PayPal is planning to lay off thousands of employees over the next two to three years, according to a report by The Wall Street Journal. The company is expected to cut about 20% of its staff, which amounts to roughly 4,760 positions out of its total workforce of 23,800 employees.
Cost-Cutting and AI Acceleration
The layoffs are part of a sweeping cost-cutting initiative aimed at accelerating the company's adoption of artificial intelligence and streamlining operations. PayPal CEO Enrique Lores, who took over in March after the ouster of Alex Chriss, told investors that the company has underinvested in its technology platform and has fallen behind competitors.
Lores outlined a two-step plan: "First, we will remove duplication and layers from our organizational structure. Second, we will accelerate our AI adoption and automation across our operations." He emphasized that PayPal needs to "focus" and "recommit to the fundamentals," with his highest priority being the checkout business, which remains the company's core offering. He also sees growth potential in buy now, pay later services, Venmo, and payment processing.
Restructuring and Future Outlook
The layoffs mark the second major initiative under Lores. Last week, PayPal reorganized into three business units: Checkout Solutions & PayPal, Consumer Financial Services & Venmo, and Payment Services & Crypto. The restructuring is intended to improve accountability and align the company with growth opportunities in checkout, payment processing, and consumer financial services.
Formerly the CEO of HP, Lores is known for streamlining operations and focusing on AI and subscription-based models. Now, his leadership signals a similar transformation at PayPal, as the company moves toward investing more in technology.
Market Reaction and Financial Performance
Shares of PayPal fell more than 8% following the layoff announcement. Management expects the restructuring to deliver at least $1.5 billion in gross run-rate savings over the next two to three years. The company reported first-quarter revenue of $8.35 billion, beating analyst expectations, but profits slipped to $1.11 billion compared with $1.29 billion a year earlier.
Transaction margin dollars rose 3% to $3.8 billion, while total payment volume increased 11% to $464 billion. However, PayPal projected adjusted earnings to decline by about 9% in the current quarter, with transaction margin dollars expected to fall 3%.
