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Stock AnalysisFebruary 4, 2026By VIH Team

According to a document from 2026 (PayPal FY2025 Form 10-K filed for the year ended December 31, 2025), the PayPal debate isn’t really “Is digital payments growing?” It’s: can PayPal keep earning good money on that growth—or will it move a lot of dollars for everyone else while its own economics thin out? In 2025, PayPal processed $1.79 trillion of total payment volume (TPV) (+7% YoY), while payment transactions fell to 25.4 billion (-4% YoY). Active accounts were 439 million (+1%). Those numbers describe a mature network: still growing, but not the kind that automatically compounds itself faster each year. If anything, engagement cooled—transactions per active account declined. **The core economic test: can PayPal defend its “take”?** PayPal’s revenue is tied to what flows across its rails, but not in a simple way. Management is explicit that revenue depends on product mix, merchant mix, cross-border mix, geography, and credit exposure—all the unglamorous details that decide whether scale turns into owner earnings. Here’s the tell: transaction revenue grew 3% in 2025, even as TPV grew 7%. The company attributes that gap primarily to changes in product mix, merchant mix, and an unfavorable impact from foreign-exchange hedging. That’s the value investor’s headache in one sentence: PayPal can “win” volume and still “lose” economics. Part of this is Braintree (unbranded processing), where PayPal says it shifted toward profitable growth and went through merchant negotiations that reduced volume and revenue in early 2025 before improving later in the year. The incentive is clear: unbranded processing can be a scale business with sharp elbows—pricing pressure is constant, and growth that isn’t profitable is just a treadmill. **What the financials say about durability (so far)** In 2025, PayPal reported net revenues of $33.2B (+4%), operating income of $6.1B (+14%), and an operating margin of 18%. Net income was $5.23B. That’s not a business collapsing; it’s a business that can still throw off meaningful earnings even while its mix shifts. Costs matter too. Transaction expense is sensitive to funding mix and merchant/product mix, and PayPal notes that a lower proportion of Braintree volume (which tends to carry higher expense rates) helped reduce the transaction expense rate year over year. That’s encouraging—but also a reminder that margins here can be driven as much by what kind of volume you have as by how much volume you have. Then there’s risk. Transaction and credit losses increased 19% in 2025, and PayPal attributes the rise in transaction losses largely to fraud incidents impacting PayPal products and services (even as transaction loss rate stayed flat at 0.07%). Mature payments platforms don’t get to ignore fraud; they pay for it, either in losses or in friction that can reduce conversion. **Capital allocation: buybacks, a new dividend, and what that implies** When a business isn’t reinvesting every incremental dollar at high returns...