 ) Total net gains (losses) $ 6 $ ( 2 ) $ ( 2 ) $ ( 1 ) $ ( 42 ) 2Q 2026 FORM 10-Q 30 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Three Months Ended June 30, 2025 (In millions) Net revenues Other income (expense), net Total amounts presented in the condensed consolidated statements of income (loss) in which the gains (losses) on derivatives are recorded $ 8,288 $ 25 Gains (losses) on derivatives in cash flow hedging relationship: Amount of net gains (losses) on foreign exchange contracts reclassified from AOCI ( 70 ) — Gains (losses) on derivatives not designated as hedging instruments: Amount of net gains (losses) on foreign exchange contracts — ( 152 ) Total net gains (losses) $ ( 70 ) $ ( 152 ) The following tables provide the location in the condensed consolidated statements of income (loss) and amount of recognized gains or losses related to our derivative instruments for the six months ended June 30, 2026 and 2025: Six Months Ended June 30, 2026 (In millions) Net revenues Customer support and operations Technology and development General and administrative Other income (expense), net Total amounts presented in the condensed consolidated statements of income (loss) in which the gains (losses) on derivatives are recorded $ 17,035 $ 908 $ 1,642 $ 994 $ ( 212 ) Gains (losses) on derivatives in cash flow hedging relationship: Amount of net gains (losses) on foreign exchange contracts reclassified from AOCI ( 80 ) ( 3 ) ( 3 ) ( 1 ) — Gains (losses) on derivatives not designated as hedging instruments: Amount of net gains (losses) on foreign exchange contracts — — — — 11 Total net gains (losses) $ ( 80 ) $ ( 3 ) $ ( 3 ) $ ( 1 ) $ 11 Six Months Ended June 30, 2025 (In millions) Net revenues Customer support and operations Technology and development Other income (expense), net Total amounts presented in the condensed consolidated statements of income (loss) in which the gains (losses) on derivatives are recorded $ 16,079 $ 811 $ 1,498 $ 98 Gains (losses) on derivatives in cash flow hedging relationship: Amount of net gains (losses) on foreign exchange contracts reclassified from AOCI ( 35 ) ( 1 ) ( 1 ) — Gains (losses) on derivatives not designated as hedging instruments: Amount of net gains (losses) on foreign exchange contracts — — — ( 235 ) Total net gains (losses) $ ( 35 ) $ ( 1 ) $ ( 1 ) $ ( 235 ) 2Q 2026 FORM 10-Q 31 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The following table provides the amount of pre-tax unrealized gains or losses included in the assessment of hedge effectiveness related to our derivative instruments designated as hedging instruments that are recognized in other comprehensive income (loss): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Unrealized net gains (losses) on foreign exchange contracts designated as cash flow hedges $ 20 $ ( 318 ) $ 124 $ ( 461 ) NOTIONAL AMOUNTS OF DERIVATIVE CONTRACTS Derivative transactions are measured in terms of the notional amount; however, this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the derivative instruments. The notional amount is generally not exchanged, and used only as the underlying basis on which the value of foreign currency exchange payments under these contracts is determined. The following table provides the notional amounts of our outstanding derivative instruments: June 30, 2026 December 31, 2025 (In millions) Foreign exchange contracts designated as hedging instruments $ 7,221 $ 5,878 Foreign exchange contracts not designated as hedging instruments 9,032 11,932 Total $ 16,253 $ 17,810 MASTER NETTING AGREEMENTS - RIGHTS OF SET-OFF Under master netting agreements with certain counterparties to our derivative contracts, repurchase agreements, and reverse repurchase agreements, subject to applicable requirements, we are allowed to net settle transactions of the same type with a single net amount payable by one party to the other. PayPal has not elected to offset for balance sheet presentation and we present the derivative assets, derivative liabilities, repurchase agreements and reverse repurchase agreements on a gross basis on our condensed consolidated balance sheets. We have entered into collateral security arrangements with certain counterparties that provide for collateral to be received or posted when the net fair value of certain financial instruments fluctuates from contractually established thresholds. Receivables related to cash collateral posted and payables related to cash collateral received are recognized in other current assets and other current liabilities, respectively, on our condensed consolidated balance sheets. 2Q 2026 FORM 10-Q 32 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The following tables present the derivative assets and derivative liabilities not offset on the condensed consolidated balance sheets but available for offset in the event of default. The tables also present the cash and non-cash collateral received or pledged relating to these positions. The amount of collateral presented is limited to the amount presented on our condensed consolidated balance sheets; therefore, instances of over-collateralization are excluded from the table below. Amounts Not Offset on the Condensed Consolidated Balance Sheets Amounts Presented on the Condensed Consolidated Balance Sheets Financial Instruments (1) Collateral Received (2) Net Amounts (In millions) As of June 30, 2026 Derivative assets (3) $ 148 $ 16 $ 110 $ 22 As of December 31, 2025 Derivative assets (3) $ 20 $ 13 $ 2 $ 5 Amounts Not Offset on the Condensed Consolidated Balance Sheets Amounts Presented on the Condensed Consolidated Balance Sheets Financial Instruments (1) Collateral Pledged (2) Net Amounts (In millions) As of June 30, 2026 Derivative liabilities (3) $ 52 $ 16 $ 16 $ 20 As of December 31, 2025 Derivative liabilities (3) $ 158 $ 13 $ 122 $ 23 (1) For derivative positions, this includes any derivative fair value that could be offset in the event of counterparty default. (2) Includes cash and the fair value of securities exchanged with the counterparty. (3) We received cash collateral from derivative counterparties totaling $ 120 million and $ 2 million as of June 30, 2026 and December 31, 2025, respectively, and securities from derivative counterparties with a fair value of $ 75 million and $ 90 million as of June 30, 2026 and December 31, 2025, respectively. We posted $ 20 million and $ 156 million of cash collateral as of June 30, 2026 and December 31, 2025, respectively, and securities to derivative counterparties with a fair value of $ 56 million and $ 91 million as of June 30, 2026 and December 31, 2025, respectively. NOTE 11— LOANS AND INTEREST RECEIVABLE LOANS AND INTEREST RECEIVABLE, HELD FOR SALE As of June 30, 2026 and December 31, 2025, loans and interest receivable, held for sale was $ 1.9 billion and $ 1.7 billion, respectively. During the six months ended June 30, 2026, we derecognized loans with an unpaid balance of $ 15.9 billion and had net proceeds of $ 15.8 billion from loans and interest receivable sold. During the six months ended June 30, 2025, we derecognized loans with both an unpaid balance and net proceeds of $ 11.6 billion from loans and interest receivable sold. LOANS AND INTEREST RECEIVABLE, NET Consumer receivables We offer revolving and installment credit products as a funding option for consumers in certain checkout transactions on our payments platform. Our revolving credit product consists of PayPal Credit in the United Kingdom (“U.K.”), which is made available to consumers as a funding source in their PayPal wallet once they are approved for credit. Additionally, we offer installment credit products at the time of checkout in various markets, including the U.S., several markets across Europe, Australia, and Japan. We offer non interest-bearing installment credit products in these markets as well as interest-bearing installment credit products in the U.S. and Germany, among other markets. We purchase receivables related to interest-bearing installment loans extended to U.S. consumers by an independent chartered financial institution (“partner institution”) and are responsible for the servicing functions related to that portfolio. During the six months ended June 30, 2026 and 2025, we purchased approximately $ 783 million and $ 602 million in consumer receivables, respectively. For both June 30, 2026 and December 31, 2025, the outstanding balance of consumer receivables, which consisted of revolving and installment loans and interest receivable, was $ 5.5 billion, net of the participation interest sold to the partner institution of $ 36 million and $ 33 million as of June 30, 2026 and December 31, 2025, respectively. 2Q 2026 FORM 10-Q 33 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Consumer receivables delinquency and allowance The following tables present the delinquency status and gross charge-offs of revolving and installment loans and interest receivable by year of origination, as applicable. The amounts are based on the number of days past the billing date for revolving loans or contractual repayment date for installment loans. The “current” category represents balances that are within 29 days of the billing date or contractual repayment date, as applicable. June 30, 2026 (In millions, except percentages) Revolving Loans Amortized Cost Basis Installment Loans Amortized Cost Basis 2026 2025 2024 2023 2022 Total Percent Consumer loans and interest receivable: Current $ 2,824 $ 1,533 $ 700 $ 198 $ 40 $ — $ 5,295 96.6 % 30 - 59 Days 27 25 10 3 1 — 66 1.2 % 60 - 89 Days 17 13 6 2 1 — 39 0.7 % 90 - 179 Days 45 12 20 3 — — 80 1.5 % Total $ 2,913 $ 1,583 $ 736 $ 206 $ 42 $ — $ 5,480 100 % Gross charge-offs for the six months ended June 30, 2026 $ 75 $ 1 $ 69 $ 11 $ — $ — $ 156 December 31, 2025 (In millions, except percentages) Revolving Loans Amortized Cost Basis Installment Loans Amortized Cost Basis 2025 2024 2023 2022 2021 Total Percent Consumer loans and interest receivable: Current $ 2,767 $ 2,043 $ 360 $ 114 $ — $ — $ 5,284 96.4 % 30 - 59 Days 29 34 5 2 — — 70 1.3 % 60 - 89 Days 19 22 4 2 — — 47 0.9 % 90 - 179 Days 39 31 6 2 — — 78 1.4 % Total $ 2,854 $ 2,130 $ 375 $ 120 $ — $ — $ 5,479 100 % Gross charge-offs for the year ended December 31, 2025 $ 136 $ 36 $ 107 $ 20 $ 1 $ — $ 300 2Q 2026 FORM 10-Q 34 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The following table summarizes the activity in the allowance for consumer loans and interest receivable for the six months ended June 30, 2026 and 2025: June 30, 2026 June 30, 2025 Consumer Loans Receivable Interest Receivable Total Allowance Consumer Loans Receivable Interest Receivable Total Allowance (In millions) Beginning balance $ 366 $ 3 $ 369 $ 341 $ 7 $ 348 Provisions 93 8 101 117 6 123 Charge-offs ( 148 ) ( 8 ) ( 156 ) ( 143 ) ( 9 ) ( 152 ) Recoveries 41 — 41 33 — 33 Other (1) ( 7 ) — ( 7 ) 25 — 25 Ending balance $ 345 $ 3 $ 348 $ 373 $ 4 $ 377 (1) Includes amounts related to foreign currency remeasurement. The allowance for credit losses at June 30, 2026 for our consumer receivable portfolio remained relatively consistent with the allowance for credit losses at December 31, 2025. In the first quarter of 2026, we updated our expected credit loss model for interest bearing installment loans in the U.S. to reflect current risk characteristics. This change did not have a material impact on our allowance for credit losses in the period. Merchant receivables We offer access to merchant finance products for certain small and medium-sized businesses through our PayPal Working Capital (“PPWC”) product in the U.S., Germany, and U.K., among other markets, and our PayPal Business Loan (“PPBL”) product in the U.S., which we collectively refer to as our merchant finance offerings. We purchase receivables related to credit extended to U.S. merchants by a partner institution and are responsible for the servicing functions related to that portfolio. During the six months ended June 30, 2026 and 2025, we purchased approximately $ 1.2 billion and $ 1.0 billion in merchant receivables, respectively. As of June 30, 2026 and December 31, 2025, the total outstanding balance in our pool of merchant loans, advances, and fees receivable was $ 1.9 billion and $ 1.8 billion, respectively, net of the participation interest sold to the partner institution of $ 67 million and $ 65 million, respectively. Merchant receivables delinquency and allowance The following tables present the delinquency status and gross charge-offs of merchant loans, advances, and fees receivable by year of origination. The amounts are based on the number of days past the expected or contractual repayment date for amounts outstanding. The “current” category represents balances that are within 29 days of the expected repayment date or contractual repayment date, as applicable. June 30, 2026 (In millions, except percentages) 2026 2025 2024 2023 2022 Total Percent Merchant loans, advances, and fees receivable: Current $ 1,340 $ 343 $ 15 $ 2 $ 2 $ 1,702 89.6 % 30 - 59 Days 32 41 8 1 — 82 4.3 % 60 - 89 Days 11 25 5 1 — 42 2.2 % 90 - 179 Days 7 46 9 1 — 63 3.3 % 180+ Days — 6 4 1 — 11 0.6 % Total $ 1,390 $ 461 $ 41 $ 6 $ 2 $ 1,900 100 % Gross charge-offs for the six months ended June 30, 2026 $ — $ 61 $ 20 $ 3 $ — $ 84 2Q 2026 FORM 10-Q 35 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) December 31, 2025 (In millions, except percentages) 2025 2024 2023 2022 2021 Prior Total Percent Merchant loans, advances, and fees receivable: Current $ 1,558 $ 53 $ 5 $ 3 $ — $ 2 $ 1,621 89.8 % 30 - 59 Days 63 17 1 1 — — 82 4.5 % 60 - 89 Days 27 10 1 1 — — 39 2.2 % 90 - 179 Days 34 18 2 1 — — 55 3.0 % 180+ Days 2 5 2 — — — 9 0.5 % Total $ 1,684 $ 103 $ 11 $ 6 $ — $ 2 $ 1,806 100 % Gross charge-offs for the year ended December 31, 2025 $ 25 $ 87 $ 19 $ 4 $ — $ 2 $ 137 The following table summarizes the activity in the allowance for merchant loans, advances, and fees receivable for the six months ended June 30, 2026 and 2025: June 30, 2026 June 30, 2025 Merchant Loans and Advances Fees Receivable Total Allowance Merchant Loans and Advances Fees Receivable Total Allowance (In millions) Beginning balance $ 156 $ 14 $ 170 $ 107 $ 6 $ 113 Provisions 83 8 91 69 8 77 Charge-offs ( 77 ) ( 7 ) ( 84 ) ( 55 ) ( 4 ) ( 59 ) Recoveries 9 — 9 12 — 12 Other (1) ( 1 ) — ( 1 ) 4 — 4 Ending balance $ 170 $ 15 $ 185 $ 137 $ 10 $ 147 (1) Includes amounts related to foreign currency remeasurement. The allowance for credit losses at June 30, 2026 for our merchant receivable portfolio remained relatively consistent with the allowance for credit losses at December 31, 2025. NOTE 12— DEBT NOTES In May 2026, we issued fixed-rate notes with varying maturity dates for an aggregate principal amount of $ 2.0 billion, consisting of $ 650 million aggregate principal amount of 4.550 % notes due 2028, $ 850 million aggregate principal amount of 4.950 % notes due 2031, and $ 500 million aggregate principal amount of 5.550 % notes due 2036. Interest on the notes is payable on June 1 and December 1, beginning on December 1, 2026. The notes are senior unsecured obligations and are collectively referred to as the “Notes.” We may redeem the Notes in whole at any time or in part from time to time, prior to maturity, at their redemption prices. Upon the occurrence of both a change of control of the Company and a downgrade of the Notes below an investment grade rating, we will be required to offer to repurchase each series of Notes at a price equal to 101 % of the then outstanding principal amounts, plus accrued and unpaid interest. The Notes are subject to covenants, including limitations on our ability to create liens on our assets, enter into sale and leaseback transactions, and merge or consolidate with another entity, in each case subject to certain exceptions, limitations, and qualifications. Proceeds from the issuance of these Notes may be used for general corporate purposes, which may include funding the repayment or redemption of outstanding debt, share repurchases, ongoing operations, capital expenditures, and possible acquisitions of businesses, assets, or strategic investments. 2Q 2026 FORM 10-Q 36 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The following table summarizes total long-term debt: Maturities Effective Interest Rate June 30, 2026 December 31, 2025 (in millions) September 2019 debt issuance: Fixed-rate 2.650 % notes 10/1/2026 2.78 % $ 1,250 $ 1,250 Fixed-rate 2.850 % notes 10/1/2029 2.96 % 1,500 1,500 May 2020 debt issuance: Fixed-rate 2.300 % notes 6/1/2030 2.39 % 1,000 1,000 Fixed-rate 3.250 % notes 6/1/2050 3.33 % 1,000 1,000 May 2022 debt issuance: Fixed-rate 3.900 % notes 6/1/2027 4.06 % 500 500 Fixed-rate 4.400 % notes 6/1/2032 4.53 % 1,000 1,000 Fixed-rate 5.050 % notes 6/1/2052 5.14 % 1,000 1,000 Fixed-rate 5.250 % notes 6/1/2062 5.34 % 500 500 June 2023 debt issuance (1) : ¥ 23 billion fixed-rate 0.972 % notes 6/9/2026 1.06 % — 147 ¥ 37 billion fixed-rate 1.240 % notes 6/9/2028 1.31 % 228 237 May 2024 debt issuance: Fixed-rate 5.150 % notes 6/1/2034 5.35 % 850 850 Fixed-rate 5.500 % notes 6/1/2054 5.66 % 400 400 March 2025 debt issuance: Floating-rate notes 3/6/2028 4.68 % 450 450 Fixed-rate 4.450 % notes 3/6/2028 4.66 % 450 450 Fixed-rate 5.100 % notes 4/1/2035 5.20 % 600 600 May 2026 debt issuance: Fixed-rate 4.550 % notes 6/1/2028 4.87 % 650 — Fixed-rate 4.950 % notes 6/1/2031 5.11 % 850 — Fixed-rate 5.550 % notes 6/1/2036 5.66 % 500 — Total term debt 12,728 10,884 Unamortized premium (discount) and issuance costs, net ( 84 ) ( 76 ) Less: current portion of term debt (2) ( 1,749 ) ( 1,396 ) Total carrying amount of term debt $ 10,895 $ 9,412 (1) Principal amounts represent the U.S. dollar equivalent as of June 30, 2026 and December 31, 2025, respectively. (2) The current portion of term debt is included within “short-term debt” on our condensed consolidated balance sheets. As of June 30, 2026, the future principal payments associated with our long-term debt was as follows (in millions): Remaining 2026 $ 1,250 2027 500 2028 1,778 2029 1,500 2030 1,000 Thereafter 6,700 Total $ 12,728 2Q 2026 FORM 10-Q 37 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) The effective interest rates for the notes include interest on the notes, amortization of debt issuance costs, and amortization of the debt discount. The interest expense recorded for the notes, including amortization of the debt discount and debt issuance costs, was $ 119 million and $ 225 million for the three and six months ended June 30, 2026, respectively. The interest expense recorded for the notes, including amortization of the debt discount and debt issuance costs, was $ 110 million and $ 208 million for the three and six months ended June 30, 2025, respectively. CREDIT FACILITIES Paidy credit agreement In February 2022, we entered into a credit agreement (the “Paidy Credit Agreement”) with Paidy as co-borrower, which provided for an unsecured revolving credit facility of ¥ 60.0 billion, which was modified in September 2022 to increase the borrowing capacity by ¥ 30.0 billion for a total borrowing capacity of ¥ 90.0 billion (approximately $ 556 million as of June 30, 2026). The Paidy Credit Agreement will terminate and all amounts owed thereunder will be due and payable in February 2027, unless the commitments are terminated earlier. As of June 30, 2026 and December 31, 2025, ¥ 90.0 billion (approximately $ 556 million) and ¥ 90.0 billion (approximately $ 575 million) was drawn down under the Paidy Credit Agreement, respectively, which was recorded in short-term debt and long-term debt, respectively, on our condensed consolidated balance sheets. The weighted average interest rate on the borrowing was 1.49 % as of June 30, 2026. At June 30, 2026, no borrowing capacity was available for the purposes permitted by the Paidy Credit Agreement. During the three and six months ended June 30, 2026 and 2025, the total interest expense and fees we recorded related to the Paidy Credit Agreement were de minimis. COMMERCIAL PAPER There was $ 200 million outstanding in commercial paper notes as of both June 30, 2026 and December 31, 2025, which was recorded in short-term debt on our condensed consolidated balance sheets. The weighted average interest rate on the commercial paper borrowings was 4.06 % and 4.07 % as of June 30, 2026 and December 31, 2025, respectively. The maturities of the commercial paper notes may vary, but may not exceed 397 days from the date of issuance. Other than as provided above, there were no significant changes to the information disclosed in our 2025 Form 10-K. NOTE 13— COMMITMENTS AND CONTINGENCIES LITIGATION AND REGULATORY MATTERS Overview We are involved in legal and regulatory proceedings on an ongoing basis. Certain of these proceedings are in early stages and may seek an indeterminate amount of damages or penalties or may require us to change or adopt certain business practices. If we believe that a loss arising from such matters is probable and can be reasonably estimated, we accrue the estimated liability in our financial statements at that time. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range. For those proceedings in which an unfavorable outcome is reasonably possible but not probable, (i) we have disclosed an estimate of the reasonably possible loss or range of losses or (ii) we have concluded that our estimate of the reasonably possible loss or range of losses arising directly from the proceeding (i.e., monetary damages or amounts paid in judgment or settlement) is not material. If we cannot estimate the probable or reasonably possible loss or range of losses arising from a legal proceeding, we have disclosed that fact. In assessing the materiality of a legal proceeding, we evaluate, among other factors, the amount of monetary damages claimed, as well as the potential impact of non-monetary remedies sought by plaintiffs (e.g., injunctive relief) that may require us to change our business practices in a manner that could have a material adverse impact on our business. With respect to the matters disclosed in this Note 13, we are unable to estimate the possible loss or range of losses that could potentially result from the application of such non-monetary remedies. 2Q 2026 FORM 10-Q 38 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Amounts accrued for legal and regulatory proceedings for which we believe a loss is probable and reasonably estimable were not material as of June 30, 2026. Except as otherwise noted for the proceedings described in this Note 13, we have concluded, based on currently available information, that reasonably possible losses arising directly from the proceedings (i.e., monetary damages or amounts paid in judgment or settlement) in excess of our recorded accruals are also not material. Determining legal reserves or possible losses from such matters involves judgment and may not reflect the full range of uncertainties and unpredictable outcomes. We may be exposed to losses in excess of the amount recorded, and such amounts could be material. If any of our estimates and assumptions change or prove to have been incorrect, it could have a material adverse effect on our business, financial position, results of operations, or cash flows. Regulatory proceedings In February 2022, we received a Civil Investigative Demand (“CID”) from the Federal Trade Commission (“FTC”) related to PayPal’s practices relating to commercial customers that submit charges on behalf of other merchants or sellers, and related activities. In August 2025, we received an additional CID investigating whether deceptive schemes and other unlawful activities by merchants using PayPal’s platform were facilitated or furthered by the Company’s onboarding, due diligence, and other practices. The CIDs request the production of documents and answers to written questions, as well as other information. We are cooperating with the FTC in connection with these CIDs. In January 2023, we received notice of an administrative proceeding and a related request for information from the German Federal Cartel Office (“FCO”) related to terms in PayPal (Europe) S.à.r.l. et Cie, S.C.A.’s contractual terms with merchants in Germany prohibiting surcharging and requiring parity presentation of PayPal relative to other payment methods. We are cooperating with the FCO in connection with this proceeding. We have received CIDs from the Consumer Financial Protection Bureau (“CFPB”) related to investigation and error-resolution obligations under Regulation E, the presentment of transactions to linked bank accounts, and related matters. The CIDs request the production of documents and answers to written questions. We are cooperating with the CFPB in connection with these CIDs. In August 2024, we received a CID from the CFPB related to PayPal Credit. The CID also relates to backup payment options in a digital wallet to pay for goods or services. The CID requests the production of documents and answers to written questions. We are cooperating with the CFPB in connection with this CID. In March 2026, we received notices of investigations and related requests for information from the U.K. Financial Conduct Authority (“FCA”) under the Competition Act 1998 regarding certain provisions in PayPal’s contractual agreements with Visa and Mastercard relating to funding and use of the PayPal digital wallet. We are cooperating with the FCA in connection with these investigations. 2Q 2026 FORM 10-Q 39 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Legal proceedings On October 4, 2022, a putative securities class action captioned Defined Benefit Plan of the Mid-Jersey Trucking Industry and Teamsters Local 701 Pension and Annuity Fund v. PayPal Holdings, Inc., et al. , Case No. 22-cv-5864, was filed in the U.S. District Court for the District of New Jersey. On January 11, 2023, the Court appointed Caisse de dépôt et placement du Québec as lead plaintiff and renamed the action In re PayPal Holdings, Inc. Securities Litigation (“PPH Securities Action”). On March 13, 2023, the lead plaintiff filed an amended and consolidated complaint. The PPH Securities Action asserts claims relating to our public statements with respect to net new active accounts (“NNA”) results and guidance, and the detection of illegitimately created accounts. The PPH Securities Action purports to be brought on behalf of purchasers of the Company’s stock between February 3, 2021 and February 1, 2022 (the “Class Period”), and asserts claims for alleged violations of Section 10(b) of the Exchange Act against the Company, as well as its former Chief Executive Officer, former Chief Strategy, Growth and Data Officer, and former Chief Financial Officer (collectively, the “Individual Defendants,” and together with the Company, “Defendants”), and for alleged violations of Sections 20(a) and 20A of the Exchange Act against the Individual Defendants. The complaint alleges that certain public statements made by Defendants during the Class Period were rendered materially false and misleading (which, allegedly, caused the Company’s stock to trade at artificially inflated prices) by the Defendants’ failure to disclose that, among other things, the Company’s incentive campaigns were susceptible to fraud and led to the creation of illegitimate accounts, which allegedly affected the Company’s NNA results and guidance. The PPH Securities Action seeks unspecified compensatory damages on behalf of the putative class members. Defendants filed a motion to dismiss the PPH Securities Action. On January 29, 2025, the Court dismissed all of the claims without prejudice. On March 17, 2025, the lead plaintiff filed an amended complaint. On March 31, 2026, the Court dismissed all of the claims with prejudice. On April 30, 2026, the plaintiffs filed an appeal in the U.S. Court of Appeals for the Third Circuit. On November 2, 2022, a putative shareholder derivative action captioned Shah v. Daniel Schulman, et al. , Case No. 22-cv-1445, was filed in the U.S. District Court for the District of Delaware (the “Shah Action”), purportedly on behalf of the Company. On April 4, 2023, a putative shareholder derivative action captioned Nelson v. Daniel Schulman, et. al. , Case No. 23-cv-01913, was filed in the U.S. District Court for the District of New Jersey (the “Nelson Action”) purportedly on behalf of the Company. On January 31, 2025, a putative shareholder derivative action captioned Spathias v. Daniel Schulman, et al. , Case No. 25-cv-1007, was filed in the U.S. District Court for the Northern District of California (the “Spathias Action,” and collectively, the “Derivative Actions”). The Derivative Actions are based on the same alleged facts and circumstances as the PPH Securities Action, and name certain of our officers, including our former Chief Executive Officer and former Chief Financial Officer, and members of our Board of Directors, as defendants. The Derivative Actions allege claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, waste of corporate assets, gross mismanagement and violations of the Exchange Act, and seek to recover damages on behalf of the Company. The Derivative Actions have been stayed pending further developments in the PPH Securities Action. On February 24, 2026, a putative securities class action captioned Darcy v. PayPal Holdings, Inc. et al. , Case No. 3:26-cv-01589-JSC, was filed in the U.S. District Court for the Northern District of California (the “Darcy Securities Action”). The Darcy Securities Action purports to be brought on behalf of purchasers of the Company’s stock between February 25, 2025 and February 2, 2026 (the “Darcy Class Period”), and asserts claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against the Company and certain of its current and former officers. The complaint alleges that certain public statements made by the Company during the Darcy Class Period were rendered materially false and misleading (which, allegedly, caused the Company’s stock to trade at artificially inflated prices) by the defendants’ failure to disclose impediments to its branded checkout growth strategy that impaired the Company’s ability to meet its 2027 financial targets. The Darcy Securities Action seeks unspecified compensatory damages on behalf of the putative class members. On April 2, 2026, a putative securities class action captioned Norfolk County Retirement System v. PayPal Holdings, Inc. et al. , Case No. 5:26-cv-02849, was filed in the U.S. District Court for the Northern District of California (the “Norfolk Securities Action”). The Norfolk Securities Action generally asserts the same claims and allegations made in the Darcy Securities Action, but expands the Darcy Class Period to February 8, 2024 to February 2, 2026 and includes additional alleged misstatements from the earlier time period. The Norfolk Securities Action seeks unspecified compensatory damages on behalf of the putative class members. 2Q 2026 FORM 10-Q 40 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) On May 21, 2026, the Norfolk Securities Action was consolidated with the Darcy Securities Action under the caption In re PayPal Branded Checkout Securities Litigation , Case No. 3:26-cv-01589 (the “Branded Checkout Securities Action”), and the Court appointed the Wayne County Employees’ Retirement System, Macomb County Intermediate Retirees Medical Benefits Trust, Macomb County Retirement Health Care Fund, Macomb County Employees’ Retirement System, and Norfolk County Retirement System as lead plaintiffs. On March 11, 2026, a putative shareholder derivative action captioned Goncalves v. Chriss et al. , Case No. 3:26-cv-02145, was filed in the U.S. District Court for the Northern District of California (the “Goncalves Action”), purportedly on behalf of the Company. On May 6, 2026, a putative shareholder derivative action captioned LR Trust v. Chriss et al. , Case No. 3:26-cv-04132, was filed in the U.S. District Court for the Northern District of California (the “LR Trust Action”), purportedly on behalf of the Company. On May 11, 2026, a putative shareholder derivative action captioned Stan v. Chriss et al. , Case No. 5:26-cv-04330, was filed in the U.S. District Court for the Northern District of California (the “Stan Action”), purportedly on behalf of the Company. On May 17, 2026, a putative shareholder derivative action captioned Lovoi v. Adkins et al. , Case No. 3:26-cv-04650, was filed in the U.S. District Court for the Northern District of California (the “Lovoi Action”), purportedly on behalf of the Company. On June 3, 2026, a putative shareholder derivative action captioned Haliburton v. Chriss et al. , Case No. 1:26-cv-00655, was filed in the U.S. District Court for the District of Delaware (the “Haliburton Action,” and collectively with the Goncalves Action, LR Trust Action, Stan Action, and Lovoi Action, the “Branded Checkout Derivative Actions”), purportedly on behalf of the Company. The Branded Checkout Derivative Actions are based on the same alleged facts and circumstances as the Branded Checkout Securities Action, and name certain of our officers, including our former Chief Executive Officer, and members of our Board of Directors, as defendants. The Branded Checkout Derivative Actions allege claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, waste of corporate assets, gross mismanagement, abuse of control, insider trading, contribution, and violations of the Exchange Act, and seek, on behalf of the Company, an award of damages and an order directing the Company to reform its corporate governance and internal procedures. On July 10, 2026, the Goncalves Action, the LR Trust Action, the Stan Action, and the Lovoi Action were consolidated in the U.S. District Court for the Northern District of California under the caption In re PayPal Holdings, Inc. Stockholder Derivative Litigation , Case No. 3:26-cv-02145. General matters Other third parties have from time to time claimed, and others may claim in the future, that we have infringed their intellectual property rights. We are subject to patent disputes and expect that we will increasingly be subject to additional patent infringement claims involving various aspects of our business as our products and services continue to expand in scope and complexity. Such claims may be brought directly or indirectly against our companies and/or against our customers (who may be entitled to contractual indemnification under their contracts with us), and we are subject to increased exposure to such claims as a result of our acquisitions, particularly in cases where we are introducing new products or services in connection with such acquisitions. We have in the past been forced to litigate such claims, and we believe that additional lawsuits alleging such claims will be filed against us. Intellectual property claims, whether meritorious or not, are time-consuming and costly to defend and resolve, could require expensive changes in our methods of doing business, or could require us to enter into costly royalty or licensing agreements on unfavorable terms or make substantial payments to settle claims or to satisfy damages awarded by courts. 2Q 2026 FORM 10-Q 41 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) From time to time, we are involved in other disputes or regulatory inquiries that arise in the ordinary course of business, including suits by our consumers (individually or as class actions), merchants or regulators alleging, among other things, improper disclosure of our prices, rules, or policies, that our practices, prices, rules, policies, or user, product, business or merchant agreements violate applicable law, or that we have acted unfairly or not acted in conformity with such prices, rules, policies, or agreements. In addition to these types of disputes and regulatory inquiries, our operations are also subject to regulatory and legal review and challenges that may reflect the increasing global regulatory focus and scrutiny to which the payments industry is subject and, when taken together with other regulatory and legislative action, such actions could result in the imposition of costly new compliance burdens on our business and customers and may lead to increased costs and decreased transaction volume and revenue. Further, the number and significance of these disputes and inquiries are increasing as our business has grown and expanded in scale and scope, including the number of active accounts and payment transactions on our platform, the range and increasing complexity of the products and services that we offer, and our geographical operations. Any claims or regulatory actions against us, whether meritorious or not, could be time consuming, result in costly litigation, settlement payments, damage awards (including statutory damages for certain causes of action in certain jurisdictions), fines, penalties, injunctive relief, or increased costs of doing business through adverse judgment or settlement, require us to change our products, services, or business practices in expensive ways, require significant amounts of management time, result in the diversion of significant operational resources, or otherwise harm our business. INDEMNIFICATION PROVISIONS Our agreements with eBay governing our separation from eBay provide for specific indemnity and liability obligations for both eBay and us. Disputes between eBay and us have arisen and others may arise in the future, and an adverse outcome in such matters could materially and adversely impact our business, results of operations, and financial condition. In addition, the indemnity rights we have against eBay under the agreements may not be sufficient to protect us, and our indemnity obligations to eBay may be significant. In the ordinary course of business, we include indemnification provisions in certain of our agreements with parties with whom we have commercial relationships. Under these contracts, we generally indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party in connection with claims by any third party with respect to our domain names, trademarks, logos, and other branding elements to the extent that such marks are related to the subject agreement. These indemnification provisions generally include indemnity for other types of third-party claims, which may be related to intellectual property rights, confidentiality, willful misconduct, data privacy obligations, and certain breach of contract claims, among others. These indemnification provisions generally also include indemnity to our payments processors arising out of conduct by us or our customers, including in the event of card association fines or other damages incurred by the processor. It is not possible to determine the maximum potential loss under these indemnification provisions due to our limited history of prior indemnification claims and the unique facts and circumstances involved in each particular situation. PayPal has participated in the U.S. Government’s Paycheck Protection Program administered by the U.S. Small Business Administration. Loans made under this program were funded by an independent chartered financial institution that we partnered with. We received a fee for providing services in connection with these loans and retained operational and audit risk related to those activities. We have agreed, under certain circumstances, to indemnify the chartered financial institution and its assignee of a portion of these loans in connection with the services provided for loans made under this program. As part of the agreements to sell certain loans receivable portfolios, in certain circumstances such as breaches in loan warranties, we may be required to indemnify the third-party investors that purchased the loans or repurchase the loans. The estimate of the maximum potential amount of future payments we may be required to make is equal to the current outstanding balances of the loans sold; however, the maximum potential amount of the indemnification is not, in our view, representative of the expected future exposure. As of June 30, 2026 and December 31, 2025, the current outstanding balances of the loans sold was $ 3.9 billion and $ 3.8 billion, respectively. The term of the indemnification obligations align to the maturities of the loans sold. To date, no significant costs have been incurred, either individually or collectively, in connection with our indemnification provisions. 2Q 2026 FORM 10-Q 42 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) OFF-BALANCE SHEET ARRANGEMENTS As of June 30, 2026 and December 31, 2025, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources. PROTECTION PROGRAMS In addition to the protections afforded by applicable law, we provide consumers and merchants with protection programs for certain purchase transactions completed on our payments platform. Our protection programs help protect both consumers and merchants from financial loss resulting from, among other things, counterparty non-performance. These programs are designed to promote confidence on the part of both consumers, who will be reimbursed in certain circumstances, such as not receiving their purchased eligible item in the condition significantly as described, as well as merchants, who will receive payment in certain circumstances, such as establishing proof of shipment or delivery of an eligible item to the customer. These protection programs are considered assurance-type warranties under applicable accounting standards for which we estimate associated costs within the allowance for transaction losses. Our protection programs may result in negative customer balances when there are insufficient funds in a customer’s PayPal account to cover charges applied for merchant-related chargebacks within the scope of our protection programs. Negative customer balances can also occur from bank returns and reversals due to insufficient funding sources. The allowance for negative customer balances represents our estimate of current expected credit losses on negative customer balances. At June 30, 2026 and December 31, 2025, the allowance for transaction losses was $ 92 million and $ 73 million, respectively. The allowance for negative customer balances was $ 221 million and $ 271 million at June 30, 2026 and December 31, 2025, respectively. The following table shows changes in the allowance for transaction losses and negative customer balances related to our protection programs for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (in millions) Beginning balance $ 310 $ 305 $ 344 $ 342 Provision (1) 323 383 599 661 Realized losses and charge-offs ( 373 ) ( 371 ) ( 732 ) ( 719 ) Recoveries (2) 53 35 102 68 Ending balance $ 313 $ 352 $ 313 $ 352 (1) Changes in estimates for the prior period provision related to the allowance for transaction losses are not material and are aggregated with current period provision. (2) Recoveries are only relevant for the allowance for negative customer balances. NOTE 14 — STOCKHOLDERS’ EQUITY STOCK REPURCHASE PROGRAM During the six months ended June 30, 2026, we repurchased approximately 67 million shares of our common stock for approximately $ 3.0 billion at an average cost of $ 44.99 , excluding excise tax. These shares were purchased 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 The following table summarizes our dividend activities for the six months ended June 30, 2026: Record Date Payment Date Dividend Per Share Total $ Value (in millions) June 4, 2026 June 25, 2026 $ 0.14 $ 125 March 4, 2026 March 25, 2026 $ 0.14 $ 130 2Q 2026 FORM 10-Q 43 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) NOTE 15— STOCK-BASED PLANS In May 2026, our stockholders approved the PayPal Holdings, Inc. 2026 Equity Incentive Award Plan (the “2026 Plan”) to replace the PayPal Holdings, Inc. 2015 Equity Incentive Award Plan, as amended and restated (the “2015 Plan”) as the source of equity awards granted on or after May 19, 2026, and no additional equity awards will be granted under the 2015 Plan following that date. The 2026 Plan authorizes the issuance of up to 39.1 million shares of our common stock, plus up to 44.6 million shares of our common stock underlying awards granted under the 2015 Plan that expire or are terminated, are settled in cash without the delivery of shares, or otherwise become available for grant in accordance with the terms of the 2015 Plan on or after May 19, 2026. STOCK-BASED COMPENSATION EXPENSE Stock-based compensation expense is measured based on the estimated fair value of shares at the time of grant and recognized over the award’s vesting period. The following table summarizes the impact of stock-based compensation expense on our results of operations for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Customer support and operations $ 52 $ 53 $ 101 $ 104 Sales and marketing 32 34 67 67 Technology and development 131 136 257 247 General and administrative 67 83 141 155 Restructuring and other 19 — 19 — Total stock-based compensation expense $ 301 $ 306 $ 585 $ 573 Capitalized as part of internal use software and website development costs $ 31 $ 33 $ 62 $ 68 NOTE 16— INCOME TAXES Our effective tax rate for the three and six months ended June 30, 2026 was 16 % and 18 %, respectively. Our effective tax rate for the three and six months ended June 30, 2025 was 18 % and 19 %, respectively. The difference between our effective tax rate and the U.S. federal statutory rate of 21% in the periods presented was primarily the result of foreign and U.S. income taxed at different rates as well as discrete tax adjustments including tax effects of stock-based compensation. Gross unrecognized tax benefits were approximately $ 2.5 billion as of both June 30, 2026 and December 31, 2025. Due to various factors, including uncertainties of the judicial, administrative, and regulatory processes in certain jurisdictions, the timing of the resolution of these unrecognized tax benefits is highly uncertain. It is reasonably possible that within the next twelve months, we may receive additional tax adjustments by various tax authorities or possibly reach resolution of audits in one or more jurisdictions. These adjustments or settlements could result in changes to our unrecognized tax benefits related to positions on prior year tax filings. NOTE 17— RESTRUCTURING AND OTHER RESTRUCTURING The restructuring charges associated with the following plans were recorded in “restructuring and other” on our condensed consolidated statements of income. Accrued restructuring liabilities were included in “accrued expenses and other current liabilities” on our condensed consolidated balance sheets. 2Q 2026 FORM 10-Q 44 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 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. 2Q 2025 Plan 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 completed in the second quarter of 2026 and the technology infrastructure component expected to be substantially completed in 2028. The following table summarizes the associated restructuring charges (reversals): Three Months Ended June 30, Six Months Ended June 30, Total Plan Costs Incurred to Date 2026 2025 2026 2025 (In millions) Employee severance and benefits costs $ ( 13 ) $ 95 $ ( 11 ) $ 95 $ 85 Other restructuring costs (1) 15 — 24 — 30 Total $ 2 $ 95 $ 13 $ 95 $ 115 (1) Other restructuring costs relate to process re-engineering and one-time migration to cloud solutions and consist of contractor costs, consulting fees, and prepaid software and maintenance costs without future economic benefit. 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. The timing of activities and cost estimates continue to be developed and are subject to change. The following table summarizes the restructuring reserve activity during the six months ended June 30, 2026: Employee Severance and Benefits Costs Other Restructuring Costs Total (In millions) Accrued liability as of January 1, 2026 $ 52 $ 6 $ 58 Charges (reversals) ( 11 ) 24 13 Payments ( 31 ) ( 10 ) ( 41 ) Accrued liability as of June 30, 2026 $ 10 $ 20 $ 30 1Q 2025 Plan 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 was completed in the third quarter of 2025. OTHER 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. 2Q 2026 FORM 10-Q 45 Table of Contents PayPal Holdings, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) NOTE 18— SEGMENT INFORMATION Our chief operating decision maker (“CODM”), our Chief Executive Officer, manages the business and evaluates operating performance based on consolidated net income. Our CODM uses consolidated net income to monitor budget versus actual results. We operate as one segment and have one reportable segment that constitutes consolidated results. The following table sets forth our segment information for revenue, segment profit (loss), and significant expenses: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (In millions) Net revenues $ 8,682 $ 8,288 $ 17,035 $ 16,079 Less (add): Transaction expense 4,385 3,968 8,550 7,672 Transaction losses 323 383 599 661 Credit losses 74 93 176 186 Customer support and operations (1) 462 413 908 811 Sales and marketing (1) 546 583 1,064 1,071 Technology and development (1) 849 767 1,642 1,498 General and administrative (1) 503 461 994 964 Restructuring and other 113 116 187 182 Other income (expense), net 117 ( 25 ) 212 ( 98 ) Income tax expense 206 268 486 584 Segment net income (loss) $ 1,104 $ 1,261 $ 2,217 $ 2,548 (1) Includes depreciation and amortization expense. For the three and six months ended June 30, 2026, total depreciation and amortization expense was $ 246 million and $ 484 million, respectively. For the three and six months ended June 30, 2025, total depreciation and amortization expense was $ 239 million and $ 484 million, respectively. There are no reconciling items or adjustments between segment net revenues, net income, total assets and consolidated net revenues, net income, and total assets. For disclosure of geographical information, please refer to “Note 2—Revenue”. 2Q 2026 FORM 10-Q 46 Table of Contents