PayPal Stock Drops Despite Strong Results. Is This a Buying Opportunity?

Paypal (NASDAQ: PYPL) came into Q1 2026 as a company in the middle of a reset and still managed to beat across the board. Revenue landed at $8.35 billion versus expectations of $8.05 billion. Adjusted EPS came in at $1.34, comfortably ahead of the $1.27 estimate. Total payment volume hit $464 billion, up 11% year over year, the highest in its history. And yet, the stock fell almost 9% before the market even opened.

That kind of reaction usually means the headline numbers are not the real story. In this case, it comes down to guidance and how you interpret it.

What Actually Worried Investors

For Q2 2026, PayPal expects non-GAAP EPS to fall about 9% compared to last year. For the full year, it is guiding to flat or slightly lower earnings versus $5.31 in 2025. On the surface, that is not great. A company that just beat expectations is basically saying the next stretch could look worse.
But there is an important detail that did not get much attention. PayPal is intentionally loading most of its costs into 2026. It is reorganizing teams, shifting roles, and rolling out AI across the business. All of that hits profits now. The payoff is supposed to come later, mainly from 2027 onward.

So this is less about weakness and more about timing. They are choosing to take the hit upfront. Check out Buy or Sell PYPL Stock and see how PYPL’s key metrics compare with peers such as Block (XYZ) and Affirm (AFRM)

A New CEO, Very Early Days

Enrique Lores took over as CEO on March 1, 2026, after running HP for six years. He is not from the payments world. He is known for restructuring large, complex businesses.
His first big move was to split PayPal into three focused units:

• Checkout and core PayPal
• Consumer financial services and Venmo
• Payment services and crypto

The idea is simple. Different businesses need different strategies. Keeping everything under one structure was slowing things down. Breaking it up creates clearer ownership and accountability.
He is also targeting at least $1.5 billion in cost savings over the next two to three years and plans to cut about 20% of the workforce. That sounds aggressive, but this is a company generating $6.8 billion in free cash flow. It is not a survival move. It is about improving margins.

See also, What GameStop’s $55B Bid For eBay Means For Investors

The Buyback Story People Are Missing

While everyone is focused on guidance, PayPal is quietly shrinking its share count.

In Q1 alone, it bought back about 34 million shares for $1.5 billion. Over the past year, that number is $6 billion. It still has $13.5 billion in cash versus $11.6 billion in debt, so it has room to keep going.
If this pace continues, the share count could drop by around 15% over the next couple of years. That matters a lot. Even if profits do not grow dramatically, fewer shares mean higher earnings per share. It is a subtle but powerful tailwind.

The AI Angle 

PayPal is also working on something that could matter more than it looks today. It is embedding its payment system directly into AI platforms like Microsoft Copilot, OpenAI, Perplexity, and Google.
The idea is to power transactions inside AI assistants. Instead of you going to a website and checking out, the AI does the browsing and buying for you.

Right now, this is not a big revenue driver. But if AI driven shopping takes off, being part of that flow early could be a real advantage.

Valuation, Stripped Down

PayPal is trading at about 10 times forward earnings. The broader fintech space is closer to 19 times.
That gap suggests the market is already assuming things go wrong. Maybe the turnaround fails. Maybe competition keeps eating into its core business.

But if even part of the plan works, there is room for upside. If EPS gets back to around $5.80 to $6.20 by 2027 and the valuation moves to 14 times earnings, the stock could land somewhere in the low to mid $80s.

That is not an aggressive scenario. It is just a partial recovery.

What Needs To Work And What Could Break

For the bullish case to play out, a few things need to go right:

• Cost savings show up roughly on schedule
• Branded checkout growth improves from the current weak 2%
• The company keeps prioritizing buybacks

There are real risks too. If guidance gets cut again, if restructuring costs run higher than expected, or if competition keeps taking share, the stock could stay stuck or even fall further.

Bottom Line

PayPal today is a $43 billion company generating $6.8 billion in free cash flow, trading at a big discount to its peers, and run by a CEO focused on fixing its structure. The near term outlook looks messy because the company is choosing to absorb the pain now.

Execution is not guaranteed, and turnarounds rarely go smoothly. But at current levels, the gap between what the market expects and what a decent outcome looks like is hard to ignore.

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