Payment portal firm PayPal Holdings Inc announced on Monday, May 7th, that it raised its annual profit forecast well beyond previous market estimates. The revised forecast was the result of higher quarterly profits for the company as its margins improved following a number of cost-reduction measures and the way consumers continue to shop online despite inflationary pressure.
Indeed, while conventional retail has reported losses due to the rising cost of living especially among those in the lower-income brackets, PayPal’s payments volume was up by 12% on a forex-neutral basis, earning a total of $354.5 billion as of the end of the first quarter of this year. This means that consumer spending remains steady despite the possibility of an economic recession.
Company revenue was also up by 10% on a forex-neutral basis, ending the first quarter with $7.04 billion. Likewise, it earned a profit of $1.17 per share on an adjusted basis – a major jump from $0.88 at the same time last year.
Better Than Expected
PayPal’s more optimistic forecast mirrors those of Visa and Mastercard, both of whom have remained positive about spending volumes in the face of increasing travel demand as well as steady customer spending on and offline.
For now, PayPal expects its full-year adjusted profit to grow by around 20% ($4.95 per share), which is slightly higher than the previous estimate of $4.88 a share.
Previously, the company set its sights on lowering its operating expenses in light of the possibility of inflation adversely impacting consumer spending. As a result, its adjusted operating margin for end-Q1-2023 came to around 22.7% compared to last year’s 20.7%.