PayPal Holdings' PYPL transaction revenues form the backbone of PayPal's business model. In the third quarter of 2025, PayPal reported another quarter of transaction revenue growth. In this quarter, PayPal reported transaction revenues of $7.52 billion, up 6.4% year over year. Transaction revenues accounted for approximately 89.4% of its net revenues in the third quarter of 2025. The continued rise in online shopping and mobile payments helped to boost transaction revenues, which led to solid third-quarter 2025 results.
Transaction revenues come primarily from fees charged to merchants and consumers on payments processed through PayPal's platforms. These fees are based on the Total Payment Volume processed by the company. Transaction margin dollars ("TM$") is the profit PayPal makes from its transactions after deducting the direct costs associated with processing them.
For the third quarter of 2025, management had expected TM$ to be between $3.76 billion and $3.82 billion, suggesting growth in the 3-5% range and 5-7% excluding interest on customer balances. PayPal delivered above the high end of its guidance range for the metric in the quarter. TM$ came in at $3.87 billion, which grew 5.9% on a reported basis. Excluding interest on customer balances, TM$ increased 7.1% to $3.55 billion.
Its TM$ growth continues to come from multiple areas of the business, including branded experiences, PSP and Venmo. Moreover, in the third quarter of 2025, the company’s enterprise payments business has turned a corner, returning to volume growth and consistently contributing to its TM$ growth.
How Did Block & Payoneer Perform?
Block's XYZ transaction revenues in Q3 2025 were $1.87 billion, up 9.4% YoY and representing 30.6% of its net revenues. XYZ earns most of its transaction revenue from Square by charging merchant fees for payment processing. Cash App also plays a significant role, earning from peer-to-peer payments, Bitcoin trading and other financial services.
Payoneer Global's PAYO Q3 2025 total revenues were $270.9 million, up 9% YoY, with revenues excluding interest income growing 15% YoY. The increase in transaction volume and improved SMB customer take rates were important for this growth. PAYO generates transaction revenue by charging fees on cross-border payments, currency conversions and fund withdrawals.
PYPL’s Price Performance, Valuation & Estimates
Shares of PayPal have declined 21.3% year to date, underperforming both the broader industry and the S&P 500 Index.
Image Source: Zacks Investment Research
From a valuation standpoint, PayPal shares are trading cheaply, as suggested by the Value Score of A. In terms of forward 12-month P/E, PYPL stock is trading at 11.44X, which is at a significant discount to the Zacks Financial Transaction Services industry’s 20.64X.
Image Source: Zacks Investment Research
PayPal’s estimate revisions reflect a positive trend. The Zacks Consensus Estimate for full-year 2025 EPS has been revised upward over the past week. The Zacks Consensus Estimate for 2025 EPS suggests 14.6% growth year over year.
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PayPal currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Download Atomic Opportunity: Nuclear Energy's Comeback free today.PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
Payoneer Global Inc. (PAYO) : Free Stock Analysis Report
Block, Inc. (XYZ) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
