(Reuters) -PayPal Holdings missed its estimate for second-quarter operating margin on Wednesday, casting a pall over resilient consumer spending trends, sending the payments firm’s shares down nearly 8% in extended trading.
Underwhelming margins at PayPal (NASDAQ: PYPL) 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: AAPL).
PayPal’s adjusted operating margin for the quarter came in at 21.4%, missing its forecast of 22%.
Even as signs of inflation cooling emerge, macroeconomic pressures have squeezed household budgets this year, particularly among the lower-income bracket, weighing on shoppers’ purchasing power.
U.S. card giants – Mastercard (NYSE: MA) and American Express (NYSE: AXP) – who are similarly dependent on consumer strength have also given muted outlooks for the rest of the year amid persistent worries of a looming economic slowdown.
PayPal also expects its adjusted profit per share in the current quarter to be in a range of $1.22 and $1.24 compared with analysts’ estimates of $1.22.
In a bright spot, PayPal’s total payment volume surged 11% in the second quarter to $376.5 billion, benefiting from resilient consumer spending trends.
Banking on the continued steady use of its platform, PayPal said it expects third-quarter revenue at about $7.4 billion, above analysts’ average estimate of $7.32 billion, according to Refinitiv data.
The company’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.
In May, PayPal cut its forecast for annual adjusted operating margin, a move that eclipsed its profit forecast raise.