PYPL 10-Q filed 2026-10-27 | Key takeaways
PYPL filed its 10-Q; the most relevant disclosure change is added Regulatory proceedings: In September 2026, PayPal received a new Civil Investigative Demand (CID) from the FTC investigating whether PayPal engaged in deceptive, unfair, or otherwise unlawful practices in connection with the advertising, marketing, sale, issuance, or management of fe.
Key takeaways
Profitability: Operating margin contracted to 16% from 18% due to higher transaction expense growth and restructuring charges of $152 million associated with the global workforce reduction (3Q 2026 Plan).
Restructuring: The 3Q 2026 Plan resulted in $152 million in restructuring charges with expected annualized employee-related cost savings of approximately $340 million.
Loans portfolio: Loans held for sale increased significantly to $3.7 billion from $1.7 billion at year-end 2025, including a $1.5 billion reclassification of Japan installment loans.
Regulatory: A new FTC CID was received in September 2026 investigating whether PayPal engaged in deceptive practices in connection with advertising, marketing, and fees for purchase protection services.
IRS examination: The IRS completed its examination of U.S. federal tax returns for 2015-2018 and issued a Revenue Agent's Report proposing adjustments; PayPal disagrees and intends to contest through IRS Appeals.
Active accounts: 440 million active accounts at Q3 2026, up 1% year-over-year, with TPV of $487.1 billion up 6%.
Key metrics
Disclosure changes
- Regulatory proceedings
In September 2026, PayPal received a new Civil Investigative Demand (CID) from the FTC investigating whether PayPal engaged in deceptive, unfair, or otherwise unlawful practices in connection with the advertising, marketing, sale, issuance, or management of fees and purchase protection in connection with financial products and services.
This represents a new regulatory investigation specifically targeting PayPal's purchase protection and fee advertising practices, adding potential enforcement risk and reputational concerns. - Loans and interest receivable, held for sale
Loans and interest receivable, held for sale was $3.7 billion as of September 30, 2026, up from $1.7 billion at December 31, 2025. During the nine months ended September 30, 2026, the company reclassified approximately $1.5 billion of Japan installment loan receivables to held for sale.
Significant increase in loans held for sale reflects strategic decisions to reduce consumer credit exposure, particularly the exit from Japan installment lending, with forward flow arrangements with third-party investors. - Restructuring and other
The 3Q 2026 Plan resulted in $152 million in restructuring charges during both the three and nine months ended September 30, 2026, consisting of employee severance and benefits costs including stock-based compensation. Expected annualized employee-related cost savings of approximately $340 million.
The global workforce reduction is a significant operational change that will reduce costs but also represents strategic realignment expenses and potential revenue impact from reduced staffing. - Income taxes
In September 2026, the IRS completed its examination of U.S. federal income tax returns for tax years ended December 31, 2015 through 2018 and issued a Revenue Agent's Report proposing several adjustments to taxable income. PayPal disagrees with the proposed adjustments and intends to contest them through IRS Appeals, a process expected to take more than 12 months.
Potential tax liability from IRS proposed adjustments on 2015-2018 tax years, though the company intends to contest through IRS Appeals. - European customer balances designated for credit activities
As of September 30, 2026, the cumulative amount approved by PayPal to be designated to fund European and U.K. credit activities was $2.5 billion, representing approximately 34% of European customer balances, up from $2.0 billion (26%) at December 31, 2025.
Increased allocation of European customer balances to fund credit activities provides additional capital for credit product expansion but reduces liquidity available for corporate use. - Branded Checkout Securities Litigation
The Branded Checkout Securities Action was consolidated in August 2026 with an amended complaint expanding the class period to February 7, 2024 through February 2, 2026 and adding PayPal's President, Global Markets as a defendant.
Expanded securities litigation with additional defendant and slightly extended class period increases potential exposure and legal costs.
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