A month has gone by since the last earnings report for Paypal (PYPL Quick QuotePYPL - Free Report) . Shares have lost about 7.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Paypal due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for PayPal Holdings, Inc. before we dive into how investors and analysts have reacted as of late.

PayPal's Q1 Earnings Beat Estimates on Higher TPV & Revenue Growth

PayPal Holdings delivered a solid first quarter of 2026 with non-GAAP earnings per share (EPS) of $1.34, beating the Zacks Consensus Estimate of $1.27 by 5.51%. The metric increased 1% year over year. Revenues totaled $8.35 billion, surpassing the consensus mark of $8.11 billion by 2.96% and increasing 7.2% from the year-ago period.

The quarter reflected broad-based momentum across the platform, highlighted by total payment volume rising 11% to $464 billion, alongside steady profitability and strong cash generation.

Transactions Stay Resilient

Transaction margin dollars increased 3% year over year to $3.81 billion in the quarter. Excluding interest on customer balances, transaction margin dollars also rose 3% to $3.54 billion. The performance shows PayPal held up its margin even while continuing targeted investments across the portfolio.

Transaction margin declined to 45.6% from 47.7% a year ago. However, transaction margin dollars increased year over year, reflecting an expanding profit pool, supported by scale and improving loss performance.

Engagement Metrics Show Mixed Signals

PayPal ended the quarter with 439 million active accounts, up 1% from the year-ago period, indicating continued growth in platform reach. However, on a trailing 12-month basis, payment transactions per active account declined 1% to 58.7, reflecting softer frequency per account versus last year.

Payment activity improved on an absolute basis. Total payment transactions increased 7% year over year to 6.5 billion, reflecting stronger overall activity across PayPal’s platform, even as transactions per active account edged down year over year.

Margins Reflect Higher Operating Intensity

On a non-GAAP basis, operating income decreased 5% to $1.54 billion, and operating margin fell 229 basis points to 18.4% year over year. Non-transaction related expenses rose 8% to $2.27 billion, underscoring increased spending tied to technology and growth initiatives.

PayPal’s Cash Flow Supports Capital Returns

Cash flow from operations was $1.13 billion and free cash flow totaled $903 million in the quarter. Adjusted free cash flow, which excludes timing impacts tied to buy now, pay later receivables, came in at $1.72 billion, reflecting strong underlying cash generation.

PayPal returned significant capital to shareholders. The company repurchased approximately 34 million shares for $1.5 billion during the quarter and also initiated a dividend program, declaring a cash dividend of 14 cents per share payable June 25, 2026, to shareholders of record as of June 4, 2026.

PayPal Reiterates 2026 Outlook Amid Strategy Reset

Management reiterated full-year 2026 guidance. PayPal continues to expect non-GAAP EPS to range from a low-single digit decline to slightly positive.

Adjusted free cash flow is expected to be more than $6 billion, with share repurchases projected at roughly $6 billion. Management also outlined deliberate steps to sharpen strategy, simplify the organization and improve the growth trajectory and cost structure, signaling an execution-focused approach as it works to build a more durable path to long-term growth.

For the second quarter of 2026, PayPal expects non-GAAP EPS to decline at a high-single digit rate, or approximately 9%, versus $1.40 in the year-ago quarter.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Paypal has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a score of A on the value side, putting it in the top quintile for value investors.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Paypal has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Paypal is part of the Zacks Financial Transaction Services industry. Over the past month, Wex (WEX Quick QuoteWEX - Free Report) , a stock from the same industry, has gained 1.3%. The company reported its results for the quarter ended March 2026 more than a month ago.

Wex reported revenues of $673.8 million in the last reported quarter, representing a year-over-year change of +5.8%. EPS of $4.15 for the same period compares with $3.51 a year ago.

For the current quarter, Wex is expected to post earnings of $4.90 per share, indicating a change of +24.1% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.9% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Wex. Also, the stock has a VGM Score of B.