Financial Performance

Breakout Quarter for Venmo Powers PayPal Beat

"While it is still early, our [Venmo] monetization efforts appear to be reaching a tipping point," PayPal CEO Dan Schulman says.
Matthew HellerOctober 19, 2018

PayPal reported better-than-expected earnings and revenue amid signs that its Venmo peer-to-peer payment app has turned a corner after struggling to make money.

Total payment volume for Venmo rose 78% in the third quarter to roughly $17 billion. That was a fraction of PayPal’s volume of $143 billion but Venmo’s breakout quarter fueled investor optimism, with PayPal’s stock climbing as much as 7.5% in after-hours trading Thursday.

“While it is still early, our [Venmo] monetization efforts appear to be reaching a tipping point,” PayPal CEO Dan Schulman said on an earnings call with analysts Thursday. “I’m especially pleased with the strong overall momentum surrounding Venmo.”

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Twenty four percent of Venmo users have now participated in what Schulman called a “monetizable action,” up from 17% in the second quarter. In September alone, PayPal said it processed more than $1 billion in instant transfer volume on the Venmo platform.

Venmo has struggled to make money since it was acquired by PayPal in 2012. The app “has a loyal user base, but some analysts were concerned that monetization efforts were proceeding in a slower-than-expected manner,” MarketWatch said.

PayPal has launched several initiatives to boost Venmo usage. Pay with Venmo, aimed at getting users to choose Venmo for online purchases, saw 195% growth in volume on a month-over-month basis in the third quarter, while volume for the Venmo debit card, which PayPal unveiled this summer, rose 320%.

Food delivery companies Grubhub, Eat24, and Seamless have also integrated with Venmo, and PayPal executives said the partnerships have been “growing quite remarkably.”

“The Pay with Venmo and debit-card efforts are fairly new, so it’s likely that PayPal is increasing revenue off a small base,” MarketWatch said. “Still, the early momentum is encouraging given that Venmo is considered one of the big growth catalysts for PayPal shares.”

Overall, PayPal earned 58 cents per share on revenue of $3.68 billion in the latest quarter, beating analysts’ estimates of earnings of 54 cents per share on revenue of $3.66 billion.

Total payment volume jumped 25% but missed analysts’ expectations of $145 billion.