PayPal forecasts quarterly revenue above estimates as consumers shrug inflation worries

(Reuters) – Payments firm PayPal (NASDAQ:) Holdings forecast third-quarter revenue above estimates on Wednesday, expecting consumers to remain resilient in the face of a tough economy.

Though inflationary headwinds and subsequent interest rate hikes have squeezed budgets in households, consumer spending held up through the second quarter, driving an 11% surge in PayPal’s total payment volume to $376.5 billion.

The upbeat outlook comes alongside promising data showing that U.S. inflation rose at its slowest pace in more than two years in June, with underlying price pressures receding.

PayPal expects third-quarter revenue at about $7.4 billion, above analysts’ average estimate of $7.32 billion, according to Refinitiv data.

The optimistic revenue forecast echoed results of card giants Mastercard (NYSE:) and Visa (NYSE:), which posted a boost in quarterly profits on the back of strong consumer spending.

PayPal also expects its adjusted profit per share in the current quarter to be in a range of $1.22 and $1.24. Analysts on average had expected $1.22.

PayPal’s revenue jumped to $7.3 billion in the second quarter ended June 30, compared with $6.8 billion a year earlier.

The firm earned $1.16 per share on an adjusted basis, in line with Wall Street expectations.

However, the company’s operating margin for the quarter came in at 21.4%, compared to its forecast of 22%.

Underwhelming margins at PayPal have been worrying analysts in recent quarters. The company’s low-margin business products have grown strongly, while growth in its branded products has slowed due to increased pressure from competitors like Apple (NASDAQ:).

In May, PayPal cut its forecast for annual adjusted operating margin, a move that eclipsed its profit forecast raise.

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