10-K – 2026-02-03 – pypl-20251231.htm

Cross-border trade (i.e., transactions where the merchant and consumer are in different countries) is an important source of our revenues and profits. Cross-border transactions generally provide higher revenues and operating income than similar transactions that take place within a single country or market. In certain markets, cross-border trade may represent our primary or sole offering. Cross-border trade has been and may be negatively impacted by various factors including foreign exchange rate fluctuations; changes in or new tariffs, trade disputes, barriers or restrictions threats of such actions, and the related uncertainty thereof; sanctions; import or export controls; and the interpretation and application of laws of multiple jurisdictions in the context of cross-border trade and foreign exchange. Any factors that increase the costs or uncertainty of cross-border trade for us or our customers or that restrict, delay, or make cross-border trade more expensive, difficult or impractical could reduce our cross-border transactions and volume, negatively impact our revenues and profits, and harm our business.

Failure to deal effectively with fraud, abusive behaviors, bad transactions, and negative customer experiences may increase our loss rate and could severely diminish merchant and consumer confidence in and use of our services and negatively impact our business.

We expect that third parties will continue to attempt to abuse access to and misuse our payments services to commit fraud by, among other things, creating fictitious accounts using stolen or synthetic identities or personal information, taking over customer accounts or creating fraudulent accounts, making transactions with stolen financial instruments, abusing or misusing our services for financial gain, or fraudulently inducing users of our products and services into engaging in fraudulent transactions. Due to the nature of our digital payments services, third parties may seek to engage in abusive schemes or fraud attacks that are often difficult to detect and may be deployed at a scale that would otherwise not be possible in physical transactions. Measures to detect and reduce the risk of fraud and abusive behavior are complex, require continuous improvement, and may not be effective in detecting and preventing fraud, particularly new and continually evolving forms of fraud or in connection with new or expanded product offerings. If these measures are not effective, our business could be negatively impacted. We also incur substantial losses from erroneous transactions and situations where linked accounts designated by customers to fund PayPal transactions have insufficient funds or are otherwise unavailable to fund the payments, or the payment is initiated to an unintended recipient in error. Numerous and evolving fraud schemes and misuse of our

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payments services could subject us to significant costs and liabilities, require us to change our business practices, cause us to incur significant remediation costs, lead to loss of customer confidence in, or decreased use of, our products and services, damage our reputation and brands, divert the attention of management from the operation of our business, and result in significant compensation or contractual penalties from us to our customers and their business partners as a result of losses or claims. While we actively seek to recover transaction losses where possible, such recoveries may be insufficient to compensate us for such losses.

Our purchase and seller protection programs (“protection programs”) are intended to reduce the likelihood of losses for consumers and merchants from unauthorized and fraudulent transactions. Our purchase protection program also protects eligible transactions where consumers do not receive the item ordered or receive an item that is significantly different from its description. We incur substantial losses from our protection programs as a result of disputes filed by our customers. While we may seek to recover losses from our protection programs from the merchant, we ultimately may not be able to fully recover such losses.

In addition, consumers who pay through PayPal or Venmo may have reimbursement rights from their payment card issuer, which in turn will seek recovery from us. If losses incurred by us related to payment card transactions become excessive, we could lose the ability to accept payment cards for payment, which would negatively impact our business. Regulators and card networks may also adapt error resolution and chargeback requirements to account for evolving forms of fraud, which could increase PayPal’s exposure to fraud losses and impact the scope of coverage of our protection programs. Increases in our loss rate, including as a result of changes to the scope of transactions covered by our protection programs, could negatively impact our business and results of operations.

Failure to effectively monitor and evaluate the financial condition of our merchants may expose PayPal to losses. In the event of the bankruptcy, insolvency, business failure, or other business interruption of a merchant that sells goods or services in advance of the date of their delivery or use (e.g., airline, cruise, or concert tickets, custom-made goods, and subscriptions), we could be liable to the buyers of such goods or services, including through our purchase protection program or through chargebacks on payment cards used by customers to fund their purchase. Allowances for transaction losses that we have established may be insufficient to cover incurred losses.

Use of our payments services for illegal activities or improper purposes could harm our business.

We expect that users will continue to attempt to use our platform for illegal activities or improper uses, including money laundering, terrorist financing, sanctions evasion, illegal gambling or gaming, fraudulent sales of goods or services, illegal telemarketing activities, illegal sales of prescription medications or controlled substances, piracy of software, movies, music, and other copyrighted, trademarked or digital goods, bank fraud, child pornography, human trafficking, prohibited sales of alcoholic beverages or tobacco products, securities fraud, pyramid or Ponzi schemes, or the facilitation of other illegal or improper activity. Moreover, certain activity that may be legal in one jurisdiction may be illegal in another jurisdiction, and a customer may be found responsible for intentionally or inadvertently importing or exporting illegal goods, resulting in liability for us. Owners of intellectual property rights or government authorities may seek to bring legal action against providers of payments solutions, including PayPal, that are peripherally involved in the sale of infringing or allegedly infringing items by a user. While we invest in measures intended to prevent and detect illegal activities that may occur on our platform, these measures require continuous improvement and may not be effective in detecting and preventing illegal activity or improper uses, and we may be subject to claims, individual and class action lawsuits, and government and regulatory requests, inquiries, or investigations that could result in liability, restrict our operations, impose additional restrictions or limitations on our business or require us to change our business practices, harm our reputation, increase our costs, and negatively impact our business.

Acquisitions, dispositions, strategic investments, and other strategic transactions could result in operating difficulties and could harm our business.

We expect to continue to consider and evaluate a wide array of potential strategic transactions as part of our overall business strategy, including business combinations, acquisitions, and dispositions of certain businesses, technologies, services, products, and other assets; strategic investments; and commercial and strategic partnerships (collectively, “strategic transactions”). At any given time, we may be engaged in discussions or negotiations with respect to one or more strategic transactions, any of which could, individually or in the aggregate, be material to our financial condition and results of operations. There can be no assurance that we will be successful in identifying, negotiating, consummating, or integrating suitable transaction opportunities. Strategic transactions may involve additional significant challenges, uncertainties, and risks, including challenges of obtaining regulatory or other approvals, integrating new employees, products, systems, technologies, operations, and business cultures; challenges associated with operating acquired businesses in markets or business areas in which we may have limited or no

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experience; disruption of our ongoing operations and diversion of our management’s attention; inadequate data security, cybersecurity, or operational and IT resilience; failure to identify or accurately assess commitments, liabilities, deficiencies and other risks associated with acquired businesses or assets; potential exposure to new or incremental risks associated with acquired businesses and entities, strategic investments or other strategic transactions, including potential new or increased regulatory oversight and uncertain or evolving legal, regulatory, and compliance requirements, particularly with respect to companies in new or developing businesses or industries; challenges associated with dispositions of business or operations, including disruption to other parts of our business, potential loss of employees or customers, the transfer of technology and/or certain intellectual property rights to third-party purchasers, or exposure to unanticipated liabilities or ongoing obligations to us following any such dispositions; failure of the transaction to advance our business strategy or for its anticipated benefits to materialize; potential impairment of goodwill or other acquisition-related intangible assets; and the potential for our acquisitions to result in dilutive issuances of our equity securities or the incurrence of significant additional debt. Strategic transactions are inherently risky, may not be successful, and may harm our business, results of operations, and financial condition.

Strategic investments in which we have a minority ownership stake inherently involve a lesser degree of influence and visibility over business operations and we may be dependent on controlling shareholders, management, or other persons or entities that may have business interests, strategies, or goals that are inconsistent with ours. Business decisions or other actions or omissions of the controlling shareholders, management, or other persons or entities who control companies in which we invest may adversely affect the value of our investment, result in litigation or regulatory action against us, and damage our reputation.

Our international operations subject us to increased risks, which could harm our business.

Our international operations generate a significant portion of our net revenues and subject us to significant challenges, uncertainties, and risks, including, but not limited to, local regulatory, licensing, reporting, and legal obligations; costs and challenges associated with operating in markets in which we may have limited or no experience, including adapting our products and services to local requirements and customer preferences; difficulties in developing, staffing, and simultaneously managing a large number of varying foreign operations as a result of distance, language, and cultural differences and varying laws, regulations, and customs; differing employment practices and the existence of works councils; difficulties in hiring, retaining and integrating qualified employees and maintaining our company culture; fluctuations in foreign exchange rates; exchange control regulations; profit repatriation restrictions; changes in or new tariffs, sanctions, fines, or other trade barriers or restrictions and the related uncertainty thereof; import or export regulations; compliance with U.S. and foreign anti-bribery, anti-corruption, sanctions, anti-money laundering and counter-terrorist financing laws and regulations; the interpretation and application of laws of multiple jurisdictions; and national or regional political, economic, or social instability. In addition, some countries have enacted or are considering data localization or residency laws, which require that certain data be maintained, stored and/or processed within their country of origin. Maintaining local data centers in individual countries could significantly increase our operating costs.

Our international operations also may heighten many of the other risks described in this “Risk Factors” section. Any violations of the complex foreign and U.S. laws, rules and regulations that may apply to our international operations may result in lawsuits, enforcement actions, criminal actions, or sanctions against us and, our directors, officers, and employees; prohibit or require us to change our products, services and business practices; and damage our reputation. There can be no assurance that our employees, contractors, or agents will not violate applicable laws or our policies, procedures and controls designed to help ensure compliance with these laws. These risks are inherent in our international operations, may increase our costs of doing business internationally, and could materially and adversely affect our business.

Global and regional economic conditions could harm our business.

Adverse global and regional economic conditions such as political unrest and turmoil affecting the banking system or financial markets, including, but not limited to, tightening in the credit markets, extreme volatility or distress in the financial markets (including the fixed income, credit, currency, equity, and commodity markets), unemployment, consumer debt levels, recessionary or inflationary pressures, supply chain issues, reduced consumer confidence or economic activity, government fiscal, monetary and tax policies, U.S. and international trade relationships, agreements, treaties, changes in or new tariffs and restrictive actions or threats of such actions, including an escalation of trade tensions between the U.S. and its trading partners, the inability of a government to enact a budget in a fiscal year, government shutdowns, government austerity programs, geopolitical conditions or events, and other negative financial news or macroeconomic developments could have a material adverse impact on the demand for our products and services, including a reduction in the volume and size of transactions on our platform. In particular, recent tariffs and reciprocal trade measures enacted or threatened to be enacted by the U.S. and other countries have led to increased volatility and uncertainty in certain parts of the global economy. We cannot predict the timing, strength or duration of any economic volatility, slowdown, instability or recovery, whether in the U.S. or globally, or within any particular industry. These conditions could have a material adverse impact on the demand for our products and services which

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could adversely affect our results of operations. Additionally, any inability to access the capital markets when needed due to volatility or illiquidity in the markets, liquidity needs due to unanticipated reductions in customer balances, or increased regulatory liquidity and capital requirements may strain our liquidity position. Such conditions may also expose us to fluctuations in foreign exchange rates or interest rates that could materially and adversely affect our financial results.

If our reputation or our brands are damaged, our business and operating results may be harmed.

Our reputation and brands are globally recognized, important to our business, and affect our ability to attract and retain our customers. There are numerous ways our reputation or brands could be damaged. We may experience scrutiny or criticism from customers, partners, employees, government entities, media, advocacy groups, and other influencers or stakeholders that disagree with, among other things, our product offering decisions, internal policies, or public policy positions. Damage to our reputation or our brands may result from, among other things, change to or new features, products, services, operational efforts, or terms of service, or our decisions regarding user privacy, data practices, or information security. The pervasiveness of social media may increase and compound the likelihood, speed, magnitude, and unpredictability of negative brand events. If our brands or reputation are damaged, our business and operating results may be adversely impacted.

Real or perceived inaccuracies in our key metrics may harm our reputation and negatively affect our business.

Our key metrics are calculated using internal company data based on the activity we measure on our platform and compiled from multiple systems, including systems that are internally developed or acquired through business combinations. There are inherent challenges and limitations in measuring our key metrics globally at scale. The methodologies used to calculate our key metrics require significant judgment. We regularly review our processes for calculating these key metrics, and from time to time we may make adjustments to improve the accuracy or relevance of our metrics. Although such adjustments may impact key metrics reported in prior periods, we generally do not update previously reported key metrics to reflect these subsequent adjustments unless the retrospective impact of process improvements or enhancements is determined by management to be material. Further, as our business evolves, we may revise or cease reporting metrics if we determine that such metrics are no longer appropriate measures of our performance. If investors, analysts, or customers do not consider our reported measures to be sufficient or to accurately reflect our business, we may receive negative publicity, our reputation may be harmed, and our business may be adversely impacted.

Evolving laws, regulations and stakeholder expectations with respect to environmental, social and governance matters could harm our reputation and adversely affect our business.

Various jurisdictions both in the U.S. and internationally have adopted or are developing laws, regulations and policies relating to environmental, social and governance matters (e.g., environmental sustainability and climate change) which include disclosure, reporting and diligence requirements. Compliance with these requirements may involve significant costs, and any actual or perceived failure to comply with applicable (and potentially conflicting) federal, state, local or international laws or regulations concerning environmental, social, and governance matters could subject us to fines, penalties, regulatory or other enforcement actions, and adversely affect our business or financial condition. In addition, various stakeholders, including investors, customers, employees, governmental authorities and regulators, may have differing expectations regarding environmental, social and governance matters related to us (including those supporting and opposing various environmental, social and governance matters), whose expectations and requirements are evolving and varied. Any initiatives, targets, data, or commitments we disclose with respect to these matters involve risks and uncertainties and could be difficult to achieve and costly to implement. Any actual or perceived failure or inaccuracy with respect to such initiatives, targets, data or commitments or to otherwise successfully manage investor or other stakeholder expectations on these matters could result in adverse reaction by consumers or other stakeholders (including, but not limited to, customers choosing not to use our products and services and the commencement of legal and regulatory proceedings against us), harm our reputation, and adversely affect our business, results of operation and financial condition.

If one or more of our counterparty financial institutions default on their financial or performance obligations to us or fail, we may incur significant losses.

We have significant amounts of cash, cash equivalents, receivables outstanding, and other investments on deposit or in accounts with banks or other financial institutions in the U.S. and internationally. As part of our foreign exchange hedging activities, we regularly enter into transactions involving derivative financial instruments with various financial institutions. Certain banks and other financial institutions are also lenders under our credit facilities. While we seek to diversify counterparty risk, regularly monitor and actively manage our concentration of, and exposure to, counterparty risk, we may be exposed to the risk of default on obligations by, or deteriorating operating results or financial condition or failure of, these counterparty financial institutions. If one of our counterparty financial institutions were to become insolvent, placed into receivership, or file for bankruptcy, our

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ability to recover losses incurred as a result of default or to access or recover our assets that are deposited, held in accounts with, or otherwise due from, such counterparty may be limited due to the insufficiency of the failed institutions’ estate to satisfy all claims in full or the applicable laws or regulations governing the insolvency, bankruptcy, or resolution proceedings. In the event of default on obligations by, or the failure of, one or more of these counterparties, we could incur significant losses, which could negatively impact our results of operations and financial condition.

If we are unable, or perceived as unable, to effectively manage customer funds, our business could be harmed.

We hold a substantial amount of funds belonging to our customers, including balances in customer accounts and funds being remitted to sellers of goods and services or recipients of person-to-person transactions. In certain jurisdictions where we operate, we are required to comply with applicable regulatory requirements with respect to customer balances. Our success is reliant on public confidence in our ability to effectively manage our customers’ balances and handle substantial transaction volumes and amounts of customer funds. Any failure to manage customer funds in compliance with applicable regulatory requirements, or any public loss of confidence in us or our ability to effectively manage customer balances, could lead customers to discontinue or reduce their use of our products or reduce customer balances held with us, which could significantly harm our business.

There are risks associated with our indebtedness.

We have incurred indebtedness, and we may incur additional indebtedness in the future. Our ability to pay interest and repay the principal for our indebtedness is dependent upon our ability to manage our business operations and generate sufficient cash flows to service such debt. Our outstanding indebtedness and any additional indebtedness we incur may have significant consequences, including the need to use a significant portion of our cash flow from operations and other available cash to service our indebtedness, thereby reducing the funds available for other purposes, including working capital, capital expenditures, acquisitions, strategic investments, share repurchases, dividend payments, or other general corporate purposes; limits on our ability to obtain additional financing for such purposes; and the reduction of our flexibility in planning for or reacting to changes in our business, competitive pressures and market conditions.

Our revolving credit facilities and the indentures for our senior unsecured notes pursuant to which certain of our outstanding debt securities were issued contain financial and other covenants that restrict or could restrict, among other things, our business and operations. If we fail to pay amounts due under a debt instrument or breach any of its covenants, the lenders or noteholders would typically have the right to demand immediate repayment of all borrowings thereunder (subject in certain cases to a grace or cure period). Any such acceleration and required repayment of, or default in respect of, our indebtedness could, in turn, constitute an event of default under other debt instruments, thereby resulting in the acceleration and required repayment of our indebtedness. Any of these events could materially adversely affect our liquidity and financial condition.

Any downgrade in our credit rating or negative change in our rating outlook could increase our future borrowing costs and adversely affect our ability to obtain additional financing in the future on favorable terms or at all.

Changes in tax laws, exposure to unanticipated additional tax liabilities, or implementation of reporting or record-keeping obligations could have a material adverse effect on our business.

An increasing number of U.S. states, the U.S. federal government, and governments of foreign jurisdictions, such as the EU Commission, as well as international organizations, such as the Organization for Economic Co-operation and Development (“OECD”), are focused on tax reform and other legislative or regulatory action to increase tax revenue. These actions may materially and adversely affect our effective tax rate, net income, and cash flows.

Specifically, the OECD has published model rules and is coordinating negotiations among participating countries with the goal of achieving consensus on significant changes to international tax rules, including the implementation of a global minimum tax rate of 15%, commonly referred to as Pillar Two. Each individual jurisdiction will need to enact minimum tax legislation which may result in various interpretations of the OECD model rules and applicable timelines. Certain countries in which we do business have enacted implementing legislation effective January 1, 2025. As additional jurisdictions enact similar legislation, transition rules expire, and other provisions of the minimum tax legislation become effective, our effective tax rate and cash tax payments could increase in future years. The impact will depend on several factors including U.S and foreign tax legislation as well as our overall tax profile. A number of details around the provisions are still uncertain as the OECD and individual jurisdictions continue to issue guidance.

The determination of our worldwide provision for income taxes and other tax liabilities requires estimation and significant judgment, and there are many transactions and calculations for which the ultimate tax determination is uncertain. Our future

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income taxes could be adversely affected by changes in our geographical mix of income and impacts of statutory tax rates; by changes in the valuation of our deferred tax assets and liabilities, including as a result of gains on our foreign exchange risk management program; by changes in tax laws, regulations, or accounting principles; or by certain discrete items. In addition, we are currently undergoing a number of investigations, audits, and reviews by tax authorities in multiple U.S. and foreign tax jurisdictions. Any adverse outcome of any such audit or review could result in unforeseen tax-related liabilities that differ from the amounts recorded in our financial statements, which may, individually or in the aggregate, materially affect our financial results in the periods for which such determination is made. While we have established reserves based on assumptions and estimates that we believe are reasonable to cover such eventualities, these reserves may prove to be insufficient.

To improve tax compliance, a number of U.S. states, the U.S. federal government, and foreign jurisdictions have implemented and may impose reporting or record-keeping obligations on companies that engage in or facilitate ecommerce as well as companies offering digital asset services. A number of jurisdictions are also reviewing whether payment service providers and other intermediaries could be deemed to be the legal agent of merchants for certain tax purposes. We have modified our systems to meet applicable requirements and expect that further modifications will be required to comply with future requirements, which may negatively impact our customer experience and increase operational costs. Any failure by us to comply with these and similar reporting and record-keeping obligations could result in substantial monetary penalties and other sanctions, adversely impact our ability to do business in certain jurisdictions, and harm our business.

We may be unable to attract, retain, and develop the highly skilled employees we need to support our business.

Competition for key and other highly skilled personnel is intense, particularly for executive talent, software engineers, and other technology talent. We may be limited in our ability to recruit or hire internationally, including due to restrictive laws or policies on immigration, travel, or availability of visas for skilled workers. The loss of the services of any of our key personnel, or our inability to attract, hire, develop, motivate and retain key and other highly qualified and diverse talent, could harm our overall business and results of operations.

We are subject to risks associated with information disseminated through our products and services.

We may be subject to claims relating to information disseminated through our online services by our customers and other third parties, including, but not limited to, claims alleging defamation, libel, harassment, hate speech, breach of contract, invasion of privacy, negligence, copyright or trademark infringement, or other theories based on the nature and content of the materials disseminated through the services. While we invest in measures intended to detect and block activities that may occur on our platform in violation of our policies and applicable laws, they may not be sufficiently effective in detecting and preventing the exchange of information in violation of our policies and applicable laws, which could negatively impact our business. If the laws or regulations that provide protections for online dissemination of information are invalidated, modified, or supplemented to reduce protections available to us or to increase requirements on us, we could be directly harmed and may be forced to implement new measures to reduce our exposure to this liability, including expending substantial resources and discontinuing certain product or service offerings, which could harm our business.

There can be no assurance that we will continue to repurchase stock or declare cash dividends, and stock repurchases or dividends could increase the volatility of our stock price and could diminish our cash reserves.

We engage in share repurchases of our common stock from time to time, and our stock repurchase programs do not have expiration dates and do not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares. In October 2025, we announced the initiation of a cash dividend program. Future cash dividends are subject to declaration by our Board of Directors at its sole discretion and are therefore subject to numerous factors including, among others, prevailing market conditions, our results of operations, financial condition and liquidity, applicable laws and agreements. Our stock repurchases and our dividends could affect our share trading prices, increase its volatility, reduce our cash reserves and may be suspended or terminated at any time, which may result in a decrease in our share trading price.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

CYBERSECURITY RISK MANAGEMENT AND STRATEGY

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Our Information Security Program (“Program”) is designed to support the Company in identifying, protecting, detecting, responding to, and recovering from cybersecurity threats and incidents (collectively, “cybersecurity risks”) with the intention to protect the confidentiality, integrity, and availability of our critical systems and information.

We design and regularly assess our Program guided by National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) and ISO standards (including ISO 27001), proprietary controls and industry best practices.

Our Program is built on a three lines of defense model integrated into our overall Enterprise Risk and Compliance Management Program (“ERCM Program”). It shares common methodologies, reporting channels, and governance processes that apply across the ERCM Program to other legal, compliance, strategic, operational, and financial risk areas. The Program is governed by the Technology, Information Security, and Privacy Risk Management Committee and overseen by our Board of Directors (“Board”) and its Risk and Compliance Committee (“R&C Committee”).

The three lines of defense model is designed to provide a structure for risk management in the first line of defense (“FLOD”), monitoring and guidance by the second line of defense (“SLOD”), and independent audit by the third line of defense (“TLOD”). Our Office of the Chief Information Security Officer oversees the Company’s information, cyber, and technology security. The Enterprise Risk Management Organization provides second line monitoring and guidance. The Technology and Information Security team serves as SLOD and provides independent oversight of our technology and cybersecurity risk mitigation practices and capabilities. As TLOD, Internal Audit independently assesses the effectiveness of our cybersecurity risk management and independently reports the results of audits to our R&C Committee to assist it in its oversight duties.

Our Program includes:

• Risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise Information Technology (“IT”) environment;
• Regular testing of our systems to identify and address potential vulnerabilities;
• Integrated planning and preparedness activities supporting business continuity and operational resiliency;
• Security teams principally responsible for managing our (1) annual cybersecurity risk assessment processes, (2) security controls, and (3) response to cybersecurity incidents;
• A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents;
• 24/7 monitoring and measurement of cybersecurity threats through our PayPal Cyber Defense Center (“CDC”);
• The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;
• An information training and awareness program for our employees, contractors, incident response personnel, and senior management; and
• A third-party risk management framework designed to monitor and address risks from cybersecurity incidents of service providers, suppliers, and vendors that includes due diligence over the information security and technology control environment of third parties at onboarding and periodically throughout the lifecycle of the relationship. In addition, our standard contractual terms require notification and communication from third parties in the event of a cybersecurity incident. We maintain procedures to respond to, manage and mitigate third-party cybersecurity events and vulnerabilities when identified.

For a description of risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition, see “Item 1A. Risk Factors” under the captions “ Cyberattacks and security vulnerabilities could result in serious harm to our reputation, business, and financial condition ” and “ Business interruptions or systems failures may impair the availability of our websites, applications, products or services, or otherwise harm our business. ”

CYBERSECURITY GOVERNANCE

Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to our R&C Committee oversight of cybersecurity and other information technology risks. The R&C Committee oversees PayPal’s overall risk framework, including management’s implementation of our cybersecurity risk management program, and reports to the full Board of Directors on a regular basis on cybersecurity and information technology risk management. The R&C Committee receives quarterly reports from the Chief Information Security Officer (“CISO”) on our cybersecurity risks. Management also updates the R&C Committee, as necessary, regarding cybersecurity incidents.

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Our CISO is responsible for implementing the information security strategy, security engineering, enabling business partners, and securing customer data, digital assets, and payments. His organization also monitors cyber regulation requirements and reviews impacts of new products and initiatives. Our CISO has over two decades of experience as a cybersecurity professional, including as a CISO at PayPal and four other organizations that include leading global financial services institutions and large-scale U.S. government agencies (including within the Department of Defense). He has an extensive record of success shepherding digital transformation aligned with business goals, launching cybersecurity frameworks, building security engineering teams, and ensuring protection of assets, data, privacy, and company reputation.

The R&C Committee reports to the Board regarding its activities, including those related to cybersecurity risk oversight. The Board also receives briefings at least annually from management on our Program. Board members receive presentations on cybersecurity topics from our CISO and external experts from time to time as part of our continuing education to the Board on topics relevant to their service on our Board.

Our cybersecurity teams, overseen by our CISO, are responsible for assessing and managing our risks from cybersecurity threats, including defining security policy and Board reporting of security risk. The CISO approves all security policies and oversees the identification, assessment, and management of cybersecurity risks, which is designed to provide a proactive and comprehensive approach to safeguarding our information assets. The teams have primary responsibility for our overall Program and supervise both our internal cybersecurity personnel and our external cybersecurity consultants. Our cybersecurity teams’ expertise includes cybersecurity incident response, in-depth security assessments, security emulation exercises to evaluate security profiles, security research, education and outreach, and security tool development.

Our cybersecurity teams supervise efforts to prevent, detect, mitigate, and remediate cybersecurity threats and incidents through the operation of our incident response plan and various other means, which may include briefings from internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us, as well as alerts and reports produced by security tools deployed in the IT environment. They also oversee, identify, and address security threats aimed at PayPal customers, employees, and partners.

ITEM 2. PROPERTIES

We own and lease various properties in the United States (“U.S.”) and other countries around the world. We use these properties for executive and administrative offices, customer services and operations centers, product development offices, and data centers. As of December 31, 2025, our owned and leased properties provided us with aggregate square footage as follows:

United States Other Countries Total
  (In millions)
Owned facilities 0.7  0.2  0.9 
Leased facilities 1.3  1.5  2.8 
Total facilities 2.0  1.7  3.7 

We own a total of approximately 70 acres of land, with approximately 49 acres in the U.S. Our corporate headquarters are located in San Jose, California and occupy approximately 0.7 million of owned square feet.

ITEM 3. LEGAL PROCEEDINGS

The information set forth under “Note 13—Commitments and Contingencies— Litigation and Regulatory Matters ” to the consolidated financial statements included in Part IV, Item 15 of this Form 10-K is incorporated herein by reference.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

COMMON STOCK

PayPal common stock is quoted on the Nasdaq Global Select Market under the ticker symbol “PYPL.”

As of January 28, 2026, there were 3,567 holders of record of our common stock. The actual number of stockholders is significantly greater than this number of record holders, and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.

DIVIDENDS

In October 2025, we announced that our Board of Directors approved the initiation of a quarterly cash dividend program and declared a cash dividend of $0.14 per share on our common stock, totaling approximately $130 million. The dividend was payable on December 10, 2025, to stockholders of record of our common stock as of the close of business on November 19, 2025. We currently expect to continue to pay comparable cash dividends on a quarterly basis in the future; however, payments in future quarters will be subject to and contingent upon market conditions and approval by our Board of Directors at its sole discretion.

STOCK REPURCHASE ACTIVITY

In June 2022, our Board of Directors authorized a stock repurchase program that provides for the repurchase of up to $15.0 billion of our common stock, with no expiration from the date of authorization. In February 2025, our Board of Directors authorized an additional stock repurchase program that provides for the repurchase of up to $15.0 billion of our common stock, with no expiration from the date of authorization. This program became effective in the fourth quarter of 2025 upon completion of the June 2022 stock repurchase program.

Our stock repurchase programs are intended to offset the impact of dilution from our equity compensation programs and, subject to market conditions and other factors, may also be used to make opportunistic repurchases of our common stock to reduce outstanding share count. Any share repurchases under our stock repurchase programs may be made through open market transactions, block trades, privately negotiated transactions, including accelerated share repurchase agreements or other means at times and in such amounts as management deems appropriate, and will be funded from our working capital or other financing alternatives. Moreover, any stock repurchases are subject to market conditions and other uncertainties and we cannot predict if or when any stock repurchases will be made. We may terminate our stock repurchase programs at any time without prior notice.

The stock repurchase activity under our stock repurchase programs during the three months ended December 31, 2025 is summarized below:

Total number of shares purchased Average price
paid per share (1)
Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs
(In millions, except per share amounts)
Balance as of September 30, 2025
$ 15,355 
October 1, 2025 through October 31, 2025
7.8  $ 70.20  7.8  14,807 
November 1, 2025 through November 30, 2025
7.1  $ 63.81  7.1  14,354 
December 1, 2025 through December 31, 2025
8.2  $ 60.91  8.2  13,854 
Balance as of December 31, 2025
23.1  23.1  $ 13,854 

(1) Average price paid per share for open market purchases includes broker commissions, but excludes excise tax.

ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in conjunction with the audited consolidated financial statements and the related notes that appear in this report. Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the Company,” and “PayPal” refer to PayPal Holdings, Inc. and its consolidated subsidiaries.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations focuses on a discussion of 2025 results as compared to 2024 results. For a discussion of 2024 results as compared to 2023 results, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Form 10-K for the year ended December 31, 2024 filed with the SEC on February 4, 2025.

BUSINESS ENVIRONMENT

THE COMPANY

At PayPal, our mission is to revolutionize commerce globally. Our products are designed to enable digital payments and simplify commerce experiences for consumers and merchants to make selling, shopping, and sending and receiving money simple, personalized, and secure, whether online or in-person. Our two-sided platform serves millions of consumers and merchants worldwide.

Regulatory environment

We operate globally and in a rapidly evolving regulatory environment characterized by a heightened focus by regulators globally on all aspects of the payments industry, including anti-money laundering, countering terrorist financing, privacy, cybersecurity, and consumer protection. The laws and regulations applicable to us, including those enacted prior to the advent of digital payments, continue to evolve through legislative and regulatory action and judicial interpretation. New or changing laws and regulations, including changes to their interpretation and implementation, as well as increased penalties and enforcement actions related to non-compliance, could have a material adverse impact on our business, results of operations, and financial condition. We monitor these areas closely and are focused on designing compliant solutions for our customers.

Cybersecurity and information security

Cybersecurity and information security risks for global payments and technology companies like us have increased significantly in recent years. Although we have developed systems and processes designed to protect the data we manage, prevent data loss and other security incidents, and enable us to effectively respond to known and potential risks, and expect to continue to expend significant resources to bolster these protections, we have experienced and expect to continue to experience cybersecurity incidents and remain subject to these risks. There can be no assurance that our security measures will provide sufficient protection or security to prevent breaches or attacks. For additional information regarding our cybersecurity and information security risks, see “Item 1A. Risk Factors— Cyberattacks and security vulnerabilities could result in serious harm to our reputation, business, and financial condition ” and “Item 1C. Cybersecurity.”

MACROECONOMIC ENVIRONMENT

A deterioration in macroeconomic conditions resulting from uncertainties and effects from tariffs, inflation, international conflicts, and interest rates could continue to increase the risk of lower consumer spending, merchant and consumer bankruptcy, insolvency, business failure, higher credit losses, foreign exchange fluctuations, or other business interruption, which may adversely impact our business. We are unable to reasonably estimate the total potential impact on our financial results that may ultimately result from such changes in the macroeconomic environment.

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OVERVIEW OF RESULTS OF OPERATIONS

The following table provides a summary of our consolidated financial results for the years ended December 31, 2025, 2024, and 2023:

  Year Ended December 31, Percent Increase/(Decrease)
  2025 2024 2023 2025 2024
  (In millions, except percentages and per share amounts)
Net revenues $ 33,172  $ 31,797  $ 29,771  4  % 7  %
Operating expenses 27,107  26,472  24,743  2  % 7  %
Operating income 6,065  5,325  5,028  14  % 6  %
Operating margin 18  % 17  % 17  % ** **
Other income (expense), net 227  4  383  ** (99) %
Income tax expense
1,059  1,182  1,165  (10) % 1  %
Effective tax rate 17  % 22  % 22  % ** **
Net income (loss) $ 5,233  $ 4,147  $ 4,246  26  % (2) %
Net income (loss) per diluted share $ 5.41  $ 3.99  $ 3.84  35  % 4  %
Net cash provided by operating activities
$ 6,416  $ 7,450  $ 4,843  (14) % 54  %

All amounts in tables are rounded to the nearest million, except as otherwise noted. As a result, certain amounts may not recalculate using the rounded amounts provided.
** Not meaningful.

Net revenues increased $1.4 billion, or 4%, in 2025 compared to 2024 driven primarily by growth in total payment volume (“TPV”, as defined below under “Key Metrics”) of 7% and an increase in interest and fee revenue earned on our loans receivable portfolio, partially offset by the unfavorable impact of hedging activities.

Total operating expenses increased $635 million, or 2%, in 2025 compared to 2024 due primarily to an increase in transaction expense, sales and marketing expense, and transaction and credit losses, partially offset by a decline in general and administrative expense, and restructuring and other expenses.

Operating income increased $740 million, or 14%, in 2025 compared to 2024 due to the increase in net revenues, partially offset by the increase in operating expenses. Our operating margin was 18% and 17% for 2025 and 2024, respectively, reflecting the positive impact of a lower transaction expense growth rate.

Net income increased $1.1 billion, or 26%, in 2025 compared to 2024 due to the previously discussed increase in operating income of $740 million, an increase of $223 million in other income (expense), net, and a decline in income tax expense of $123 million driven primarily by discrete tax adjustments including tax effects of stock-based compensation and a non-recurring internal legal entity restructuring, partially offset by Pillar Two minimum tax expense.

IMPACT OF FOREIGN EXCHANGE RATES

We have significant international operations that are denominated in foreign currencies, primarily the British pound, Euro, Australian dollar, Canadian dollar, and Indian rupee, subjecting us to foreign exchange risk which may adversely impact our financial results. The strengthening or weakening of the United States (“U.S.”) dollar versus foreign currencies in which we conduct our international operations impacts the translation of our net revenues and expenses generated in these foreign currencies into the U.S. dollar. In 2025 and 2024, we generated approximately 43% of our net revenues from customers domiciled outside of the U.S. compared to 42% in 2023. Because we generate substantial net revenues internationally, we are subject to the risks of doing business outside of the U.S., including those discussed under “Item 1A. Risk Factors.”

We calculate the year-over-year impact of foreign exchange rate movements on our business using prior period foreign exchange rates applied to current period transactional currency amounts. While changes in foreign exchange rates affect our reported results, we have a foreign currency exposure management program in which we use foreign exchange contracts, designated as cash flow hedges, intended to reduce the impact on earnings from foreign exchange rate movements. Gains and losses from these foreign exchange contracts are recognized as a component of transaction revenues or operating expenses (as applicable) in the same period the forecasted transactions impact earnings.

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In the years ended December 31, 2025 and 2024, the year-over-year foreign exchange rate movements relative to the U.S. dollar had the following impact on our reported results:

Year Ended December 31,
2025 2024
(In millions)
Favorable (unfavorable) impact to net revenues (exclusive of hedging impact)
$ 339  $ (18)
Hedging impact (166) 48 
Favorable impact to net revenues
173  30 
(Unfavorable) favorable impact to operating expense (exclusive of hedging impact) (162) 28 
Hedging impact (6) — 
(Unfavorable) favorable impact to operating expense
(168) 28 
Net favorable impact to operating income $ 5  $ 58 

While we enter into foreign exchange contracts to help reduce the impact on earnings from foreign exchange rate movements, it is impossible to eliminate the total effects of this exposure.

Prior to 2025, we used foreign exchange contracts, designated as net investment hedges, to reduce the foreign exchange risk related to our investment in certain foreign subsidiaries. Gains and losses associated with these instruments will remain in accumulated other comprehensive income (loss) until the underlying foreign subsidiaries are sold or substantially liquidated.

Given that we also have foreign exchange risk on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries, we have an additional balance sheet foreign currency exposure management program in which we use foreign exchange contracts to help offset the impact of foreign exchange rate movements on our assets and liabilities. The foreign exchange gains and losses on our assets and liabilities are recorded in other income (expense), net, and are offset by the gains and losses on the foreign exchange contracts. These foreign exchange contracts reduce, but do not entirely eliminate, the impact of foreign exchange rate movements on our assets and liabilities.

Additionally, in connection with transactions occurring in multiple currencies on our payments platform, we generally set our foreign exchange rates daily and may face financial exposure if we incorrectly set our foreign exchange rates or as a result of fluctuations between setting of foreign exchange rates and timing of transactions. While we have processes in place to mitigate these risks, it is impossible to eliminate the total effects of possible exposure associated with setting foreign exchange rates on our payments platform.

KEY METRICS AND FINANCIAL RESULTS

KEY METRICS

TPV, number of payment transactions, active accounts, and number of payment transactions per active account are key non-financial performance metrics (“key metrics”) that management uses to measure the scale of our platform and the relevance of our products and services to our customers, and are defined as follows:

• TPV is the value of payments, net of payment reversals, successfully completed on our payments platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.

• Number of payment transactions is the total number of payments, net of payment reversals, successfully completed on our payments platform or enabled by PayPal via a partner payment solution, not including gateway-exclusive transactions.

• An active account is an account registered directly with PayPal or a platform access partner that has completed a transaction on our platform, not including gateway-exclusive transactions, within the past 12 months. A platform access partner is a third party whose customers are provided access to PayPal’s platform or services through such third-party’s login credentials, including individuals and entities that utilize Hyperwallet’s payout capabilities. A user may register on our platform to access different products and may register more than one account to access a product. Accordingly, a user may have more than one active account. The number of active accounts provides management with additional perspective on the overall scale of our platform, but may not have a direct relationship to our operating results.

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• Number of payment transactions per active account reflects the total number of payment transactions within the previous 12-month period, divided by active accounts at the end of the period. The number of payment transactions per active account provides management with insight into the average number of times an account engages in payments activity on our payments platform in a given period. The number of times a consumer account or a merchant account transacts on our platform may vary significantly from the average number of payment transactions per active account.

As our transaction revenue growth is typically correlated with TPV growth and the number of payment transactions completed on our payments platform, management uses these metrics to gain insights into the scale and strength of our payments platform, the engagement level of our customers, and underlying activity and trends which may be indicators of current and future performance. We present these key metrics to enhance investors’ evaluation of the performance of our business and operating results.

Our key metrics are calculated using internal company data based on the activity we measure on our payments platform and compiled from multiple systems, including systems that are internally developed or acquired through business combinations. While the measurement of our key metrics is based on what we believe to be reasonable methodologies and estimates, there are inherent challenges and limitations in measuring our key metrics globally at scale. The methodologies used to calculate our key metrics require significant judgment.

We regularly review our processes for calculating these key metrics, and from time to time we may make adjustments to improve the accuracy or relevance of our metrics. For example, we continuously apply models, processes, and practices designed to detect and prevent fraudulent account creation on our platforms, and work to improve and enhance those capabilities. When we detect a significant volume of illegitimate activity, we generally remove the activity identified from our key metrics. Although such adjustments may impact key metrics reported in prior periods, we generally do not update previously reported key metrics to reflect these subsequent adjustments unless the retrospective impact of process improvements or enhancements is determined by management to be material.

NET REVENUES

Our revenues are classified into the following two categories:

• Transaction revenues : Net transaction fees charged to merchants and consumers on a transaction basis based on the TPV completed on our payments platform. Growth in TPV is directly impacted by the number of payment transactions that we enable on our payments platform. We generate additional revenue from merchants and consumers: on transactions where we perform currency conversion, when we enable cross-border transactions (i.e., transactions where the merchant and consumer are in different countries), when we facilitate the instant transfer of funds for our customers from their PayPal or Venmo account to their bank account or debit card, when we facilitate the purchase and sale of cryptocurrencies, as contractual compensation from sellers that violate our contractual terms (for example, through fraud or counterfeiting), and other miscellaneous fees.

• Revenues from other value added services: Net revenues derived primarily from revenue earned through partnerships, referral fees, subscription fees, gateway fees, and other services we provide to our consumers and merchants. We also earn revenues from interest and fees earned on our portfolio of loans receivable, and interest earned on certain assets underlying customer balances.

Our revenues can be significantly impacted by a number of factors, including the following:
 
• The mix of merchants, products, and services;
• The mix between domestic and cross-border transactions;
• The geographic region or country in which a transaction occurs; and
• The amount of our loans receivable outstanding with consumers and merchants.

Refer to “Part I, Item 1A, Risk Factors” in this Form 10-K for further discussion on factors that may impact our revenue.

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Net revenue analysis

The components of our net revenues for the years ended December 31, 2025, 2024, and 2023 were as follows (in millions):

Transaction revenues

Transaction revenues grew $956 million, or 3%, in 2025 compared to 2024. The increase in 2025 was driven primarily by an increase of approximately $740 million and $340 million in revenue from PayPal and Venmo products and services, respectively, which was largely driven by growth in TPV and number of payment transactions, and an increase of approximately $150 million in revenue from Braintree products and services, predominantly attributable to growth in TPV despite a decline in the number of payment transactions over the same period. The increase in TPV for Braintree products and services despite a decline in the number of payment transactions is due to our strategic shift as we focus on profitable growth. Transaction revenues in 2025 were also impacted by approximately $210 million of unfavorable impact from hedging activities resulting from losses in 2025 compared to gains in 2024.

As a result of our stronger focus on profitable growth and ongoing negotiations with merchants, we experienced lower volume and transaction revenue from our Braintree offerings in the first half of 2025 followed by revenue and TPV growth in the second half of 2025.

The graphs below present the respective key metrics (in millions) for the years ended December 31, 2025, 2024, and 2023:

*Reflects active accounts at the end of the applicable period.

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The following table provides a summary of related metrics:

  Year Ended December 31, Percent Increase/
(Decrease)
  2025 2024 2023 2025 2024

Number of payment transactions per active account 57.7  60.6  58.7  (5) % 3  %

Percent of cross-border TPV (1)
12  % 12  % 12  % ** **
Percent of TPV generated outside of the U.S.
37  % 37  % 36  % ** **

(1) Cross-border TPV occurs primarily between two PayPal accounts in different countries and includes transactions initiated through our Xoom product.
** Not meaningful.

We had active accounts of 439 million and 434 million as of December 31, 2025 and 2024, respectively, an increase of 1%. Number of payment transactions was 25.4 billion and 26.3 billion for the years ended December 31, 2025 and 2024, respectively, a decrease of 4%. TPV was $1.79 trillion and $1.68 trillion for the years ended December 31, 2025 and 2024, respectively, an increase of 7%.

Transaction revenues growth was lower than the growth in TPV in 2025 due primarily to changes in product mix, merchant mix, and unfavorable impact from foreign exchange hedging activities.

Revenues from other value added services

Revenues from other value added services increased $419 million, or 14%, in 2025 compared to 2024 due primarily to an approximately $350 million increase in interest and fee revenue earned from our loans receivable portfolios as well as an increase of approximately $160 million from revenue earned from an independent chartered financial institution (“partner institution”). Revenue from the partner institution is earned primarily through a revenue share arrangement based on the economic performance of the program related to our U.S. revolving consumer credit product and PayPal and Venmo branded credit cards, when such performance exceeds a minimum return threshold. These factors favorably impacting revenues from other value added services were partially offset by a decline of approximately $110 million from lower revenues from Honey and interest earned on certain assets underlying customer account balances resulting from lower interest rates.

Consumers that have outstanding loans and interest receivable due to our partner institution may experience hardships that result in losses recognized by the partner institution, which may result in a decrease in our revenue share earned in future periods. In the event the overall return on the PayPal branded credit programs funded by the partner institution does not meet a minimum rate of return (“minimum return threshold”) in a particular quarter, our revenue share for that period would be zero. Further, in the event the overall return on the PayPal branded credit programs managed by the partner institution does not meet the minimum return threshold as measured over four consecutive quarters and in the following quarter, we would be required to make a payment to the partner institution, subject to certain limitations. Through December 31, 2025, the overall return on the PayPal branded credit programs funded by the partner institution exceeded the minimum return threshold.

Seasonality

The Company does not experience meaningful seasonality with respect to net revenues. No individual quarter in 2025, 2024, or 2023 accounted for more than 30% of annual net revenue.

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OPERATING EXPENSES

The following table summarizes our operating expenses and related metrics we use to assess the trends in each:

  Year Ended December 31, Percent Increase/
(Decrease)
  2025 2024 2023 2025 2024
  (In millions, except percentages)
Transaction expense $ 15,987  $ 15,697  $ 14,385  2  % 9  %
Transaction and credit losses 1,720  1,442  1,682  19  % (14) %
Customer support and operations 1,704  1,768  1,919  (4) % (8) %
Sales and marketing 2,283  2,001  1,809  14  % 11  %
Technology and development 3,103  2,979  2,973  4  % —  %
General and administrative 1,979  2,147  2,059  (8) % 4  %
Restructuring and other
331  438  (84) (24) % **
Total operating expenses $ 27,107  $ 26,472  $ 24,743  2  % 7  %
Transaction expense rate (1)
0.89  % 0.93  % 0.94  % ** **
Transaction and credit loss rate (2)
0.10  % 0.09  % 0.11  % ** **

(1) Transaction expense rate is calculated by dividing transaction expense by TPV.
(2) Transaction and credit loss rate is calculated by dividing transaction and credit losses by TPV.
** Not meaningful.

Transaction expense

Transaction expense is primarily composed of the costs we incur to accept a customer’s funding source of payment. These costs include fees paid to payment processors and other financial institutions when we draw funds from a customer’s credit or debit card, bank account, or other funding source they have stored in their digital wallet. We refer to the allocation of funding sources used by our consumers as our “funding mix.” The cost of funding a transaction with a credit or debit card is generally higher than the cost of funding a transaction from a bank or through internal sources such as a PayPal or Venmo account balance or our consumer credit products. As we expand the availability and presentation of alternative funding sources to our customers, our funding mix may change, which could increase or decrease our transaction expense rate. The cost of funding a transaction is also impacted by the geographic region or country in which a transaction occurs, as we generally pay lower rates for transactions funded with credit or debit cards outside the U.S. Our transaction expense rate is impacted by changes in product mix, merchant mix, regional mix, funding mix, and fees paid to payment processors and other financial institutions. Macroeconomic environment changes may also result in behavioral shifts in consumer spending patterns affecting the type of funding source they use, which could also impact the funding mix.

Transaction expense increased $290 million, or 2%, in 2025 compared to 2024 due to the increase in TPV of 7%, partially offset by favorable changes in merchant mix to lower cost merchants within our Braintree products and services. The decrease in transaction expense rate in 2025 compared to 2024 was primarily attributable to a lower proportion of TPV from Braintree products and services, which generally have higher expense rates than other products and services, and changes in merchant mix.

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Transaction and credit losses

Transaction losses include the expense associated with our customer protection programs, fraud, and chargebacks. Credit losses include the current expected credit losses associated with our consumer and merchant loans receivable portfolio. Our transaction and credit losses fluctuate depending on many factors, including TPV, product mix, current and projected macroeconomic conditions such as unemployment rates, retail e-commerce sales and average weekly earnings, merchant insolvency events, changes to and usage of our customer protection programs, the impact of regulatory changes, and the credit quality of loans receivable arising from transactions funded with our credit products for consumers and loans and advances to merchants. Estimating our current expected credit loss allowances for our loans receivable portfolios is an inherently uncertain process and the ultimate losses we incur may vary from the current estimates. We regularly update our allowance estimates as new facts become known and events occur that may impact the ultimate losses incurred. A deterioration in macroeconomic conditions or other factors beyond those considered in our estimates could result in credit losses that exceed our current estimated credit losses and adversely impact our future operating results.

The components of our transaction and credit losses for the years ended December 31, 2025, 2024, and 2023 were as follows (in millions):

Transaction and credit losses increased $278 million, or 19%, in 2025 compared to 2024.

Transaction losses were approximately $1.3 billion and $1.1 billion for 2025 and 2024, respectively, reflecting an increase of $223 million, or 20%. Transaction loss rate (transaction losses divided by TPV) was flat at 0.07% for both the years ended December 31, 2025 and 2024, compared to 0.08% in 2023. The increase in transaction losses in 2025 was primarily due to an increase in losses driven by fraud incidents impacting our PayPal products and services.

Credit losses increased $55 million in 2025 compared to 2024. The components of credit losses for the years ended December 31, 2025, 2024, and 2023 were as follows (in millions):

Year Ended December 31,
2025 (3)
2024
2023 (3)

Net charge-offs (1)
$ 328  $ 372  $ 549 
Reserve build (release) (2)
55  (44) (59)
Credit losses $ 383  $ 328  $ 490 

(1) Net charge-offs includes principal charge-offs partially offset by recoveries for consumer and merchant receivables.
(2) Reserve build (release) represents change in allowance for principal receivables excluding foreign currency remeasurement.
(3) Includes changes in the allowance due to the reclassification of certain loans and interest receivable to or from held for sale.

Credit losses in the year ended December 31, 2025 were primarily attributable to loan originations during the period. Credit losses in the year ended December 31, 2024 were primarily attributable to loan originations during the period, partially offset by improvement in the credit quality of loans outstanding.

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Consumer loan portfolio

We have entered into forward flow arrangements with third-party investors to sell certain loans receivable portfolios. As of December 31, 2025 and 2024, loans and interest receivable, held for sale was $1.7 billion and $541 million, respectively.

The consumer loans and interest receivable balance as of December 31, 2025 and 2024 was $5.5 billion and $5.4 billion, respectively, net of participation interest sold, reflecting an increase of 1%. The increase was driven primarily by growth of our revolving credit product in the United Kingdom (“U.K.”) of approximately $370 million and our installment credit products in the U.S. and Japan of approximately $190 million and $110 million, respectively, partially offset by the impact of the reclassification of $574 million of U.S. short-term, non-interest bearing installment loans to held for sale in the third quarter of 2025 and associated forward flow arrangement.

The following table provides information regarding the credit quality of our consumer loans and interest receivable balance:

December 31,
2025 2024
Percent of consumer loans and interest receivable current
96.4  % 96.6  %
Percent of consumer loans and interest receivable > 90 days outstanding (1)
1.4  % 1.6  %
Net charge-off rate (2)
4.0  % 4.5  %

(1) Represents percentage of balances which are 90 days past the billing date or contractual repayment date, as applicable.
(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended December 31, 2025, excluding fraud losses, on consumer loans as a percentage of the average daily amount of consumer loans and interest receivable balance during the same period.

In response to changing portfolio performance and macroeconomic environment, we continue to monitor risk and evaluate and modify our acceptable risk parameters. Modifications to the acceptable risk parameters did not have a material impact on our consumer loans for the year ended December 31, 2025.

Merchant loan portfolio

We offer access to merchant finance products for certain small and medium-sized businesses, which we refer to as our merchant finance offerings. Total merchant loans, advances, and fees receivable outstanding, net of participation interest sold, as of December 31, 2025 and 2024 was $1.8 billion and $1.5 billion, respectively, reflecting an increase of 23%. The increase was due primarily to growth of approximately $190 million in our PayPal Business Loans (“PPBL”) product in the U.S. and growth in our PayPal Working Capital (“PPWC”) product portfolio of approximately $150 million, primarily in Germany, and to a lesser extent, in the U.S. and the U.K.

The following table provides information regarding the credit quality of our merchant loans, advances, and fees receivable balance:

December 31,
2025 2024
Percent of merchant loans, advances, and fees receivable current
89.8  % 90.4  %
Percent of merchant loans, advances, and fees receivable > 90 days outstanding (1)
3.5  % 2.8  %
Net charge-off rate (2)
7.3  % 5.3  %

(1) Represents percentage of balances which are 90 days past the original expected or contractual repayment period, as applicable.
(2) Net charge-off rate is the annualized ratio of net credit losses during the three months ended December 31, 2025, excluding fraud losses, on merchant loans and advances as a percentage of the average daily amount of merchant loans, advances, and fees receivable balance during the same period.

In response to changing portfolio performance and macroeconomic environment, we continue to monitor risk and evaluate and modify our acceptable risk parameters. Modifications to the acceptable risk parameters did not have a material impact on our merchant loans for the year ended December 31, 2025.

For additional information, see “Note 11—Loans and Interest Receivable” in the notes to the consolidated financial statements, and “Item 1A. Risk Factors— Our credit products expose us to additional risks ” included in this Form 10-K.

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Customer support and operations

Customer support and operations includes costs incurred in our global customer operations centers, including costs to provide call support to our customers, costs to support our trust and security programs protecting our consumers and merchants, and other costs incurred related to the delivery of our products, including payment devices, card production, and customer onboarding and compliance costs.

Customer support and operations expenses decreased $64 million, or 4%, in 2025 compared to 2024 due primarily to a decline in employee-related costs of approximately $110 million and software expenses of approximately $40 million, partially offset by an increase of approximately $80 million in other operating charges and contractors and consulting costs.

Sales and marketing

Sales and marketing includes costs incurred for customer acquisition, business development, advertising, marketing programs, and certain incentives paid to users that are not our customers and revenue share paid to partners that are not our customers.

Sales and marketing expenses increased $282 million, or 14%, in 2025 compared to 2024 due primarily to higher spend of approximately $340 million on marketing and brand advertising, including our PayPal Everywhere and Venmo Everything advertising campaigns, partially offset by lower employee-related costs of approximately $50 million.

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Technology and development

Technology and development includes costs incurred in connection with the development of our payments platform, new products, and the improvement of our existing products, including the amortization of software and website development costs incurred in developing our payments platform, which are capitalized. It also includes acquired developed technology and our site operations and other infrastructure costs incurred to support our payments platform.

Technology and development expenses increased $124 million, or 4%, in 2025 compared to 2024 due primarily to increases in contractor and consultants costs of approximately $80 million, costs from cloud computing services utilized in delivering our products and services of approximately $70 million, and software maintenance costs of approximately $60 million, partially offset by a decline in depreciation and amortization expense of approximately $50 million.

General and administrative

General and administrative includes costs incurred to provide support to our business, including legal, human resources, finance, risk and compliance, executive, and other support operations.

General and administrative expenses decreased $168 million, or 8%, in 2025 compared to 2024 due primarily to a decline in employee-related costs of approximately $120 million as well as a decline of approximately $80 million in indirect tax expense and contingency reserves.

Restructuring and other

Restructuring and other primarily consist of restructuring expenses, asset impairment charges, gain on sale of divested business, and losses on loans and interest receivable, held for sale.

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Restructuring and other decreased $107 million in 2025 compared to 2024 due primarily to a decrease in restructuring charges of approximately $170 million, partially offset by an increase in net loss of approximately $60 million from fair value adjustments to measure loans and interest receivable, held for sale, at the lower of cost or fair value, and loss on sale of loans and interest receivable previously held for sale.

During the second quarter of 2025, management undertook a large-scale initiative (the “2Q 2025 Plan”) to reengineer our existing technology infrastructure to improve scalability, reduce network latency, decrease operational costs, and optimize our workforce. The 2Q 2025 Plan is a transformative unified program designed to streamline operations and includes exiting certain data centers to migrate to more efficient cloud-based solutions. The 2Q 2025 Plan is expected to be executed over a period of 18 to 42 months with the workforce component to be substantially completed in 2027 and the technology infrastructure component to be substantially completed in 2028. The associated restructuring charges during the year ended December 31, 2025 were $102 million, consisting of $96 million in employee severance and benefits costs and $6 million in other restructuring costs.

In connection with this restructuring, we expect to incur employee severance and benefits costs of approximately $90 million to $100 million, asset impairment and accelerated depreciation charges of approximately $40 million to $60 million, and other restructuring costs of approximately $110 million to $140 million over the term of the 2Q 2025 Plan. Other restructuring costs relate to process re-engineering and one-time migration to cloud solutions and consist of contractor costs, consulting fees, and prepaid software and maintenance costs without future economic benefit. We expect annualized cost savings of approximately $280 million associated with the impacted workforce and operational costs for our technology infrastructure. We expect that we will begin to realize these cost savings upon the completion of the components of the 2Q 2025 Plan, and also expect to reinvest a portion of the reduction in annual costs to drive business priorities. The timing of activities, cost, and savings estimates continue to be developed and are subject to change.

During the first quarter of 2025, management initiated a workforce reduction to ensure compliance with a new regulation impacting operations in an international market. The associated restructuring charges during the year ended December 31, 2025 were $36 million and included employee severance and benefits costs, which were completed in the third quarter of 2025. We do not anticipate cost savings in conjunction with this reduction.

For information on restructuring plans completed prior to 2025 as well as the restructuring liabilities associated with the 2Q 2025 Plan, see “Note 17—Restructuring and Other” in the notes to the consolidated financial statements included in this Form 10-K.

Other income (expense), net

Other income (expense), net increased $223 million compared to 2024. This increase in other income (expense), net was due primarily to net gains on strategic investments in the current period compared to net losses and impairments in the prior period, which contributed an increase of approximately $450 million, partially offset by declines in interest income of approximately $150 million resulting from lower average cash and investment balances, and an increase in interest expense of approximately $60 million due to incremental expense from the March 2025 and May 2024 debt issuances.

Income tax expense

Our effective income tax rate was 17% and 22% in 2025 and 2024, respectively. The decrease in our effective income tax rate in 2025 compared to 2024 was due primarily to discrete tax adjustments including tax effects of stock-based compensation and a non-recurring internal legal entity restructuring, partially offset by Pillar Two minimum tax expense. See “Note 16—Income Taxes” to the consolidated financial statements included in this Form 10-K for more information on our effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

We require liquidity and access to capital to fund our global operations, including our customer protection programs, credit products, capital expenditures, investments in our business, potential acquisitions and strategic investments, stock repurchases and dividend payments, working capital, and other cash needs. We believe that our existing cash, cash equivalents, and investments, cash expected to be generated from operations, and our expected access to capital markets, together with potential external funding through third-party sources, will be sufficient to meet our cash requirements within the next 12 months and beyond.

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SOURCES OF LIQUIDITY

Cash, cash equivalents, and investments

The following table summarizes our cash, cash equivalents, and investments as of December 31, 2025 and 2024:

Year Ended December 31,
2025 2024
(In millions)
Cash, cash equivalents, and investments (1)(2)
$ 12,848  $ 13,947 

(1) Excludes assets related to funds receivable and customer accounts of $38.2 billion and $37.7 billion as of December 31, 2025 and 2024, respectively.
(2) Excludes total restricted cash of nil and $1 million at December 31, 2025 and 2024, respectively, and strategic investments of $1.9 billion and $1.6 billion at December 31, 2025 and 2024, respectively.

Cash, cash equivalents, and investments held by our foreign subsidiaries were $7.5 billion at December 31, 2025 and $8.5 billion at December 31, 2024, or 58% and 61%, of our total cash, cash equivalents, and investments as of those respective dates. At December 31, 2025, all of our cash, cash equivalents, and investments held by foreign subsidiaries were subject to U.S. taxation under Subpart F, Net Controlled Foreign Corporation Tested Income (“NTCI”) formally known as Global Intangible Low Taxed Income (GILTI), or the one-time transition tax under the Tax Cuts and Jobs Act of 2017. Subsequent repatriations to the U.S. will not be taxable from a U.S. federal tax perspective except for any tax on foreign exchange gains and losses; however, they may be subject to state income or foreign withholding tax.

A significant aspect of our global cash management activities involves meeting our customers’ requirements to access their cash while simultaneously meeting our regulatory financial ratio commitments in various jurisdictions. Our global cash balances are required not only to provide operational liquidity to our businesses, but also to support our global regulatory requirements across our regulated subsidiaries. Accordingly, not all of our cash is available for general corporate purposes.

Cash flows

The following table summarizes our consolidated statements of cash flows:

  Year Ended December 31,
  2025 2024 2023
  (In millions)
Net cash provided by (used in):
Operating activities
$ 6,416  $ 7,450  $ 4,843 
Investing activities
797  1,689  752 
Financing activities
(5,958) (8,276) (2,993)
Effect of exchange rates on cash, cash equivalents, and restricted cash 273  (207) 76 
Net change in cash, cash equivalents, and restricted cash
$ 1,528  $ 656  $ 2,678 

Operating activities

Cash flows from operating activities includes net income adjusted for certain non-cash expenses, timing differences between expenses recognized for provision for transaction and credit losses and actual cash transaction losses incurred, originations and proceeds from repayments and sales of loans and interest receivable originally classified as held for sale, and changes in other assets and liabilities. Significant non-cash expenses for the period include depreciation and amortization and stock-based compensation. The cash impact from actual transaction losses incurred during a period is reflected as changes in other assets and liabilities. The expenses recognized during the period for provision for credit losses are estimates of current expected credit losses on our consumer and merchant credit products. Actual charge-offs of receivables related to our consumer and merchant credit products have no impact on cash from operating activities.

Net cash provided by operating activities declined $1.0 billion in 2025 compared to 2024 due primarily to an increase of approximately $1.2 billion in originations of loans receivable held for sale, net of sales and repayments, an impact of approximately $450 million from net gains on strategic investments, and an impact of approximately $230 million from stock-based compensation, partially offset by an increase of approximately $280 million in transaction and credit losses, and a decrease of $250 million in the accretion of discounts on investments, net of amortization premiums.

Cash paid for income taxes, net in 2025, 2024, and 2023 was $1.1 billion, $1.0 billion, and $2.1 billion, respectively.

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Investing activities

Cash flows from investing activities includes purchases, maturities and sales of investments; cash paid for acquisitions and strategic investments; purchases and sales of property and equipment; purchases, originations, sales, and principal repayment of loans receivable, originally classified as held for investment; changes in funds receivable; changes in collateral posted related to derivative instruments, net; and purchases and maturities of reverse repurchase agreements.

Net cash provided by investing activities decreased $892 million in 2025 compared to 2024 due primarily to changes in funds receivable of approximately $3.2 billion, an increase of approximately $220 million in collateral posted related to derivative instruments, and an increase in purchases of property and equipment of approximately $170 million, partially offset by a decrease of approximately $1.8 billion in purchases of investments, net of maturities and sales, and a decrease of approximately $1.0 billion in purchases and originations of loans receivable, net of principal repayments.

Financing activities

Cash flows from financing activities includes proceeds from issuance of common stock, purchases of treasury stock, tax withholdings related to net share settlements of equity awards, borrowings and repayments under financing arrangements, changes in funds payable and amounts due to customers, changes in collateral received related to derivative instruments, net, borrowings and repayments under repurchase agreements, and dividend payments.

Net cash used in financing activities decreased $2.3 billion in 2025 compared to 2024 due primarily to changes related to funds payable and amounts due to customers of approximately $2.1 billion, and an increase of approximately $600 million in borrowings under financing arrangements, net of repayments, partially offset by a decline of approximately $320 million in collateral received related to derivative instruments.

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

Foreign exchange rates had a positive impact of $273 million and negative impact of $207 million on cash, cash equivalents, and restricted cash during 2025 and 2024, respectively. The positive impact in 2025 was due primarily to favorable fluctuations in the exchange rate of the U.S. dollar to the British pound and, to a lesser extent, the Australian dollar and Euro. The negative impact in 2024 was primarily due to unfavorable fluctuations in the exchange rate of the U.S. dollar to the Australian dollar and, to a lesser extent, the British pound and Euro.

Available credit and debt

In June 2023, we entered into a credit agreement (the “Credit Agreement”) that provides for an unsecured $5.0 billion, five-year revolving credit facility. The Credit Agreement includes a $150 million letter of credit sub-facility and a $600 million swingline sub-facility, with available borrowings under the revolving credit facility reduced by the amount of any letters of credit and swingline borrowings outstanding from time to time. As of December 31, 2025, no borrowings were outstanding under the Credit Agreement and as such, $5.0 billion of borrowing capacity was available for the purposes permitted by the Credit Agreement, subject to customary conditions to borrowing.

In February 2022, we entered into a credit agreement (the “Paidy Credit Agreement”) with Paidy as co-borrower, which provided for an unsecured revolving credit facility of ¥60.0 billion, which was modified in September 2022 to increase the borrowing capacity by ¥30.0 billion for a total borrowing capacity of ¥90.0 billion (approximately $575 million as of December 31, 2025). As of December 31, 2025, ¥90.0 billion (approximately $575 million) was drawn down under the Paidy Credit Agreement. Accordingly, at December 31, 2025, no borrowing capacity was available under the Paidy Credit Agreement.

We maintain uncommitted credit facilities in various regions throughout the world with a borrowing capacity of approximately $80 million in the aggregate, where we can withdraw and utilize the funds at our discretion for general corporate purposes. As of December 31, 2025, substantially all of the borrowing capacity under these credit facilities was available, subject to customary conditions to borrowing.

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In November 2025, we established a commercial paper program that allows us to issue up to $5.0 billion of unsecured commercial paper notes (“Commercial Paper Notes”) through private placement using third-party broker-dealers (the “Commercial Paper Program”). Borrowings under the Commercial Paper Program are supported by the Credit Agreement. The Company intends to maintain availability under the Credit Agreement in an amount at least equal to the aggregate outstanding borrowings under the Commercial Paper Program. Net proceeds from the issuance of the Commercial Paper Notes may be used for general corporate purposes. The maturities of the Commercial Paper Notes may vary but may not exceed 397 days from the date of issuance. There were $200 million in Commercial Paper Notes outstanding as of December 31, 2025.

In March 2025, May 2024, June 2023, May 2022, May 2020 and September 2019, we issued fixed and floating rate notes with varying maturity dates (collectively referred to as the “Notes”). Proceeds from the issuance of these Notes may be used for general corporate purposes, which may include funding the repayment or redemption of outstanding debt, share repurchases, ongoing operations, capital expenditures, and possible acquisitions of businesses, assets, or strategic investments. As of December 31, 2025, we had an aggregate principal amount of $10.9 billion in debt outstanding with varying maturity dates.

For additional information, see “Note 12—Debt” to our consolidated financial statements included in this Form 10-K.

Depending on market conditions, we may from time to time issue debt, including in private or public offerings, to fund our operating activities, finance acquisitions, make strategic investments, repurchase shares under our stock repurchase program, or reduce our cost of capital.

Credit ratings

As of December 31, 2025, we continue to be rated investment grade by Standard and Poor’s Financial Services, LLC, Fitch Ratings, Inc., and Moody’s Investors Services, Inc. We expect that these credit rating agencies will continue to monitor our performance, including our capital structure and results of operations. Our goal is to be rated investment grade, but as circumstances change, various factors could result in our credit ratings being downgraded or put on a watch list for possible downgrading. If that were to occur, it could increase our borrowing rates, including the interest rate on borrowings under our credit agreements.

CURRENT AND FUTURE CASH REQUIREMENTS

Our material cash requirements include funds to support current and potential: operating activities, credit products, customer protection programs, stock repurchases, dividend payments, strategic investments, acquisitions, other commitments, capital expenditures, and other future obligations.

Credit products

Growth in our portfolio of loans receivable increases our liquidity needs, and any inability to meet those liquidity needs could adversely affect our business. We continue to evaluate partnerships and third-party sources of funding for our credit products.

The Luxembourg Commission de Surveillance du Secteur Financier (the “CSSF”) has agreed that PayPal’s management may designate up to 50% of European customer balances held in our Luxembourg banking subsidiary to fund European and U.K. credit activities. As of December 31, 2025 and 2024, the cumulative amount approved by PayPal to be designated to fund credit activities was $2.0 billion as of those respective dates and represented approximately 26% of European customer balances made available for our corporate use as of those respective dates, as determined by applying financial regulations maintained by the CSSF. We may periodically seek to change the designation of amounts of European customer balances for our credit activities, as we deem necessary, based on utilization of the approved funds and anticipated credit funding requirements. Under certain exceptional circumstances, corporate liquidity could be called upon to meet our obligations related to our European customer balances.

We have entered into forward flow arrangements with third-party investors to sell certain loans receivable portfolios. In 2023, we entered into a multi-year agreement with a third-party investment firm to sell loans receivable, which was amended and restated in 2024 and 2025. In 2025, we entered into an updated multi-year agreement with this third-party investment firm to extend the commitment period through March 2028 and increase the maximum loans to be sold to €65 billion. Also in 2025, we entered into an arrangement with a separate third-party investment firm which has a duration of two years and up to $7.0 billion of loans receivable sales over the term. During the years ended December 31, 2025 and 2024, we had net proceeds of $26.7 billion and $20.8 billion, respectively, of loans and interest receivable sold under these arrangements. For additional information, see “Note 1—Overview and Summary of Significant Accounting Policies” to our consolidated financial statements included in this Form 10-K.

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While our objective is to expand the availability of our credit products with capital from external sources, there can be no assurance that we will be successful in achieving that goal.

Customer protection programs

The risk of losses from our customer protection programs are specific to individual consumers, merchants, and transactions, and may also be impacted by regional variations in, and changes or modifications to, the programs, including as a result of changes in regulatory requirements. For the periods presented in these consolidated financial statements included in this report, our transaction loss rate ranged between 0.07% and 0.08% of TPV. Historical loss rates may not be indicative of future results.

Capital return program

Stock repurchases

During the year ended December 31, 2025, we repurchased approximately $6.0 billion of our common stock in the open market under our stock repurchase programs authorized in June 2022 and February 2025. As of December 31, 2025, a total of approximately $13.9 billion remained available for future repurchases of our common stock under our February 2025 stock repurchase program. For additional information, see “Note 14—Stockholders’ Equity” to our consolidated financial statements included in this Form 10-K.

Implementation of dividend program

In October 2025, we announced that our Board of Directors approved the initiation of a quarterly cash dividend program and declared a cash dividend of $0.14 per share on our common stock, totaling approximately $130 million. The dividend was payable on December 10, 2025, to stockholders of record of our common stock as of the close of business on November 19, 2025. Dividend payments in future quarters will be subject to and contingent upon market conditions and approval by our Board of Directors at its sole discretion.

Future obligations

We have certain fixed contractual obligations and commitments that include future estimated payments for general operating purposes. Changes in our business needs, contractual cancellation provisions, fluctuating interest rates, and other factors may result in actual payments differing from our estimates. We cannot provide certainty regarding the timing and amounts of these payments. The following table summarizes our obligations as of December 31, 2025 that are expected to impact liquidity and cash flow in future periods. We believe we will be able to fund these obligations through our existing cash and investment portfolio and cash expected to be generated from operations. 

Purchase
Obligations Leases Long-term Debt Total
Payments Due During the Year Ending December 31, (In millions)
2026 $ 829  $ 182  $ 1,811  $ 2,822 
2027 699  181  1,446  2,326 
2028 621  147  1,467  2,235 
2029 575  125  1,815  2,515 
2030 572  110  1,261  1,943 
Thereafter 66  348  8,770  9,184 
$ 3,362  $ 1,093  $ 16,570  $ 21,025 

The significant assumptions used in our determination of amounts presented in the above table are as follows:

• Purchase obligation amounts include minimum purchase commitments for cloud computing services, advertising, and other goods and services entered into in the ordinary course of business.

• Lease amounts include primarily minimum rental payments under our non-cancelable operating leases predominantly for office and data center facilities. The amounts presented are consistent with contractual terms and are not expected to differ significantly from actual results under our existing leases, unless a substantial change in our headcount needs requires us to expand our occupied space or exit an office facility early.

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• Long-term debt amounts represent the future principal and interest payments (based on contractual interest rates) on our fixed and floating-rate debt and amounts outstanding under our credit facilities. For more information, see “Note 12—Debt” to our consolidated financial statements included in this Form 10-K.

As we are unable to reasonably predict the timing of settlement of liabilities related to unrecognized tax benefits, net, the table above does not include $2.9 billion recorded in other long-term liabilities on our consolidated balance sheets as of December 31, 2025.

Other considerations

Our liquidity, access to capital, and borrowing costs could be adversely impacted by declines in our credit rating, our financial performance, and global credit market conditions, as well as a broad range of other factors. In addition, our liquidity, access to capital, and borrowing costs could also be negatively impacted by the outcome of any of the legal or regulatory proceedings to which we are a party. See “Item 1A. Risk Factors” and “Note 13—Commitments and Contingencies” to our consolidated financial statements included in this Form 10-K for additional discussion of these and other risks that our business faces.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The application of U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions about certain items and future events that directly affect our reported financial condition. We have established detailed policies and control procedures to provide reasonable assurance that the methods used to make estimates and assumptions are well controlled and are applied consistently from period to period. The accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to our financial statements. An accounting estimate or assumption is considered critical if both (a) the nature of the estimate or assumption is material due to the levels of subjectivity and judgment involved, and (b) the impact within a reasonable range of outcomes of the estimate and assumption is material to our financial condition. Management has discussed the development, selection, and disclosure of these estimates with the Audit and Finance Committee of our Board of Directors. Our significant accounting policies, including recent accounting pronouncements, are described in “Note 1 — Overview and Summary of Significant Accounting Policies” to the consolidated financial statements included in this Form 10 ‑ K.

A quantitative sensitivity analysis is provided where information is reasonably available, can be reliably estimated, and provides material information to investors. The amounts used to assess sensitivity are included to allow users of this report to understand a general directional cause and effect of changes in the estimates and do not represent management’s predictions of variability. For all of these estimates, it should be noted that future events rarely develop exactly as forecasted, and such estimates require regular review and adjustment.

ALLOWANCE FOR TRANSACTION AND CREDIT LOSSES

Transaction and credit losses include the expense associated with our customer protection programs, fraud, chargebacks, and credit losses associated with our loans receivable balances. Our transaction and credit losses fluctuate depending on many factors, including: total TPV, product mix, current and projected macroeconomic conditions, merchant insolvency events, changes to and usage of our customer protection programs, the impact of regulatory changes, and the credit quality of loans receivable arising from transactions funded with our credit products, which include revolving and installment credit products offered to consumers at checkout, as well as merchant loans and advances arising from the PPWC and PPBL products.

We establish allowances for negative customer balances and estimated transaction losses arising from processing customer transactions, such as chargebacks for unauthorized credit card use and merchant-related chargebacks due to non-delivery or unsatisfactory delivery of eligible purchased items, purchase protection program claims, account takeovers, and bank returns and reversals. Additions to the allowance, in the form of provisions, are reflected in transaction and credit losses on our consolidated statements of income (loss). The allowances are based on known facts and circumstances, internal factors including experience with similar cases, historical trends involving collection and write-off patterns, and the mix of transaction and loss types, as well as current and projected macroeconomic factors, as appropriate. Actual losses may vary from amounts recorded given the estimates used in determining allowances for negative customer balances and transaction losses involve judgment and uncertainties and historical loss patterns may not be predictive of future losses. Changes in loss rate assumptions could have a material impact on the allowance for transaction losses. We evaluate these assumptions and estimates on an ongoing basis and periodically update our allowance as new facts become known and events occur that may impact the ultimate settlement or recovery of losses.

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We also establish an allowance for loans and interest receivable, which represents our estimate of current expected credit losses inherent in our portfolio of loans and interest receivable and includes expected credit losses from modifications of receivables to borrowers experiencing financial difficulty. Determining appropriate current expected credit loss allowances for loans and interest receivable is an inherently uncertain process and ultimate losses may vary from the current estimates. We regularly update our allowance estimates as new facts become known and events occur that may impact the settlement or recovery of losses. The allowances are maintained at a level we deem appropriate to adequately provide for current expected credit losses at the balance sheet date after incorporating the impact of externally sourced macroeconomic forecasts. As of December 31, 2025, we utilized externally published projections of forecasted U.S. unemployment rates and retail e-commerce sales and forecasted U.K. average weekly earnings, among others, over the reasonable and supportable forecast period. As of December 31, 2024, we utilized externally published projections of forecasted U.S. unemployment rates, forecasted U.S. and U.K. retail e-commerce sales, and forecasted U.K. household disposable income, among others, over the reasonable and supportable forecast period. The overall principal and interest coverage ratio as of both December 31, 2025 and 2024 was approximately 7%. A significant change in the forecasted macroeconomic factors could result in a material change in our allowances. An increase of 1% in the principal and interest coverage ratio would increase our allowances by approximately $73 million based on the loans and interest receivable balance outstanding as of December 31, 2025.

ACCOUNTING FOR INCOME TAXES

Our annual tax rate is based on our income, statutory tax rates, and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authorities. Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties. We review our tax positions quarterly and adjust the balances as new information becomes available. Our income tax rate is significantly affected by the tax rates that apply to our foreign earnings. In addition to local country tax laws and regulations, our income tax rate depends on the extent that our foreign earnings are taxed by the U.S. through provisions such as the NCTI tax and base erosion anti-abuse tax.

Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings, and available tax planning strategies. These sources of income rely heavily on estimates that are based on a number of factors, including our historical experience and short-range and long-range business forecasts. To the extent deferred tax assets are not expected to be realized, we record a valuation allowance.

We recognize and measure uncertain tax positions in accordance with U.S. GAAP, pursuant to which we only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. We report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. U.S. GAAP further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the quarter in which such change occurs. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

We file annual income tax returns in multiple taxing jurisdictions around the world. A number of years may elapse before an uncertain tax position is audited by the relevant tax authorities and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our reserves for income taxes are adequate. We adjust these reserves, as well as the related interest and penalties, where appropriate in light of changing facts and circumstances. Settlement of any particular position could require the use of cash.

Based on our results for the year ended December 31, 2025, an increase in our income tax expense of $63 million would have resulted in a one-percentage point increase in our effective tax rate.

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LOSS CONTINGENCIES

We are regularly involved in various claims, regulatory and legal proceedings, and investigations of potential violations by regulatory authorities. On a regular basis, we review the status of each significant matter and assess our potential financial exposure. If the potential loss from any claim, legal proceeding, or potential regulatory violation is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. Significant judgment is required in both the determination of probability and whether an exposure is reasonably estimable. Our judgments are subjective and are based on the status of the legal or regulatory proceedings, the merits of our defenses, and consultation with in-house and outside legal counsel. Because of uncertainties related to these matters, accruals are based on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims, litigation, or other potential violations and may revise our estimates. Due to the inherent uncertainties of legal and regulatory processes in the multiple jurisdictions in which we operate, our judgments may differ materially from the actual outcomes.

REVENUE RECOGNITION

Application of the accounting principles in U.S. GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates. Complex arrangements with nonstandard terms and conditions may require significant contract interpretation to determine the appropriate accounting. Specifically, the determination of whether we are a principal to a transaction (gross revenue) or an agent (net revenue) can require considerable judgment. Further, we provide incentive payments to consumers and merchants. Evaluating whether these incentives are a payment to a customer, or consideration payable on behalf of a customer, requires judgment. Incentives determined to be made to a customer, or payable on behalf of a customer, are recorded as a reduction to gross revenue. Incentives that are earned by the customer based on performance targets are recorded when earned, based on management’s estimate of each customer’s future performance. These accruals are regularly reviewed and estimates of performance are adjusted, as appropriate, based on changes in performance expectations, actual customer performance, amendments to existing contracts, or the execution of new contracts. Changes in judgments with respect to these assumptions and estimates could impact the amount of revenue recognized.

EVALUATION OF STRATEGIC INVESTMENTS FOR IMPAIRMENT

We have strategic investments in non-marketable equity securities, which include investments that do not have a readily determinable fair value and are measured at cost minus impairment, if any, and are adjusted for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer (the Measurement Alternative). We review these investments regularly to determine if impairment has occurred. We assess whether an impairment loss on these non-marketable equity securities, which are primarily investments in privately held companies, has occurred based on qualitative factors such as the companies’ financial condition and business outlook, industry performance, regulatory, economic or technological environment, and other relevant events and factors affecting the company. When indicators of impairment exist, we estimate the fair value of these non-marketable equity securities using the market approach and/or the income approach. If any impairment is identified, we write down the investment to its fair value and record the corresponding charge through other income (expense), net on our consolidated statements of income (loss). Estimating fair value requires judgment and use of estimates such as discount rates, forecasted cash flows, and market data of comparable companies, among others. For sensitivity analysis performed on our strategic investments, see “Item 7A. Quantitative and Qualitative Disclosures about Market Risk— Equity Investment Risk .”

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as interest rates, foreign exchange rates, and equity investment risk. Management establishes and oversees the implementation of policies governing our investing, funding, and foreign exchange derivative activities intended to mitigate market risks. We monitor risk exposures on an ongoing basis.

INTEREST RATE RISK

We are exposed to interest rate risk relating to our investment portfolio, from interest-rate sensitive assets underlying the customer balances we hold on our consolidated balance sheets as customer accounts, and a portion of our debt.

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As of December 31, 2025 and 2024, approximately 63% and 48%, respectively, of our total cash, cash equivalents, and investment portfolio (excluding restricted cash and strategic investments) was held in cash and cash equivalents. The remaining portfolio and assets underlying the customer balances that we hold on our consolidated balance sheets as customer accounts are maintained in interest and non-interest bearing bank deposits, time deposits, and available-for-sale debt securities. We seek to preserve principal while holding eligible liquid assets, as defined by applicable regulatory requirements and commercial law in certain jurisdictions where we operate, equal to at least 100% of the aggregate amount of all customer balances. We do not pay interest on amounts due to customers.

Interest rate movements affect the interest income we earn on cash and cash equivalents, time deposits, and available-for-sale debt securities and the fair value of those securities. A hypothetical 100 basis points increase in interest rates would have resulted in a decrease in the fair value of our cash equivalents and available-for-sale debt securities investment by approximately $171 million and $101 million at December 31, 2025 and 2024, respectively. Changes in the fair value of our available-for-sale debt securities resulting from such interest rate changes are reported as a component of accumulated other comprehensive income (“AOCI”) and are realized only if we sell the securities prior to their scheduled maturities or the declines in fair values are due to expected credit losses.

As of December 31, 2025 and 2024, we had an aggregate principal amount of $10.4 billion and $10.6 billion, respectively, in fixed rate debt with varying maturity dates. Since these notes bear interest at fixed rates, they do not result in any financial statement risk associated with changes in interest rates. However, the fair value of these notes fluctuates when interest rates change, increasing in periods of declining interest rates and declining in periods of increasing interest rates. As of December 31, 2025, we had an aggregate principal amount of $450 million in floating rate debt with a maturity date of March 6, 2028. A hypothetical 100 basis points increase in market interest rates would not have resulted in a material impact to interest expense recorded in the year ended December 31, 2025.

As of both December 31, 2025 and 2024, we also had revolving credit facilities of approximately $5.6 billion available to us. We are obligated to pay interest on borrowings under these facilities as well as other customary fees, including an upfront fee and an unused commitment fee based on our debt rating. Borrowings under these facilities, if any, bear interest at floating rates. As a result, we are exposed to the risk related to fluctuations in interest rates to the extent of our borrowings. As of December 31, 2025 and 2024, ¥90.0 billion (approximately $575 million) and ¥90.0 billion (approximately $574 million), respectively, was outstanding under these facilities. A 100 basis points hypothetical adverse change in applicable market interest rates would not have resulted in a material impact to interest expense recorded in the period. For additional information, see “Note 12—Debt” in the notes to the consolidated financial statements included in this Form 10-K.

Interest rates may also adversely impact our customers’ spending levels and ability and willingness to pay outstanding amounts owed to us. Higher interest rates often lead to larger payment obligations by customers of our credit products to us, or to lenders under mortgage, credit card, and other consumer and merchant loans, which may reduce our customers’ ability to remain current on their obligations to us and therefore lead to increased delinquencies, charge-offs, and allowances for loans and interest receivable, which could have an adverse effect on our net income (loss).

FOREIGN EXCHANGE RISK

We have significant operations internationally that are denominated in foreign currencies, primarily the British pound, Euro, Australian dollar, Canadian dollar, and Indian rupee, which subject us to foreign exchange risk and may adversely impact our financial results. We transact in various foreign currencies and have significant international revenues and expenses. In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services. Our cash flows, results of operations, and certain of our intercompany balances that are exposed to foreign exchange rate fluctuations may differ materially from expectations, and we may record significant gains or losses due to foreign currency fluctuations and related hedging activities. We are generally a net receiver of foreign currencies and therefore benefit from a weakening of the United States (“U.S.”) dollar, and are adversely affected by a strengthening of the U.S. dollar, relative to foreign currencies. We considered the historical trends in foreign exchange rates and determined that it was reasonably possible that changes in exchange rates of 10% for all currencies could be experienced in the near term.

We have a foreign currency exposure management program designed to identify material foreign currency exposures, manage these exposures, and reduce the potential effects of currency fluctuations on our consolidated cash flows and results of operations through the execution of foreign exchange contracts. These foreign exchange contracts are accounted for as derivative instruments; for additional details related to our foreign exchange contracts, please see “Note 10—Derivative Instruments” in the notes to the consolidated financial statements included in this Form 10-K.

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We use foreign exchange contracts to protect our forecasted U.S. dollar-equivalent earnings and our investment in foreign subsidiaries from adverse changes in foreign exchange rates. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign exchange rate movements. We designate these contracts as cash flow hedges of forecasted revenues and expenses denominated in certain foreign currencies and net investment hedges for accounting purposes. The derivative’s gain or loss is initially reported as a component of AOCI. Cash flow hedges are subsequently reclassified into revenue or expense in the same period the forecasted transaction affects earnings. The accumulated gains and losses associated with net investment hedges will remain in AOCI until the foreign subsidiaries are sold or substantially liquidated, at which point they will be reclassified into earnings.

If the U.S. dollar weakened by a hypothetical 10% at December 31, 2025 and 2024, the amounts recorded in AOCI related to our foreign exchange contracts, before taxes, would have been approximately $456 million and $380 million lower, respectively, before considering the offsetting impact of the underlying hedged item.

We have an additional balance sheet foreign exchange management program in which we use foreign exchange contracts to help offset the foreign exchange risk on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries. These contracts are not designated as hedging instruments and reduce, but do not entirely eliminate, the impact of currency exchange rate movements on our assets and liabilities. The foreign exchange gains and losses on our assets and liabilities are recorded in other income (expense), net, and are offset by the gains and losses on the foreign exchange contracts.

A hypothetical adverse change of 10% in exchange rates for all foreign currencies would have resulted in a negative impact on income before income taxes of approximately $547 million and $470 million at December 31, 2025 and 2024, respectively, without considering the offsetting effect of foreign exchange contracts. Foreign exchange contracts in place as of December 31, 2025 would have positively impacted income before income taxes by approximately $476 million, resulting in a net negative impact of approximately $71 million. Foreign exchange contracts in place as of December 31, 2024 would have positively impacted income before income taxes by approximately $445 million, resulting in a net negative impact of approximately $25 million. These reasonably possible adverse changes in exchange rates of 10% were applied to monetary assets, monetary liabilities, and available-for-sale debt securities denominated in currencies other than the functional currencies of our subsidiaries at the balance sheet dates to compute the adverse impact these changes would have had on our income before income taxes in the near term.

EQUITY INVESTMENT RISK

Our strategic investments are subject to a variety of market-related risks that could substantially reduce or increase the carrying value of the portfolio. As of December 31, 2025 and 2024, our strategic investments totaled $1.9 billion and $1.6 billion, respectively, and represented approximately 13% and 10% of our total cash, cash equivalents, and short-term and long-term investment portfolio at those respective dates. Our strategic investments include marketable equity securities, which are publicly traded, and non-marketable equity securities, which are primarily investments in privately held companies. We are required to record all adjustments to the value of these strategic investments through our consolidated statements of income (loss). As such, we expect volatility to our net income (loss) in future periods due to changes in observable prices and impairment related to our non-marketable equity securities accounted for under the Measurement Alternative. These changes could be material based on market conditions. Additionally, the financial success of our investments in privately held companies is typically dependent on a liquidity event, such as a public offering, acquisition, private sale, or other favorable market event providing the ability to realize appreciation in the value of the investment. A hypothetical adverse change of 10% in the carrying value of our strategic investments as of December 31, 2025, which could be experienced in the near term, would have resulted in a decrease of approximately $190 million to the carrying value of the portfolio. We review our non-marketable equity securities accounted for under the Measurement Alternative for impairment when events and circumstances indicate a decline in fair value of such assets below carrying value. Our analysis includes a review of recent operating results and trends, recent purchases and sales of securities, and other publicly available data, for which we assess factors such as the investees’ financial condition and business outlook, industry performance, regulatory, economic, or technological environment, and other relevant events and factors affecting the investees.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The audited consolidated financial statements covering the years ended December 31, 2025, 2024, and 2023 and accompanying notes listed in Part IV, Item 15(a)(1) of this Form 10‑K are included in this report.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.   Based on the evaluation of our disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), our principal executive officer and our principal financial officer have concluded that as of December 31, 2025, the end of the period covered by this report, our disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting.   Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation under the framework in Internal Control - Integrated Framework , our management concluded that our internal control over financial reporting was effective as of December 31, 2025.

The effectiveness of our internal control over financial reporting as of December 31, 2025 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 15(a) of this Form 10-K.

Changes in Internal Controls over Financial Reporting.   There were no changes in our internal controls over financial reporting as defined in the Exchange Act Rule 13a-15(f) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

RULE 10B5-1 TRADING PLANS

An equity trading plan is a written document that preestablishes the amounts, prices, and dates (or formula for determining the amounts, prices, and dates) of future purchases or sales of the Company’s stock, including sales of shares acquired under the Company’s employee and director equity plans.

During the quarter ended December 31, 2025, each of the following Section 16 officers adopted an equity trading plan that is intended to satisfy the affirmative defense conditions of Rule 10b-1(c) under the Exchange Act:
• Frank Keller , Executive Vice President, General Manager – Large Enterprise and Merchant Platform Group , adopted a trading plan on October 30, 2025 . The trading plan is scheduled to expire no later than December 15, 2026 with approximately 62,100 shares (vested and net shares expected to vest over the duration of the trading plan) subject to sale under the plan.
• Suzan Kereere , President, Global Markets , adopted a trading plan on November 14, 2025 . The trading plan is scheduled to expire no later than March 10, 2027 with approximately 82,100 shares (vested and net shares expected to vest over the duration of the trading plan) subject to sale under the plan.
• Christopher Natali , Senior Vice President, Chief Accounting Officer , adopted a trading plan on November 18, 2025 . The trading plan is scheduled to expire no later than December 5, 2026 with approximately 8,000 shares (vested and net shares expected to vest over the duration of the trading plan) subject to sale under the plan.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Incorporated by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2025.

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Insider Trading Policies and Procedures

The Company has insider trading policies and procedures that govern the purchase, sale, and other dispositions of its securities by directors, officers, employees, and contractors, as well as by the Company itself. We believe these policies and procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations and applicable listing standards. See “Index of Exhibits” within this Annual Report on Form 10-K for our Insider Trading Policy.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2025 (excluding the information under the subheading “Pay Versus Performance”).

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Incorporated by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2025.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Incorporated by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2025.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Incorporated by reference from our Proxy Statement for our 2026 Annual Meeting of Stockholders to be filed with the SEC within 120 days after December 31, 2025.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:

1. Consolidated Financial Statements Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )
56

Consolidated Balance Sheets
58

Consolidated Statements of Income (Loss)
59

Consolidated Statements of Comprehensive Income (Loss)
60

Consolidated Statements of Stockholders’ Equity
61

Consolidated Statements of Cash Flows
62

Notes to Consolidated Financial Statements
64

2. Financial Statement Schedule
Schedule II—Valuation and Qualifying Accounts
120

All other schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

3. Exhibits Required by Item 601 of Regulation S-K
121

The information required by this Item is set forth in the Index of Exhibits that precedes the signature page of this Annual Report.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of PayPal Holdings, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of PayPal Holdings, Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of income (loss), of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2025 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Certain Consumer Loans Receivable

As described in Notes 1 and 11 to the consolidated financial statements, the total allowance for consumer loans receivable was $369 million as of December 31, 2025. The allowance for consumer loans receivable is primarily based on expectations of credit losses using historical lifetime loss data and incorporates macroeconomic forecasts applied to the portfolio. The consumer loss models incorporate various portfolio attributes including geographic region, loan term, delinquency, credit rating, vintage, and for the revolving credit portfolio, macroeconomic factors such as forecasted trends in average weekly earnings. For certain consumer loans, the forecasted macroeconomic factors are sourced externally, using probability weighted multiple economic scenarios considering the economic conditions applicable to a particular period.

The principal considerations for our determination that performing procedures relating to the allowance for certain consumer loans receivable is a critical audit matter are (i) a high degree of auditor subjectivity and effort in performing procedures and evaluating audit evidence related to certain consumer loss models, and for the revolving credit portfolio, the macroeconomic factors related to the forecasted trends in average weekly earnings, and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the allowance for certain consumer loans receivable, including controls over certain consumer loss models, and for the revolving credit portfolio, the macroeconomic factors related to the forecasted trends in average weekly earnings. These procedures also included, among others (i) testing management’s process for developing the allowance for certain consumer loans receivable; (ii) testing the completeness and accuracy of certain data used in certain consumer loss models; and (iii) the involvement of professionals with specialized skill and knowledge to assist in evaluating (a) the appropriateness of certain consumer loss models used by management and (b) for the revolving credit portfolio, the reasonableness of macroeconomic factors related to the forecasted trends in average weekly earnings.

/s/ PricewaterhouseCoopers LLP
San Jose, California
February 3, 2026

We have served as the Company’s auditor since 2000.

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PayPal Holdings, Inc.
CONSOLIDATED BALANCE SHEETS

December 31,
2025 December 31,
2024
(In millions, except par value)

ASSETS
Current assets:
Cash and cash equivalents $ 8,049   $ 6,662  
Short-term investments 2,373   4,262  
Accounts receivable, net 840   984  
Loans and interest receivable, held for sale 1,726   541  
Loans and interest receivable, net of allowances of $ 539 and $ 461 as of December 31, 2025 and 2024, respectively
6,746   6,422  
Funds receivable and customer accounts 38,198   37,671  
Prepaid expenses and other current assets 1,827   1,664  
Total current assets 59,759   58,206  
Long-term investments 4,330   4,583  
Property and equipment, net 1,700   1,508  
Goodwill 10,864   10,837  
Intangible assets, net 208   326  
Other assets 3,312   3,265  
Total assets $ 80,173   $ 78,725  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 240   $ 227  
Funds payable and amounts due to customers 40,198   39,671  
Accrued expenses and other current liabilities 6,005   5,592  
Total current liabilities 46,443   45,490  
Other long-term liabilities 3,487   2,939  
Long-term debt 9,987   9,879  
Total liabilities 59,917   58,308  
Commitments and contingencies (Note 13)
Equity:
Common stock, $ 0.0001 par value; 4,000 shares authorized; 920 and 993 shares outstanding as of December 31, 2025 and 2024, respectively
—   —  
Preferred stock, $ 0.0001 par value; 100 shares authorized, unissued
—   —  
Treasury stock at cost, 423 and 337 shares as of December 31, 2025 and 2024, respectively
( 33,138 ) ( 27,085 )
Additional paid-in-capital 21,582   20,705  
Retained earnings 32,470   27,347  
Accumulated other comprehensive income (loss) ( 658 ) ( 550 )
Total equity 20,256   20,417  
Total liabilities and equity $ 80,173   $ 78,725  

The accompanying notes are an integral part of these consolidated financial statements.

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PayPal Holdings, Inc.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
 

  Year Ended December 31,
  2025 2024 2023
  (In millions, except for per share amounts)
Net revenues $ 33,172   $ 31,797   $ 29,771  
Operating expenses:
Transaction expense 15,987   15,697   14,385  
Transaction and credit losses 1,720   1,442   1,682  
Customer support and operations 1,704   1,768   1,919  
Sales and marketing 2,283   2,001   1,809  
Technology and development 3,103   2,979   2,973  
General and administrative 1,979   2,147   2,059  
Restructuring and other 331   438   ( 84 )
Total operating expenses 27,107   26,472   24,743  
Operating income 6,065   5,325   5,028  
Other income (expense), net 227   4   383  
Income before income taxes 6,292   5,329   5,411  
Income tax expense 1,059   1,182   1,165  
Net income (loss) $ 5,233   $ 4,147   $ 4,246  

Net income (loss) per share:
Basic $ 5.46   $ 4.03   $ 3.85  
Diluted $ 5.41   $ 3.99   $ 3.84  

Weighted average shares:
Basic 959   1,029   1,103  
Diluted 968   1,039   1,107  

The accompanying notes are an integral part of these consolidated financial statements.

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PayPal Holdings, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

  Year Ended December 31,
  2025 2024 2023
  (In millions)
Net income (loss) $ 5,233   $ 4,147   $ 4,246  
Other comprehensive income (loss), net of reclassification adjustments:
Foreign currency translation adjustments (“CTA”) 117   ( 218 ) ( 156 )
Tax (expense) benefit on foreign CTA, net
( 3 ) 14   —  
Net investment hedges CTA gains, net —   122   192  
Tax expense on net investment hedges CTA gains, net —   ( 29 ) ( 44 )
Unrealized (losses) gains on cash flow hedges, net ( 257 ) 203   ( 167 )
Tax benefit (expense) on unrealized (losses) gains on cash flow hedges, net 36   ( 10 ) 8  
Unrealized (losses) gains on available-for-sale debt securities, net ( 1 ) 148   457  
Tax (expense) benefit on unrealized gains (losses) on available-for-sale debt securities, net
—   ( 34 ) ( 108 )
Other comprehensive income (loss), net of tax ( 108 ) 196   182  
Comprehensive income (loss) $ 5,125   $ 4,343   $ 4,428  

The accompanying notes are an integral part of these consolidated financial statements.

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PayPal Holdings, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock Shares Treasury Stock Additional Paid-In Capital Accumulated Other
Comprehensive Income
(Loss) Retained Earnings Total 
Equity

  (In millions)
Balances at December 31, 2022 1,136   $ ( 16,079 ) $ 18,327   $ ( 928 ) $ 18,954   $ 20,274  
Net income —  —  —  —  4,246   4,246  
Foreign CTA —  —  —  ( 156 ) —  ( 156 )
Net investment hedge CTA gains, net
—  —  —  192   —  192  
Tax expense on net investment hedges CTA gains, net
—  —  —  ( 44 ) —  ( 44 )
Unrealized losses on cash flow hedges, net
—  —  —  ( 167 ) —  ( 167 )
Tax benefit on unrealized losses on cash flow hedges, net
—  —  —  8   —  8  
Unrealized gains on available-for-sale debt securities, net
—  —  —  457   —  457  
Tax expense on unrealized gains on available-for-sale debt securities, net
—  —  —  ( 108 ) —  ( 108 )
Common stock and stock-based awards issued, net of shares withheld for employee taxes
9   —  ( 130 ) —  —  ( 130 )
Common stock repurchased ( 74 ) ( 5,046 ) —  —  —  ( 5,046 )
Treasury stock reissuance 1   80   —  —  —  80  
Stock-based compensation —  —  1,445   —  —  1,445  

Balances at December 31, 2023 1,072   $ ( 21,045 ) $ 19,642   $ ( 746 ) $ 23,200   $ 21,051  
Net income —  —  —  —  4,147   4,147  
Foreign CTA —  —  —  ( 218 ) —  ( 218 )
Tax benefit on foreign CTA —  —  —  14   —  14  
Net investment hedge CTA gains, net
—  —  —  122   —  122  
Tax expense on net investment hedges CTA gains, net
—  —  —  ( 29 ) —  ( 29 )
Unrealized gains on cash flow hedges, net
—  —  —  203   —  203  
Tax expense on unrealized gains on cash flow hedges, net
—  —  —  ( 10 ) —  ( 10 )
Unrealized gains on available-for-sale debt securities, net
—  —  —  148   —  148  
Tax expense on unrealized gains on available-for-sale debt securities, net
—  —  —  ( 34 ) —  ( 34 )
Common stock and stock-based awards issued, net of shares withheld for employee taxes 13   —  ( 263 ) —  —  ( 263 )
Common stock repurchased ( 92 ) ( 6,053 ) —  —  —  ( 6,053 )
Treasury stock reissuance
—  13   —  —  —  13  
Stock-based compensation —  —  1,326   —  —  1,326  

Balances at December 31, 2024 993   $ ( 27,085 ) $ 20,705   $ ( 550 ) $ 27,347   $ 20,417  
Adoption of crypto asset accounting standard
—  —  —  —  20   20  
Net income —  —  —  —  5,233   5,233  
Foreign CTA —  —  —  117   —  117  
Tax expense on foreign CTA —  —  —  ( 3 ) —  ( 3 )

Unrealized losses on cash flow hedges, net
—  —  —  ( 257 ) —  ( 257 )
Tax benefit on unrealized losses on cash flow hedges, net
—  —  —  36   —  36  
Unrealized losses on available-for-sale debt securities, net
—  —  —  ( 1 ) —  ( 1 )

Common stock and stock-based awards issued, net of shares withheld for employee taxes 13   —  ( 258 ) —  —  ( 258 )
Common stock repurchased ( 86 ) ( 6,053 ) —  —  —  ( 6,053 )

Cash dividends declared ($ 0.14 per share)
—  —  —  —  ( 130 ) ( 130 )
Stock-based compensation —  —  1,135   —  —  1,135  
Balances at December 31, 2025 920   $ ( 33,138 ) $ 21,582   $ ( 658 ) $ 32,470   $ 20,256  

The accompanying notes are an integral part of these consolidated financial statements.

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PayPal Holdings, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS

  Year Ended December 31,
  2025 2024 2023
  (In millions)
Cash flows from operating activities:
Net income (loss) $ 5,233   $ 4,147   $ 4,246  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Transaction and credit losses 1,720   1,442   1,682  
Depreciation and amortization 963   1,032   1,072  
Stock-based compensation 1,002   1,230   1,475  
Deferred income taxes 217   231   ( 668 )

Net (gains) losses on strategic investments
( 162 ) 285   ( 201 )
Gain on divestiture of business, excluding transaction costs
—   —   ( 356 )
Accretion of discounts on investments, net of amortization of premiums ( 83 ) ( 335 ) ( 367 )
Adjustments to loans and interest receivable, held for sale 193   125   53  
Other ( 287 ) ( 3 ) ( 104 )
Originations of loans receivable, held for sale ( 36,730 ) ( 24,498 ) ( 11,470 )
Proceeds from repayments and sales of loans receivable, originally classified as held for sale 35,414   24,352   10,795  
Changes in assets and liabilities:
Accounts receivable 144   85   ( 114 )

Transaction loss allowance for cash losses, net ( 1,318 ) ( 1,131 ) ( 1,188 )
Other current assets and non-current assets ( 493 ) ( 393 ) ( 116 )
Accounts payable 4   83   7  

Other current liabilities and non-current liabilities 599   798   97  

Net cash provided by operating activities 6,416   7,450   4,843  
Cash flows from investing activities:

Purchases of reverse repurchase agreements ( 201 ) ( 424 ) —  
Maturities of reverse repurchase agreements 288   337   —  
Purchases of property and equipment ( 852 ) ( 683 ) ( 623 )
Proceeds from sales of property and equipment 3   1   45  
Purchases and originations of loans receivable ( 20,190 ) ( 21,807 ) ( 25,198 )
Proceeds from repayments and sales of loans receivable, originally classified as held for investment 19,688   20,272   26,660  
Purchases of investments ( 20,399 ) ( 26,209 ) ( 21,980 )
Maturities and sales of investments 22,933   26,962   24,295  

Proceeds from divestiture of business, net of cash divested
—   —   466  
Funds receivable ( 303 ) 2,908   ( 2,943 )
Collateral posted related to derivative instruments, net ( 149 ) 73   ( 56 )
Other ( 21 ) 259   86  
Net cash provided by investing activities 797   1,689   752  
Cash flows from financing activities:
Borrowings from repurchase agreements 2,949   656   —  
Repayments of repurchase agreements ( 2,949 ) ( 656 ) —  
Proceeds from issuance of common stock 117   95   127  

Purchases of treasury stock ( 6,052 ) ( 6,047 ) ( 5,002 )
Tax withholdings related to net share settlements of equity awards ( 383 ) ( 351 ) ( 257 )
Borrowings under financing arrangements 2,637   1,546   1,528  
Repayments under financing arrangements ( 2,155 ) ( 1,661 ) ( 1,053 )
Funds payable and amounts due to customers 174   ( 1,954 ) 1,861  
Collateral received related to derivative instruments and reverse repurchase agreements, net ( 160 ) 156   ( 197 )
Payments of dividends to stockholders ( 130 ) —   —  
Other ( 6 ) ( 60 ) —  
Net cash used in financing activities ( 5,958 ) ( 8,276 ) ( 2,993 )

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PayPal Holdings, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

  Year Ended December 31,
  2025 2024 2023
  (In millions)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash 273   ( 207 ) 76  
Net change in cash, cash equivalents, and restricted cash 1,528   656   2,678  
Cash, cash equivalents, and restricted cash at beginning of period 22,490   21,834   19,156  
Cash, cash equivalents, and restricted cash at end of period $ 24,018   $ 22,490   $ 21,834  

Supplemental cash flow disclosures:
Cash paid for interest $ 406   $ 366   $ 331  
Cash paid for income taxes, net $ 1,099   $ 1,027   $ 2,118  

The table below reconciles cash, cash equivalents, and restricted cash as reported in the consolidated balance sheets to the total of the same amounts shown in the consolidated statements of cash flows:
Cash and cash equivalents $ 8,049   $ 6,662   $ 9,081  
Short-term and long-term investments —   1   3  
Funds receivable and customer accounts 15,969   15,827   12,750  
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 24,018   $ 22,490   $ 21,834  

The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1— OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

OVERVIEW AND ORGANIZATION

PayPal Holdings, Inc. (“PayPal,” the “Company,” “we,” “us,” or “our”) was incorporated in Delaware in January 2015. At PayPal, our mission is to revolutionize commerce globally. Our products are designed to enable digital payments and simplify commerce experiences for consumers and merchants to make selling, shopping, and sending and receiving money simple, personalized, and secure, whether online or in-person. Our two-sided platform serves millions of consumers and merchants worldwide.

SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation
The accompanying consolidated financial statements include the financial statements of PayPal and our wholly- and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Investments in entities where we have the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. For such investments, our share of the investee’s results of operations is included in other income (expense), net on our consolidated statements of income (loss). Investments in entities where we do not have the ability to exercise significant influence over the investee are accounted for at fair value or cost minus impairment, if any, adjusted for changes resulting from observable price changes, which are included in other income (expense), net on our consolidated statements of income (loss). Our investment balances are included in long-term investments on our consolidated balance sheets.

We determine at the inception of each investment, and re-evaluate if certain events occur, whether an entity in which we have made an investment is considered a variable interest entity (“VIE”). If we determine an investment is in a VIE, we then assess if we are the primary beneficiary, which would require consolidation. As of December 31, 2025 and December 31, 2024, no VIEs qualified for consolidation as the structures of these entities do not provide us with both the ability to direct activities that would significantly impact their economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

As of December 31, 2025 and December 31, 2024, the carrying value of our investments in nonconsolidated VIEs that are primarily investments in funds that are limited partnerships or similar structures which are focused on increasing access to capital for underserved communities was $ 202  million and $ 187  million, respectively, and is included as non-marketable equity securities applying the equity method of accounting in long-term investments on our consolidated balance sheets. Our maximum exposure to loss related to these nonconsolidated VIEs, which represents funded commitments and any future funding commitments, was $ 246  million as of both December 31, 2025 and 2024.
Certain amounts for prior years have been reclassified to conform to the financial statement presentation as of and for the year ended December 31, 2025.  

Use of estimates

The preparation of consolidated financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to provisions for transaction and credit losses, income taxes, loss contingencies, revenue recognition, and the evaluation of strategic investments for impairment. We base our estimates on historical experience and various other assumptions which we believe to be reasonable under the circumstances. Actual results could materially differ from these estimates.

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Cash and cash equivalents

Cash and cash equivalents are short-term, highly liquid investments and are primarily comprised of bank deposits, PayPal USD stablecoin (“PYUSD”), money market funds and debt securities with original maturities of three months or less when purchased. PYUSD is a stablecoin pegged to the U.S. dollar and fully backed by U.S. dollar deposits, U.S. Treasuries, and similar cash equivalents. Each token of PYUSD held by PayPal represents a contractual right to redeem with the third-party issuer of PYUSD for one U.S. dollar.

Investments

Short-term investments include time deposits and available-for-sale debt securities with original maturities of greater than three months but less than one year when purchased or maturities of one year or less on the reporting date. Long-term investments include time deposits and available-for-sale debt securities with maturities exceeding one year on the reporting date, as well as our strategic investments. Our available-for-sale debt securities are reported at fair value using the specific identification method. Unrealized gains and losses are reported as a component of other comprehensive income (loss), net of related estimated tax provisions or benefits.
 
We elect to account for available-for-sale debt securities denominated in currencies other than the functional currency of our subsidiaries, underlying funds receivable and customer accounts, short-term and long-term investments, under the fair value option as further discussed in “Note 9—Fair Value Measurement of Assets and Liabilities.” The changes in fair value related to initial measurement and subsequent changes in fair value are included as a component of other income (expense), net on our consolidated statements of income (loss).

Our strategic investments consist of marketable equity securities, which are publicly traded, and non-marketable equity securities, which are primarily investments in privately held companies. Marketable equity securities have readily determinable fair values with changes in fair value recorded in other income (expense), net. Non-marketable equity securities include investments that do not have a readily determinable fair value, as well as equity method investments. Our investments that do not have a readily determinable fair value are measured at cost minus impairment, if any, and are adjusted for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer (the “Measurement Alternative”). Non-marketable equity securities also include our investments where we have the ability to exercise significant influence, but not control, over the investee and these securities are accounted for using the equity method of accounting. All gains and losses on these investments, realized and unrealized, and our share of earnings or losses from investments accounted for using the equity method are recognized in other income (expense), net on our consolidated statements of income (loss).

We assess whether an impairment loss on our non-marketable equity securities accounted for under the Measurement Alternative has occurred based on qualitative factors such as the companies’ financial condition and business outlook, industry performance, regulatory, economic or technological environment, and other relevant events and factors affecting the company. We assess whether an other-than-temporary impairment loss on our equity method investments has occurred due to declines in fair value or other market conditions. If any impairment is identified for non-marketable equity securities or impairment is considered other-than-temporary for our equity method investments, we write down the investment to its fair value and record the corresponding charge through other income (expense), net on our consolidated statements of income (loss).

Our available-for-sale debt securities in an unrealized loss position are written down to fair value through a charge to other income (expense), net on our consolidated statements of income (loss) if we intend to sell the security or it is more likely than not we will be required to sell the security before recovery of its amortized cost basis. For the remaining available-for-sale debt securities in an unrealized loss position, if we identify that the decline in fair value has resulted from credit losses, taking into consideration changes to the rating of the security by rating agencies, implied yields versus benchmark yields, and the extent to which fair value is less than amortized cost, among other factors, we estimate the present value of cash flows expected to be collected. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any portion of impairment not related to credit losses is recognized in other comprehensive income (loss).

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Accounts receivable, net

Accounts receivable is primarily related to revenue earned from customers and is reduced by an allowance for credit losses. In estimating expected credit losses on accounts receivable, we assume that current conditions at the balance sheet date remain unchanged over the life of these short-term assets. For the years ended December 31, 2025 and 2024, the allowance for credit losses was not significant. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified.

Loans and interest receivable, held for sale

When PayPal has the intent to sell loans to third-party investors they are classified as loans and interest receivable, held for sale on our consolidated balance sheets and reported at the lower of cost or fair value, determined on an aggregate basis, with valuation changes and any associated charge-offs recorded in restructuring and other on our consolidated statements of income (loss). Interest income on interest bearing held-for-sale loans is accrued and recognized based on the contractual rate of interest.

Once PayPal makes the decision to sell loans classified as held for investment, they are reclassified from loans and interest receivable, net to loans and interest receivable, held for sale. When loans are reclassified to held for sale, any previously recorded allowance for credit losses is reversed, resulting in a decrease in transaction and credit losses on our consolidated statements of income (loss). The loan is then recorded consistent with loans held for sale.

Sales of loan receivables to third-party investors are accounted for as a true sale based on our determination that these receivables met all the necessary criteria for such accounting including legal isolation for transferred assets, ability of the transferee to pledge or exchange the transferred assets without constraint, and the transfer of control, and thus, we no longer record these receivables on our consolidated financial statements. We also conclude that our continuing involvement in the arrangement does not invalidate this determination. We retain the servicing rights on loans that are sold to third-party investors and we receive a market-based servicing fee for servicing the sold loans.

Loans and interest receivable, net

When PayPal has the intent and ability to hold loans for the foreseeable future or until maturity or payoff they are classified as loans and interest receivable, net on our consolidated balance sheets and are reported at their outstanding balances, net of any participation interests sold, unamortized deferred origination fees and costs, and allowance for expected credit losses.

Loans and interest receivable, net represents consumer loans originated under our revolving credit products (PayPal Credit) and our installment credit products (which we also refer to as our buy now, pay later (“BNPL”) products), and merchant receivables originated under our PayPal Working Capital (“PPWC”) product and PayPal Business Loan (“PPBL”) product.

In the U.S., our consumer interest-bearing installment products, PPWC, and PPBL are provided under a program agreement we have with an independent chartered financial institution (“partner institution”). The partner institution extends credit to consumers for interest-bearing installment products and to merchants for the PPWC and PPBL products, and we purchase the related receivables originated by the partner institution. In the U.S., we extend certain short-term, interest-free, installment loans to consumers through a U.S. subsidiary. For our international consumer credit products, we extend credit in the U.K and the rest of Europe through our U.K. subsidiary and Luxembourg banking subsidiary, respectively, and in Australia and Japan, through local subsidiaries. For our merchant finance products outside the U.S., we extend working capital advances and loans in the U.K. and rest of Europe through our U.K. subsidiary and Luxembourg banking subsidiary, respectively, and working capital loans in Australia through an Australian subsidiary.

As part of our arrangement with the partner institution in the U.S., we sell back a participation interest in the pool of receivables for the consumer interest-bearing installment products, PPWC, and PPBL. The partner institution has no recourse against us related to their participation interests for failure of debtors to pay when due. The participation interests held by the partner institution have the same priority to the interests held by us and are subject to the same credit, prepayment, and interest rate risk associated with this pool of receivables. All risks of loss are shared pro rata based on participation interests held among all participating stakeholders. We account for the asset transfer as a sale and derecognize the portion of the participation interests for which control has been surrendered. For this arrangement, gains or losses on the sale of the participation interests are not material as the carrying amount of the participation interest sold approximates the fair value at time of transfer. We retain the servicing rights for the entire pool of consumer receivables outstanding and receive a market-based service fee for servicing the assets underlying the participation interest sold.

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The terms of our consumer relationships require us to submit monthly bills to the consumer detailing loan repayment requirements. The terms also allow us to charge the consumer interest and fees in certain circumstances. Due to the relatively small dollar amount of individual loans and interest receivable, we do not require collateral on these balances.

In certain instances where a merchant is able to demonstrate that it is experiencing financial difficulty, there may be a modification of the loan or advance and the related fee receivable for which it is probable that, without modification, we would be unable to collect all amounts due.

Another partner institution is the exclusive issuer of the PayPal Credit consumer financing program in the U.S., which also includes PayPal and Venmo branded credit cards. We do not hold an ownership interest in the receivables generated through the program and therefore, do not record these receivables on our consolidated financial statements. PayPal earns a revenue share on the portfolio of consumer receivables owned by the partner institution, which is recorded in revenues from other value added services on our consolidated statements of income (loss).

If PayPal no longer intends to sell loans and interest receivable, held for sale, such loans would be reclassified to loans and interest receivable, net. When a loan is reclassified as held for investment, any amounts previously recorded in order to measure the loan at the lower of cost or fair value are reversed within restructuring and other on our consolidated statements of income (loss) and the loan is recorded consistent with loans held for investment.

Allowance for loans and interest receivable

The allowance for loans and interest receivable represents our estimate of current expected credit losses inherent in our portfolio of loans and interest receivables. Changes to the allowance for loans receivable are reflected as a component of transaction and credit losses on our consolidated statements of income (loss). Changes to the allowance for interest and fees receivable are reflected within revenues from other value added services in net revenues on our consolidated statements of income (loss), or within deferred revenue in accrued expenses and other current liabilities on our consolidated balance sheets, when interest and fees are billed at the inception of a loan or advance. The evaluation process to assess the adequacy of allowances is subject to numerous estimates and judgments.

The allowance for consumer loans and interest receivable is primarily based on expectations of credit losses using historical lifetime loss data and incorporates macroeconomic forecasts applied to the portfolio. The consumer loss models incorporate various portfolio attributes including geographic region, loan term, delinquency, credit rating, vintage, and for the revolving credit portfolio, macroeconomic factors such as forecasted trends in average weekly earnings starting in the second quarter of 2025 and utilizing household disposable income and retail e-commerce sales through the first quarter of 2025. The forecasted macroeconomic factors are sourced externally, using probability weighted multiple economic scenarios for most consumer loan portfolios starting in the second quarter of 2025 (and through the first quarter of 2025 a single scenario), that we believe are most appropriate to the economic conditions applicable to a particular period. The change to multiple macroeconomic scenarios did not have a material impact on the provision for the year ended December 31, 2025. For both 2025 and 2024, the reasonable and supportable forecast period for revolving products and installment products (not classified as held for sale) that we have included in our projected loss rates, which approximates the estimated life of the loans, was approximately 5 years and 7 months to 3.5 years, respectively. Projected loss rates (inclusive of historical loss data and for the revolving credit portfolio, macroeconomic factors) are applied to the principal amount of our consumer receivables. We also include qualitative adjustments that incorporate incremental information not captured in the quantitative estimates of our current expected credit losses, such as expectations of macroeconomic conditions not captured in the loss models for our installment products. The allowance for current expected credit losses on interest and fees receivable is determined primarily by applying loss curves to each portfolio by geography, delinquency, and period of origination, among other factors.

We charge off consumer receivable balances in the month in which a customer’s balance becomes 180 days past the billing date or contractual repayment date, except for the U.S. consumer interest-bearing installment receivables, which are charged off 120 days past the contractual repayment date. Charge-offs are recorded as a reduction to our allowance for loans and interest receivable and subsequent recoveries, if any, are recorded as an increase to the allowance for loans and interest receivable. Loans receivable continue to accrue interest until they are charged off.

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The allowance for merchant loans, advances, and fees receivable is primarily based on expectations of credit losses using historical lifetime loss data as well as macroeconomic forecasts applied to the portfolio. The merchant loss models incorporate various portfolio attributes including geographic region, first borrowing versus repeat borrowing, delinquency, internally developed risk ratings, and vintage, as well as macroeconomic factors such as forecasted trends in unemployment rates and retail e-commerce sales. The forecasted macroeconomic factors are sourced externally, using probability weighted multiple economic scenarios starting in the second quarter of 2025 (and through the first quarter of 2025, a single scenario) that we believe are most appropriate to the economic conditions applicable to a particular period. The change to multiple macroeconomic scenarios did not have a material impact on the provision for the year ended December 31, 2025. The reasonable and supportable forecast period for merchant products that we have included in our projected loss rates for 2025 and 2024, which approximates the estimated life of the loans, was approximately 2.5 to 3.5 years. Projected loss rates, inclusive of historical loss data and macroeconomic factors, are applied to the principal amount of our merchant receivables. We also include qualitative adjustments that incorporate incremental information not captured in the quantitative estimates of our current expected credit losses. The allowance for current expected credit losses on fees receivable is determined primarily by applying loss curves to each portfolio by geography, delinquency, and period of origination, among other factors.

For merchant loans and advances, the determination of delinquency is based on the current expected or contractual repayment period of the loan or advance and fixed fee payment as compared to the original expected or contractual repayment period. We charge off the receivables outstanding under our PPBL product when the repayments are 180 days past the contractual repayment date. We charge off the receivables outstanding under our PPWC product when the repayments are 180 days past our expectation of repayments and the merchant has not made a payment in the last 60 days, or when the repayments are 360 days past due regardless of whether the merchant has made a payment in the last 60 days. Charge-offs are recorded as a reduction to our allowance for loans and interest receivable and subsequent recoveries, if any, are recorded as an increase to the allowance for loans and interest receivable.

Customer accounts

We hold all customer balances, both in the U.S. and internationally, as direct claims against us which are reflected on our consolidated balance sheets as a liability classified as amounts due to customers. Certain jurisdictions where PayPal operates require us to hold eligible liquid assets, as defined by applicable regulatory requirements and commercial law in these jurisdictions, equal to at least 100 % of the aggregate amount of all customer balances. Therefore, we restrict the use of the assets underlying the customer balances to meet these regulatory requirements and separately classify the assets as customer accounts on our consolidated balance sheets. We classify the assets underlying the customer balances as current based on their purpose and availability to fulfill our direct obligation under amounts due to customers. Customer funds for which PayPal does not have a present right to obtain the related economic benefits or restrict others’ access to those benefits are not reflected on our consolidated balance sheets. These funds include U.S. dollar funds which are deposited at one or more third-party financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”) and are eligible for FDIC pass-through insurance (subject to applicable limits).