PayPal Q3 2025 Earnings: Growth Tempered by Rising Credit Losses

PayPal recently released its financial results for the third quarter of 2025, and a dive into its latest 10-Q filing reveals a picture of solid growth alongside some emerging challenges. The global payments giant continues to expand its revenue and profits, but a closer look at its operational costs, particularly transaction and credit losses, tells a more nuanced story. Let's break down the key takeaways.

Solid Top-Line and Bottom-Line Growth

PayPal's financial performance for the quarter ending September 30, 2025, showed robust health at the top and bottom lines.

• Net revenues climbed to $8.4 billion, a 7% increase from the $7.8 billion reported in the same quarter last year.
• More impressively, net income saw a significant 24% jump, reaching $1.25 billion for the quarter, up from $1.01 billion in Q3 2024.
• This translated to a diluted earnings per share (EPS) of $1.30, a 32% increase year-over-year.

The company's revenue primarily comes from two streams: transaction revenues, which grew to $7.5 billion, and revenues from other value-added services (like credit products and partnership fees), which rose to $895 million.

The following flow diagram provides a visual breakdown of PayPal's quarterly income statement, showing how revenue is channeled through various expenses to arrive at the final net income.

A Closer Look at Costs and Losses

While revenue grew, so did operating expenses, which also increased by 7% to $6.9 billion. A particularly noteworthy item is the sharp rise in Transaction and Credit Losses. This expense, which covers everything from fraud and chargebacks to defaults on loans, surged 37% to $483 million for the quarter. For the first nine months of the year, these losses are up 32% to $1.3 billion.

This increase signals potential pressure from the broader economic environment. While credit losses on its loan portfolio were relatively stable for the quarter at $86 million, the company has been building its reserves. This suggests an anticipation of tougher conditions ahead for its consumer and merchant credit products. While the net charge-off rate for its merchant loan portfolio improved to 7.3% from 8.3% a year ago, the percentage of loans more than 90 days past due increased from 2.8% to 3.5%, a mixed signal on credit quality.

User Engagement vs. Financial Growth

An interesting metric from the report is the "number of payment transactions per active account," which, on a trailing twelve-month basis, declined by 6% to 57.6. This suggests that while PayPal is generating more revenue overall, individual user engagement may be softening. This trend is critical to watch, as sustained engagement is key to long-term growth in a competitive payments landscape.

On another front, PayPal has been actively returning capital to its shareholders. The company repurchased 21.3 million shares for approximately $1.5 billion during the third quarter. Over the first nine months of 2025, total share buybacks amounted to a substantial $4.55 billion.

Final Thoughts

PayPal's Q3 2025 performance demonstrates a company that is successfully growing its revenue and profitability. The strong earnings growth and commitment to share buybacks are positive signs for investors.

However, the significant increase in transaction and credit losses, coupled with a dip in user transaction frequency, highlights the challenges ahead. Managing credit risk effectively in a fluctuating economy while boosting user engagement will be crucial for sustaining momentum against a backdrop of fierce competition in the digital payments space.