PayPal Stock Fell Sharply after Earnings Report
PayPal is getting rid of employees and restructuring as it attempts to cut costs after the first quarter earnings report.
Quick overview
- PayPal's Q1 earnings rose 5%, but the stock fell 7.74% due to comments from new CEO Enrique Lores about necessary cost-cutting measures.
- Lores announced plans to reduce the workforce by 20% and restructure the company to improve profitability.
- Despite beating Wall Street revenue estimates with $8.4 billion, the company's bleak outlook for the current quarter has spooked investors.
- PayPal's stock may continue to struggle as it undergoes significant changes aimed at long-term stability.
PayPal (PAY) earnings rose 5% in Q1 according to this week’s report, but their stock plummeted 7.74% on comments from the new CEO about changing course.
In premarket trading, PayPal stock ticked up after their earnings call, but then the stock shot downward. The reversal came as investors and analysts processed comments from the company’s new CEO Enrique Lores who said that PayPal needs to drastically cut costs and make structural changes in order to remain profitable.
Those changes include cutting the workforce by about 20% over the next couple of years as the company drastically decreases its costs. Lores said that he believes he can put the company on a path that is stabler and more durable. His comments caused PayPal stock to sink back to its early April level at $46 per share.
Strong Earnings Derailed by Company Spending Woes
PayPal’s adjusted earnings for the first fiscal quarter of 2026 were $1.34 per share, and they beat Wall Street estimates for earnings with $8.4 billion in revenue for that quarter. Their revenue rose 5% when reporting on a constant currency basis, which eliminates price changes in foreign currency for accounting purposes.
The outlook for the quarter they are in is less than rosy, though, and the company adjusted its forecast to account for cost cutting measures and changes in revenue trajectory. CEO Lores says that the expected adjusted income decline is in the high single digit, and that bleak forecast has shareholders dropping their PayPal investments this week.
Even though PayPal beat Wall Street revenue predictions of $8.1 billion with their $8.4 billion total and adjusted earnings per share of $1.27 with $134, their second quarter outlook has investors spooked. If the company cannot produce some growth in the current quarter, they may see their stock sink further than the 18.9% loss they have already experienced this year.
When news broke earlier in the year that PayPal would be under new management, the stock price rose 6%. However, Lores’ efforts to cut costs and increase profit margins could take years, and meanwhile, PayPal stock may not look as promising as it has in past quarters while the company goes through those changes.
The company is trying to reduce duplication between its layers and streamline its workforce to produce similar results with fewer employees. The result of that change could reap “$1.5 billion in gross run-rate savings,” according to Lores. As the company shed employees, it will go through a restructuring process that will create three simple divisions. Investors may want to hold on this stock while its CEO plays the long game with the turnaround process.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
- Read our latest reviews on: Avatrade, Exness, HFM and XM
Related Articles
Sidebar rates
Related Posts
Save
