The growth in PayPal’s earnings per share is a buyback result, not an earnings-power result. In the third quarter, adjusted earnings per share rose 8% to $1.45 while adjusted net income fell 3.3%, from $1,288 million to $1,245 million, because the weighted diluted share count dropped 10.6%, from 960 million to 858 million. Run this year’s adjusted profit over last year’s share count and it comes to about $1.30 a share, 3% below the $1.34 of a year ago. Both inputs sit in the reconciliation tables of PayPal’s own release, and the arithmetic is below.
The Arithmetic Behind the 8%
Third quarter 2026 against third quarter 2025, with PayPal’s figures in the first six rows and our calculation in the last. Adjusted means PayPal’s non-GAAP basis.
| Item | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Net revenues | $8,584M | $8,417M | +2.0% |
| Transaction margin dollars | $3,950M | $3,871M | +2.0% |
| Adjusted operating income | $1,613M | $1,568M | +2.9% |
| Adjusted net income | $1,245M | $1,288M | -3.3% |
| Diluted shares | 858M | 960M | -10.6% |
| Adjusted EPS | $1.45 | $1.34 | +8% |
| Adjusted net income over last year’s shares | $1.30 | $1.34 | -3% |
Adjusted operating income grew 3%, so the loss sits below that line. PayPal’s adjusted tax rate rose to 22% from 18%, and GAAP other income swung to a $28 million expense from $13 million of income. The GAAP quarter was weaker still: net income fell 14% to $1,073 million, operating margin contracted 173 basis points to 16.3%, and EPS fell 4% to $1.25.
The first reports led with raised guidance and a revenue miss: analysts had expected $1.31 a share and $8.71 billion in revenue, and PayPal reported $1.45 and $8.58 billion. Neither number shows what the share count did. Of the 11-cent rise in per-share earnings from $1.34 to $1.45, the smaller share count added about 15 cents and lower net income took away about 4.
Where the Missing Shares Went
PayPal bought back about 28 million shares for $1.5 billion in the quarter, roughly $54 each by our division, and about 117 million shares for $6.0 billion over twelve months, near $51 each. Free cash flow was $1,431 million, so the quarter’s repurchases slightly exceeded it. Adjusted free cash flow, which strips out the timing of buy now, pay later receivables, was $2,047 million and covers them comfortably.
The raise itself did not come from extra repurchasing. CFO Jamie Miller told analysts that transaction margin dollars beat expectations and operating expenses came in under forecast, and that guidance “continues to incorporate approximately $6 billion in share repurchases.” What the buyback decides is whether a slightly smaller profit reads as growth. For the fourth quarter, PayPal guides to adjusted EPS of about $1.43 against $1.23 a year earlier, up 16%, while the same call described transaction margin dollars as “slightly positive” and non-transaction operating expenses as flat to low-single-digit growth. Sixteen percent per share on transaction margin dollars that barely grow is the buyback again.
Returning cash is a legitimate choice for a business that produced $1.4 billion of free cash flow in a quarter. Calling the result a turnaround is the part the numbers do not support yet.
What Management Says Will Change
CEO Enrique Lores said branded checkout volume growth “has remained relatively stable in the 1%-2% range for four quarters,” and active accounts grew only 0.6% to 440 million. Total payment volume rose 6% to $487.1 billion, and Lores said Venmo and Braintree each deliver double-digit volume growth.
The plan for next year leans on the same lever. Lores said PayPal will “invest further in both transaction margin dollars and operating expenses” in 2027 and is “targeting 2027 non-GAAP EPS growth similar to this year.” This year’s target is 5.5% above 2025’s $5.31. Our read: spending more on both lines compresses operating profit, which leaves the share count to hold per-share growth near that pace. PayPal also reaffirmed GAAP EPS guidance of about $5.07, 6% below the $5.41 of 2025, a year that included roughly 14 cents from its investment portfolio and crypto holdings.
The Test Is the Fourth Quarter
The fourth-quarter report shows which story holds. If transaction margin dollars stay near 2% growth while the share count keeps falling at a double-digit pace, per-share earnings will keep rising on the buyback alone. A turnaround would show up where PayPal has not yet shown it: branded checkout growth above 2%, and net income that rises without help from fewer shares.