PayPal (NASDAQ: PYPL) shares climbed after the company turned in strong third-quarter results and announced a new partnership with OpenAI. This follows an earlier partnership announcement with Alphabet, in which the two companies would team up on “agentic commerce,” including artificial intelligence (AI) shopping agents to help consumers make purchases and discover new products. Despite the jump in price, the stock is still down about 14% on the year.
Let’s take a closer look a PayPal’s results and OpenAI partnership to see if the stock still has more upside from here.
While PayPal turned in good results, the big news was its partnership with OpenAI. PayPal will adopt OpenAI’s Agentic Commerce Protocol, which will let ChatGPT users instantly check out with PayPal when shopping on the chatbot. As part of the partnership, PayPal will also do the payment processing for merchants that use OpenAI’s Instant Checkout. PayPal will also expand its use of OpenAI’s API to help with product development.
With the deal, PayPal will become the first payments wallet embedded into ChatGPT. The deal will also let PayPal merchants sell on ChatGPT with their inventories listed on the platform, while current PayPal wallet holders will be able to buy items directly from ChatGPT.
Turning to its results, PayPal’s revenue climbed 7% to $8.42 billion, while adjusted earnings per share (EPS) rose 12% to $1.34. That came in ahead of the adjusted EPS of $1.20 on revenue of $8.24 billion analysts had expected.
Transaction margin dollars, which are the profits it makes from each payment it processes (similar to gross profits), rose by 6% to $3.87 billion. This is one of the most closely watched metrics for PayPal, since before its new CEO took over, much of its revenue growth had been coming from low gross margin revenue streams.
Total payment volumes (TPV) grew 8% to $458.1 billion. PayPal branded checkout TPV jumped 8% on a constant currency basis, while Venmo climbed 14%. Its unbranded Braintree TPV rose 6%.
Payment transactions dropped by 5% to 6.3 billion, while payment transactions per active account dipped 6% to 57.6 on a trailing-12-month basis. This is largely due to the loss of low-margin Braintree transactions. Excluding third-party platforms that primarily use Braintree, such as Shopify, the number of payment transactions climbed 7% and 5% per active account.
