Enrique Lores, CEO of Hewlett-Packard speaks on CNBC outside the World Economic Forum in Davos, Switzerland on Jan. 22, 2025.
Gerry Miller | CNBC
PayPal issued a lackluster profit forecast for 2026 and reported fourth-quarter earnings below Wall Street expectations on Tuesday, while naming HP’s Enrique Lores as its president and CEO.
Shares of the company slumped more than 17% in premarket trading, after the payments giant’s board said the pace of change and execution under current CEO Alex Chriss was not in line with its expectations.
Chriss was tasked with steering PayPal through a challenging period as post-pandemic trading volumes declined and competitive pressures in its core business intensified from large technology companies and newer fintech rivals.
PayPal said Chief Financial Officer Jamie Miller would serve as interim CEO until Lores assumes the role on March 1. Lores joins the payments firm from consumer electronics giant HP, where he was the president and CEO for more than 6 years.
Spending trends in focus
Retail spending has softened as shoppers, squeezed by elevated interest rates, stubbornly high living costs and signs of a softening labor market, cut back on discretionary purchases and prioritize everyday necessities, a pattern highlighted by major retailers and consumer goods companies as households navigate tighter budgets.
PayPal expects full-year adjusted profit to decline in the low-single-digit percentage to increase slightly, compared with Wall Street expectations of about 8% growth, according to data compiled by LSEG.
It reported revenue of $8.68 billion for the holiday quarter, missing the $8.80 billion estimate. Total payment volumes rose 6% on an FX-neutral basis to $475.1 billion.
Adjusted profit was $1.23 per share during the three months ended December 31, also below analysts’ view of $1.28.
The fourth-quarter results are in contrast to a typical holiday quarter for payments firms as consumers usually spend more freely on gifts, travel and seasonal promotions.
Spotlight on branded checkout
Growing PayPal’s higher-margin branded checkout business has been a key focus for outgoing CEO Chriss, who has pushed for “profitable growth” while aiming to streamline costs tied to unbranded processing.
Online branded checkout growth decelerated to 1% in the fourth quarter, compared with 6% a year earlier. The company said this was driven by weakness in U.S. retail, international headwinds and tougher comparisons.
Investors have long worried that the entry of Big Tech companies such as Apple and Google into PayPal’s core payments business could erode its market share despite its status as the legacy market leader.
Though PayPal says it continues to perform well in its core products despite rising competition, the concerns have pressured its stock in recent years, with investors closely monitoring the branded checkout results.
The company said it was taking near-term action to restore online branded checkout momentum.