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Company lifts annual profit forecast as spending holds up

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CEO says "solid progress" on innovation, partnerships

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Shares have risen 36% so far this year

Oct 29 (Reuters) - PayPal ( PYPL ) forecast

fourth-quarter revenue below estimates on Tuesday as the digital

payments company focuses more on its higher-margin businesses to

boost profitability instead of aggressive expansion.

Efficiency has been a focal point for PayPal ( PYPL ) as CEO Alex

Chriss, who took the helm last year, stresses on cost

discipline, resulting in job cuts and increased investments in

automation and artificial intelligence.

The strategy shift has also led the company to moderate

growth in low-margin units such as Braintree, which provides

payments technology to businesses, and instead focus on

lucrative segments like branded checkout.

"We are making solid progress in our transformation as we

bring new innovations to market, forge important partnerships

with leading commerce players, and drive awareness and

engagement through new marketing campaigns," CEO Chriss said.

PayPal ( PYPL ) expects revenue in the fourth quarter to grow by a

"low single-digit" percentage compared with the 5.4% range

analysts polled by LSEG had expected.

Third-quarter revenue jumped 6% to $7.85 billion but missed

estimate of $7.89 billion. Still, strong spending trends allowed

PayPal ( PYPL ) to lift its 2024 profit forecast for the third time this

year.

It expects earnings per share, excluding one-time costs, to

grow in the "high-teens" percentage range in 2024 - an increase

from its prior forecast of "low to mid-teens".

Adjusted profit grew 14% to $1.23 billion in the third

quarter. On a per-share basis, PayPal ( PYPL ) earned $1.20 versus 98

cents a year ago.

COMPETITIVE PRESSURES PERSIST

Rivals, including Zelle and tech giants such as Apple ( AAPL )

and Alphabet, have eroded PayPal's ( PYPL ) dominance

in a fast-evolving payments industry.

To maintain its competitive edge, PayPal ( PYPL ) is pursuing new

partnerships and expanding existing ones with companies in the

retail and payments sector such as Fiserv ( FI ), Adyen

, Amazon ( AMZN ), Global Payments ( GPN ) and Shopify ( SHOP )

.

These partnerships, along with the "one-click" checkout

feature called Fastlane that PayPal ( PYPL ) introduced in January, have

resulted in a 36% surge in its shares this year, outperforming

the S&P 500 index.

Analysts, however, said these are longer-term initiatives

and may take some time to move the needle.

The company's operating margins, on an adjusted basis,

expanded 194 basis points to 18.8% in the third quarter.

The metric has been under scrutiny over the past year as

investors assess the sustainability and overall health of

PayPal's ( PYPL ) business.

(Reporting by Niket Nishant and Manya Saini in Bengaluru;

Editing by Arun Koyyur)