“While we are still finalizing our plans, this first phase of actions could result in a transformation related charge of approximately $120 million to $140 million during the second half of 2026.”

In context

“Jamie Miller (Chief Financial and Operating Officer): Thanks, Enrique. Over the last quarter, the team has focused on sharpening our strategy across each of our three core businesses, while taking a rigorous approach to identifying the opportunities where we believe we can generate the highest and most durable return on our investments. Based on the progress to date, we are confident that greater strategic clarity underpinned by sharper execution and a leaner cost structure will enable us to deliver durable results over time. Turning to the financials in more detail on Slide 9. PayPal delivered a good quarter with both transaction margin dollars and non-GAAP earnings per share coming in above our guide. Total payment volume was $486 billion, accelerating to 9% currency-neutral growth. On a currency-neutral basis, online branded checkout volume growth stabilized at 2% for a second consecutive quarter, while Braintree and Venmo continue to grow in the mid-teens. Second quarter revenue grew 5% on a spot and 3% on a currency-neutral basis. Our financial services portfolio, including Credit and Buy Now Pay Later, is showing good momentum on pace to grow revenue at least twice as fast as the total company this year. Transaction margin dollars excluding interest on customer balances grew 3%. The drivers of our year-over-year transaction margin dollar growth were broad-based. From a product lens, drivers included Venmo monetization, continued strong credit performance and Braintree improvement. In addition, FX favorability and lower losses across PayPal and Venmo contributed to transaction margin dollar performance in the quarter. Growth in these areas more than offset investments to strengthen branded checkout and drive higher engagement over time. Second quarter non-GAAP earnings per share came in better than our guidance, declining 1% to $1.38. We saw benefits from stronger transaction margin dollars growth and a lower effective tax rate with some offset from higher non-transaction operating expense, which I will discuss shortly. Adjusted free cash flow, which excludes the timing impact from the origination and sale of Paylater receivables, was $1.8 billion. Turning to Slide 10. We continue to drive deeper, more active relationships with our customers. Monthly active accounts increased 1% to 228 million. Transactions per active account, excluding PSP, grew 7%, accelerating for a second consecutive quarter. Moving to Slide 11. We continue to see more diversified sources of growth across our business. Branded experience TPV, which includes online checkout, PayPal and Venmo debit as well as tap-to-pay, grew 6% compared to 5% in the first quarter and 4% in the fourth quarter. While debit card and tap-to-pay spend represent a small portion of branded experiences volume today, growth remained strong at greater than 60% year-over-year. Venmo TPV continues to reach new highs, delivering 14% growth year-over-year and marking the seventh consecutive quarter of double-digit growth. Online branded checkout volume growth further stabilized, up 2% on a currency-neutral basis, consistent with first quarter growth. This was slightly better than our expectations, primarily driven by accelerating Buy Now Pay Later and Pay with Venmo performance as well as faster growth in the U.S. Pay with Venmo and Buy Now Pay Later continue to outpace the market, taking share from other payment methods and growing 44% and 26%. P2P and other consumer volume growth remains healthy, up 10% in the second quarter and reflecting the debit card and Venmo momentum I just mentioned. Turning to PSP. Volume growth accelerated to 13% from 11% in the first quarter and from 7% in the second half of 2025. Braintree TPV continued to grow in the mid-teens from a combination of growth in profitable front book business, high retention and growth alongside our existing merchant base. We are driving higher attachment of value-added services, supporting margin expansion over time. Moving to more financial detail on Slide 12. Transaction revenue grew 5% on a spot basis to $7.8 billion. Other value-added services revenue was approximately flat at $850 million driven by strong contribution from consumer and merchant credit offset primarily by lower interest rates on customer balances. Transaction take rate declined by 7 basis points to 1.61%. Operationally, this was driven by a combination of factors, including branded co-marketing investments and mix dynamics, including faster Venmo growth. Transaction margin dollars excluding interest on customer balances grew 3%. Within volume-based expenses, transaction expense as a percentage of TPV was 90 basis points, increasing slightly year-over-year from mix shift to Braintree. Transaction loss as a percentage of TPV improved slightly year-over-year to 7 basis points. This reflects our team's ongoing work and OpEx investments to improve and strengthen onboarding, fraud prevention and risk management capabilities. During the second quarter, we made meaningful progress on our reorganization and sharpened our view of the highest impact actions needed to accelerate our growth strategy. At the same time, we saw stronger-than-expected underlying business performance, including transaction margin trends. And against that backdrop, we have invested more heavily in a number of high priority areas, which helped drive higher non-transaction-related operating expense in the quarter and will continue in the third quarter. These investments reflect our prioritization of operating spend in the areas where we see the greatest long-term value creation and position us to capitalize on the momentum we're seeing while advancing our transformation. It's important to note that part of the increase is timing; we're investing ahead of cost savings that we expect to become more material in the fourth quarter. These investments include platform and cloud modernization, risk capabilities that improve loss performance and targeted investments to support our highest priority growth initiatives. As a result of higher operating expenses, as well as the lapping of the nonrecurring partner benefit previously discussed, non-GAAP operating income was down 8% in the quarter to $1.5 billion. Moving to capital allocation. In the second quarter, we completed $1.5 billion in share repurchases, bringing the trailing 12-month total to $6 billion. We ended the quarter with $15.3 billion in cash, cash equivalents and investments and $13.4 billion in debt. Moving to guidance on Slide 13 for the third quarter and full year 2026. We are pleased with our first half performance, reflecting continued stabilization and the resilience of our business while driving significant organizational change. As Enrique highlighted, 2026 is a year where PayPal is strengthening its fundamentals and its execution muscle to position for greater momentum in the years ahead. The progress we've made to date gives us greater clarity on the path forward for each of our three main businesses. With that as a backdrop, we are raising guidance for the full year. We now expect transaction margin dollars to increase to approximately $15.6 billion or $14.5 billion, excluding interest on customer balances. Approximately 7% to 8% growth in non-transaction operating expenses and non-GAAP EPS to increase to $5.38. Our guidance continues to assume at least $6 billion of adjusted free cash flow and approximately $6 billion in share repurchases. For online branded checkout, we now expect low single-digit TPV growth on a currency-neutral basis for the full year, reflecting a modest improvement from our prior expectations. We are encouraged by the early progress of our targeted growth investments and remain disciplined in evaluating their performance, balancing near and longer-term value creation. We now expect these investments to represent a modestly lower headwind to transaction margin dollars in 2026 than the three points we previously anticipated. This primarily reflects the timing of investment activity during the year rather than any change to our conviction around these initiatives. Consistent with the investments we've already discussed, a portion of that benefit is offset by higher non-transaction OpEx as we continue investing in our transformation and other high priority opportunities. On savings initiatives, we have simplified our operating model and are on track to remove three organizational layers. We have decreased end-to-end production time by embedding AI within the full software delivery cycle, and we have prioritized geographies for investment and identified specific rationalization opportunities. We are on track to achieve at least $1.5 billion in gross run rate cost savings over the next two to three years. We have already identified actions to unlock approximately $400 million of new run rate gross savings by the end of this year, with a portion to be realized in the fourth quarter. While we are still finalizing our plans, this first phase of actions could result in a transformation related charge of approximately $120 million to $140 million during the second half of 2026. Consistent with what we shared last quarter, we intend to reinvest a significant portion of these savings into our highest priority growth initiatives while improving operating leverage and our overall financial profile over time. With that said, we are raising our full year guidance for non-GAAP transaction margin dollars and earnings per share, while also expecting higher non-transaction-related operating expense growth, reflecting the stronger business performance we're seeing and investments aligned with our strategy. We expect our cost savings initiatives to become more meaningful in the fourth quarter, which will benefit operating expense as the year progresses. Now turning to more specifics for the third quarter. We expect low single-digit revenue growth on a currency-neutral basis, slightly positive growth in transaction margin dollars, transaction margin dollars excluding interest on customer balances to be slightly positive to growing low single digits, high single-digit growth in non-transaction operating expenses, and non-GAAP earnings per share to decline within a low single-digit range. As implied from our guidance for the third quarter and the full year, we also expect fourth quarter transaction margin dollar growth to be slightly positive. I'd like to wrap up by thanking the PayPal team for everything they've accomplished this quarter. Our path to realizing the next phase of PayPal's growth is becoming clearer with substantive progress and we remain focused on building our momentum to drive durable long-term value creation. With that, Steve, let's go to Q&A.”