Nasdaq-100® Inside the Index: PayPal Holdings (PYPL)
Key Figures
- $33.2B FY2025 revenue
- 439M active accounts (Q2 2026)
- $1.79T payments volume (FY2025)
- 1.78% transaction take rate (Q2 2026)
- ~11× forward P/E (2026E)
VOL 1 • ISSUE 09 • AUGUST 2026
PayPal never sells the thing you are buying. It charges a toll on $486 billion a quarter.
PYPL • Industrials • Index Constituent
This Issue — PYPL
PayPal, a current Nasdaq-100® constituent at ~0.23% index weight, runs a two-sided payments network across more than 200 countries, holding both the consumer wallet and the merchant checkout. It never owns the goods being sold; it earns a small percentage of the money moving through, so revenue tracks commerce itself rather than any one retailer. Q2 2026 revenue and adjusted earnings both beat consensus, and management raised full-year guidance.
Business Model & Revenue Drivers
What PayPal Actually Charges For
The familiar part is the button: the PayPal checkout, Pay with Venmo, and the app people open to split a dinner bill. Underneath sits a two-sided network of 439 million active accounts, plus the plumbing carrying other companies' payments through Braintree, Xoom, and Buy Now Pay Later (per company filings).
The money is a toll on volume. PayPal moved $486.4 billion in Q2 2026 at a 1.78% transaction take rate, so revenue tracks payment volume rather than any product price. Fractions of a cent decide the quarter, so the mix between branded checkout, Venmo, and unbranded processing matters more than headline volume.
Competitive Moat
Why the Network Is Hard to Copy
Both sides of the network already exist. Merchants accept PayPal because consumers keep accounts funded and protected, and consumers keep them because merchants accept them, in more than 200 countries (per company filings). That identity and fraud infrastructure is difficult to replicate from zero, and management points to it as the defense against payments routing around the button.
What reinforces it is the second network inside the first. Venmo payment volume grew 14% year over year in Q2 2026, a seventh straight quarter of double-digit growth, while Pay with Venmo expanded 44% and Venmo Debit Card monthly active accounts grew over 50% (per company disclosures). Branded checkout volume grew about 2% FX-neutral in the same quarter.
Operating Strengths
Three Structural Advantages
- 25.4B transactions processed (2025). Feeds the fraud and identity data newer entrants gather one transaction at a time (per company filings).
- $3.9B transaction margin dollars (Q2 2026). Revenue left after paying the card networks, 4.1% above consensus, and the number management runs against.
- ~15% fewer shares (2024–2026E). Down from 1.003 billion at end-2024, expected near 855 million by end-2026 (consensus estimates).
Growth Catalysts
Where the Next Volume Could Come From
Payments inside AI assistants is the new front. PayPal adopted OpenAI's Agentic Commerce Protocol so merchants can sell inside ChatGPT's Instant Checkout, and its Agentic Commerce Services, launched in October 2025, let merchants take payment on AI surfaces with fraud detection and buyer protection attached (per company disclosures). Checkout that works inside a chatbot represents potential upside if shopping moves there.
- Financial services beyond checkout. Buy Now Pay Later revenue is expected to grow at least twice as fast as the total company in 2026 (company guidance), and PayPal has applied to form an industrial loan company in Utah for small-business lending.
- PayPal World. A platform connecting PayPal, Venmo, WeChat Pay, Mercado Pago, and UPI, which the company says could widen its addressable consumer network from about 400 million users toward 2 billion.
- Advertising and lending partnerships. PayPal Ads Manager, launched October 2025, lets small businesses run campaigns from their accounts as an early high-margin revenue layer, and a consumer lending partnership with Amazon is expected to launch in Germany and Austria.
Historical Context
2023–2027E Revenue Trajectory
Revenue grew in each reported year from 2023 through 2025, at roughly 4% to 7% a year: $29.8B in 2023, $31.8B in 2024, and $33.2B in 2025, with $34.6B and $36.1B in the 2026E and 2027E consensus estimates. Payment volume rose from $1.53 trillion to $1.79 trillion, up 17%, across 25.4 billion transactions in 2025. Adjusted earnings per share grew faster than revenue over that period, from $3.83 to $5.31, up 39%, helped by share repurchases that reduced shares outstanding from 1,003 million to 936 million. The 2026E and 2027E bars are consensus estimates, and the margin compression in them reflects a planned reinvestment cycle in cloud modernization and risk (company guidance and consensus estimates).
Seven straight quarters of double-digit Venmo growth. Up 14% again in Q2 2026.
Valuation & Investment Thesis
Priced Like a Toll Road
PayPal trades at ~11× forward P/E and ~7.9× EV/EBITDA (2026E), a discount to fintech peers that analyst commentary ties to branded checkout share loss and turnaround execution risk. The same multiple was ~16.7× in 2022.
The multiple also carries a live question about ownership. Stripe and Advent International reportedly offered about $60.50 a share, which PayPal's board reportedly viewed as inadequate.
Key Risks
What Could Change the Story
- Checkout competition, with Apple Pay on 13 of the top 50 US retail websites as of early April 2026 and Shop Pay and Google Pay gaining traction (per Bloomberg research).
- Agentic disintermediation, if AI shopping agents route around merchant checkout pages to cheaper account-to-account rails.
- International softness, with international payment volume growth at roughly 0% FX-neutral in Q2 2026 and Germany, its second-largest market, moderating.
- Margin pressure, with transaction margin at a 10-quarter low of 44.9% in Q2 2026 and operating expenses guided ~7–8% higher in FY2026 (company guidance).
- Execution and ownership uncertainty, with an early-stage turnaround plan and an unsettled standalone path.
What This Means For You
The Index Angle, in Plain Terms
In Your Index Fund — If you hold a fund that tracks the Nasdaq-100 Index®, you already own this.
- Index composition follows transparent eligibility criteria, and PYPL is a current constituent at ~0.23% index weight: roughly 23 cents of every $100 tracking the Nasdaq-100 sits in PayPal.
- You have probably used it twice this month without thinking about it, once as the PayPal button at an online checkout and once splitting a bill on Venmo.
- Each of those taps pays the company a small percentage of the amount, about 1.78% of the volume in Q2 2026, which is why volume rather than price sets its top line.
Decoding the Jargon
Two terms doing the heavy lifting in this issue.
- Total Payment Volume (the money moved). $486.4B passed through PayPal in Q2 2026. It measures the size of the pipe rather than the company's revenue, so it can grow while profit does not.
- Take rate (the slice charged). PayPal's transaction revenue equalled about 1.78% of the money it moved in Q2 2026, charged before it pays the card networks. Unbranded processing carries a thinner slice than the branded button, so the mix moves this number more than volume does.
Bottom Line
Inside the Nasdaq-100®, PayPal is paid for how you pay, not for what you buy. Its growth depends on one thing: whether more money keeps moving through the button.
About the Series
The Nasdaq-100® is a globally recognized index of 100 of the most innovative large cap companies listed on the Nasdaq Stock Market®. The Inside the Index series profiles one constituent each issue, from software to soft drinks and computer chips to potato chips, exploring what makes each business distinctive and the metrics investors should know.
Sources
NASDAQ GLOBAL INDEXES. PAYPAL HOLDINGS SEC FILINGS VIA SEC EDGAR: Q2 2026 FORM 10-Q, FY2025 FORM 10-K; PAYPAL INVESTOR RELATIONS FILINGS ARCHIVE. CHECKOUT-ADOPTION AND COMPETITOR FIGURES PER BLOOMBERG RESEARCH. CONSENSUS FIGURES PER BLOOMBERG CONSENSUS ESTIMATES. DATA AS OF 8/5/2026.
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