PayPal Struggles to Keep Its Spot in Digital Checkout ‘Friend Zone’

Shoppers appear to be checking out on PayPal. Checking out on using it at checkout, that is. 

The cash register, both online and in-store, has become a crowded space for payment platforms. The Venmo parent is up against giants like Apple Pay and Google Pay, e-commerce companies such as Shopify and new buy-now-pay-later providers like Affirm and Klarna, and it’s not winning.

Its most recent earnings report shows slowing growth in its branded checkout business, which lets customers choose PayPal at checkout. Growth in online branded checkout decelerated to 1% in the fourth quarter from 6% a year ago. The disappointing figures weighed on the company’s revenue ($8.68 billion, compared with the $8.79 billion analysts expected, according to FactSet) and guidance (a mid-single-digit percentage decline in earnings per share in 2026, versus Wall Street’s expectation of an 8% increase). 

Downgrades and Dismissal

Why the slowdown for branded checkout? The company said weakness in US retail, international headlines and tough comparisons to previous results are partly to blame. But PayPal has also been doing some self-reflection, leading to the replacement of its CEO. HP’s former president and CEO, Enrique Lores, is taking the reins on March 1, replacing Alex Chriss, who had held the top role since September 2023.

“Our execution has not been where it needs to be, particularly in branded checkout,” Jamie Miller, chief financial and operating officer who is serving as interim CEO until Lores starts, said in a statement.

The weak guidance and surprising executive shuffle have analysts rethinking PayPal’s strength: 

• Analysts at HSBC downgraded the stock to hold from buy, reflecting their lower confidence in the company’s ability to fix branded checkout and improve results. 
• TD Cowen analysts lowered their price target for the stock to $48 from $65. While PayPal has made progress in some initiatives, including Venmo and BNPL, “the Street is left to debate structural concerns in PYPL’s core Branded online checkout business and await the potential for new strategic initiatives as PYPL changes its CEO,” they wrote. 

No More Mojo: PayPal’s former president, David Marcus, who has also served as Meta’s head of crypto and now runs payments company Lightspark, said his alma mater has “lost its mojo, its product edge, and its ability to compete in a market that’s being rewired and reinvented in front of our eyes.” He opined on X that the company made a “fundamental miscalculation” by optimizing for payment volume rather than margin and differentiation, and by leaning into unbranded checkout rather than branded checkout. When asked for comment, PayPal pointed to its earnings statement and call.