Digital payments pioneer PayPal Holdings sought to allay fears about slowing growth during an earnings report Tuesday by pointing to improvements for its peer-to-peer brand Venmo and diversification of revenue streams. 

The company’s third-quarter earnings report showed mid-teen growth for Venmo transaction volume helped lift overall results, buffering slower single-digit growth at its legacy checkout brand. The number of Venmo debit card holders jumped by about 55% to 6.7 million monthly active accounts, including 1.6 million who used it for the first time in the quarter, PayPal CEO Enrique Lores said during a conference call with analysts to discuss the results.

“We are building on the strength of the Venmo brand to broaden adoption of financial services, deepen customer relationships and increase (average revenue per account),” Lores told analysts during the company’s conference call.

Lores, who took the top post in March, has sought to jump-start growth and profitability at the early innovator in digital payments as the field of fintech competitors mushrooms. He’s the third person to hold the job in as many years as the company has struggled with stagnating growth amid volatile economic conditions and rising competition.

To bolster the bottom line, the company embarked this year on reducing management layers and cutting its headcount. It has eliminated some 2,000 jobs, as it adds more artificial intelligence tools to automate some parts of the operation, Lores told analysts.

PayPal sells services to merchants, including retailers and other merchants, as well as consumers, making it one of the few payments players to have a two-sided business.

The company acquired Venmo in 2013 when it purchased the Braintree business, which provides processing services to large companies. Since then, PayPal leaders have been at a loss to better monetize the Venmo brand despite its P2P popularity with a younger generation of consumers. It has offered a Venmo debit card since at least 2018.

Instigating growth for Venmo has been a key goal for the company for years, especially given the flagging growth at the legacy checkout PayPal brand. Former CEOs Dan Schulman and Alex Chriss were hard pressed to offset the slowing momentum at PayPal as macroeconomic factors, including the COVID-19 pandemic and the tariff war under President Donald Trump, put a damper on demand.

The company’s Venmo credit card, introduced in 2020, hasn’t fared as well as the new debit card, but the company pivoted on that offering early this month. PayPal revamped the credit card’s rewards program to offer up to 4% cash back on certain dining and entertainment transactions, according to an Oct. 5 press release. That includes a bump in rewards when the card holder uses it to split the payment of a purchase.

With the company’s stock having dropped 76% during the past five years, Lores has sought to protect the business from low-ball bids. Under his leadership, the company in July reportedly rejected an offer from the younger processor juggernaut Stripe, backed by private equity investor Advent International.

While the Venmo business is helping drive the Lores quest for profitable growth, the increase in volume for the company’s legacy PayPal branded checkout business has remained “relatively stable” at 1% to 2% growth over the past four quarters, he said.

Meanwhile, the CEO is trying to diversify the company’s revenue, also by building demand for financial services, like its buy now, pay later offering and seeking to build demand in Europe where the company is rolling out services it has begun to scale in the U.S. 

“While there is more work to do, we're encouraged by the improvement relative to the market, continued momentum in the U.S., and strength in BNPL and Pay with Venmo,” Enrique told analysts on the call. “These results show that our financial performance is increasingly coming from multiple parts of the business.”

Third-quarter net income sunk 14% to $1.07 billion even as revenue edged up 2% to $8.6 billion and overall payments volume climbed 6% compared with the year-earlier quarter, according to the San Jose, California-based company’s earnings release.

Analysts had a tepid reaction to the results. The report was “mixed,” RBC analysts told their investment clients, noting the company fell short of analysts’ revenue projections, but offered some better profit figures and increased the outlook for the full year. TD Cowen analysts told clients the net result of the earnings report was “ok,” with “no surprises” in the low bar set by the company’s turnaround plan.  

PayPal plans to continue investing in more growth, directing some of the $1.5 billion in savings it expects over several years to new efforts to scale the parts of the business where it’s seeing successes. Those investments will temper profits to some degree, so the company’s executives sought to temper expectations on the call with the analysts who counsel investors.

“We are still early in these changes,” Lores told analysts. “This is a multi-year transformation, and there is much more work to do, but the progress we are seeing reinforces our conviction in the strategy.”

PayPal’s chief financial officer, Jamie Miller, underscored that sentiment in delving into the company’s financial results.

“The savings are creating capacity to self-fund more of our growth investments, such as improving the consumer experience, strengthening merchant presentment, and building and scaling our financial services products,” Miller said on the call. “As we learn what's working, we're being deliberate about where we invest more and where we pull back.”

She also attempted to make sure investors understand the changes will take time.

“We're really encouraged by the results we're seeing, but it's early, and we've got more work to do,” Miller said. “In the U.S. in particular, we saw nice sequential growth over the past few quarters in U.S. branded checkout (total processing volume) growth, so we're seeing good signs, but we also don't want to get ahead of ourselves, she said, noting a three-year “time horizon” for reviving the PayPal branded checkout business.