PayPal Holdings PYPL · USD

SEGMENT INFORMATIONOur chief operating decision maker (“CODM”), our Chief Executive Officer, manages the business and evaluates operating performance based on consolidated net income. Our CODM uses consolidated net income to monitor budget versus actual results. We operate as one segment and have one reportable segment that constitutes consolidated results.The following table sets forth our segment information for revenue, segment profit (loss), and significant expenses:Year Ended December 31,202520242023(In millions)Net revenues$33,172 $31,797 $29,771 Less (add):Transaction expense15,987 15,697 14,385 Transaction losses1,337 1,114 1,192 Credit losses383 328 490 Customer support and operations(1)1,704 1,768 1,919 Sales and marketing(1)2,283 2,001 1,809 Technology and development(1)3,103 2,979 2,973 General and administrative(1)1,979 2,147 2,059 Restructuring and other331 438 (84)Other income (expense), net(227)(4)(383)Income tax expense1,059 1,182 1,165 Segment net income (loss)$5,233 $4,147 $4,246 (1) Includes depreciation and amortization expense. Total depreciation and amortization expense was $1.0 billion for both years ended December 31, 2025 and 2024 and $1.1 billion for the year ended December 31, 2023.There are no reconciling items or adjustments between segment net revenues, net income, total assets and consolidated net revenues, net income, and total assets.For disclosure of geographical information, please refer to “Note 2—Revenue” and “Note 7—Other Financial Statement Details”.

REVENUEWe enable our customers to send and receive payments. We earn revenue primarily by completing payment transactions for our customers on our payments platform and from other value added services. Our revenues are classified into two categories: transaction revenues and revenues from other value added services.TRANSACTION REVENUES We earn transaction revenues primarily from fees paid by our customers to receive payments on our platform. These fees may have a fixed and variable component. The variable component is generally a percentage of the value of the payment amount and is known at the time the transaction is processed. For a portion of our transactions, the variable component of the fee is eligible for reimbursement when the underlying transaction is approved for a refund. We estimate the amount of fee refunds that will be processed each quarter and record a provision against our transaction revenues. The volume of activity processed on our payments platform, which results in transaction revenue, is referred to as Total Payment Volume (“TPV”). We generate additional revenues from merchants and consumers: on transactions where we perform currency conversion, when we enable cross-border transactions (i.e., transactions where the merchant and consumer are in different countries), when we facilitate the instant transfer of funds for our customers from their PayPal or Venmo account to their bank account or debit card, when we facilitate the purchase and sale of cryptocurrencies, as contractual compensation from sellers that violate our contractual terms (for example, through fraud or counterfeiting), and other miscellaneous fees. Our transaction revenues are also reduced by certain incentives provided to our customers.Our contracts with our customers are usually open-ended and can be terminated by either party without a termination penalty after the notice period has lapsed. Therefore, our contracts are defined at the transaction level and do not extend beyond the service already provided. Our contracts generally renew automatically without any significant material rights. Some of our contracts include tiered pricing, which are based primarily on volume. The fee charged per transaction is adjusted up or down if the volume processed for a specified period is different from prior period defined volumes.

COMMITMENTS AND CONTINGENCIESLITIGATION AND REGULATORY MATTERSOverviewWe are involved in legal and regulatory proceedings on an ongoing basis. Certain of these proceedings are in early stages and may seek an indeterminate amount of damages or penalties or may require us to change or adopt certain business practices. If we believe that a loss arising from such matters is probable and can be reasonably estimated, we accrue the estimated liability in our financial statements at that time. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range. For those proceedings in which an unfavorable outcome is reasonably possible but not probable, (i) we have disclosed an estimate of the reasonably possible loss or range of losses or (ii) we have concluded that our estimate of the reasonably possible loss or range of losses arising directly from the proceeding (i.e., monetary damages or amounts paid in judgment or settlement) is not material. If we cannot estimate the probable or reasonably possible loss or range of losses arising from a legal proceeding, we have disclosed that fact. In assessing the materiality of a legal proceeding, we evaluate, among other factors, the amount of monetary damages claimed, as well as the potential impact of non-monetary remedies sought by plaintiffs (e.g., injunctive relief) that may require us to change our business practices in a manner that could have a material adverse impact on our business. With respect to the matters disclosed in this Note 13, we are unable to estimate the possible loss or range of losses that could potentially result from the application of such non-monetary remedies.Amounts accrued for legal and regulatory proceedings for which we believe a loss is probable and reasonably estimable were not material as of December 31, 2025. Except as otherwise noted for the proceedings described in this Note 13, we have concluded, based on currently available information, that reasonably possible losses arising directly from the proceedings (i.e., monetary damages or amounts paid in judgment or settlement) in excess of our recorded accruals are also not material.

DEBTNOTESIn March 2025, we issued fixed and floating rate notes with varying maturity dates for an aggregate principal amount of $1.5 billion, consisting of $450 million aggregate principal amount of floating rate notes due 2028 (the “2028 Floating Rate Notes”), $450 million aggregate principal amount of 4.450% notes due 2028 (the “2028 Notes”) and $600 million aggregate principal amount of 5.100% notes due 2035 (the “2035 Notes”). Interest on the 2028 Floating Rate Notes is payable on March 6, June 6, September 6 and December 6 of each year, beginning on June 6, 2025. The 2028 Floating Rate Notes bear interest at a floating rate equal to the compounded secured overnight financing rate, reset quarterly, plus 0.670% per annum. Interest on the 2028 Notes is payable on March 6 and September 6 of each year, beginning on September 6, 2025. Interest on the 2035 Notes is payable on April 1 and October 1 of each year, beginning on October 1, 2025. In May 2024, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of $1.3 billion. Interest on these notes is payable on June 1 and December 1 of each year, beginning on December 1, 2024.In June 2023, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of ¥90 billion (approximately $575 million as of December 31, 2025). Interest on these notes is payable on June 9 and December 9 of each year, beginning on December 9, 2023.In May 2022, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of $3.0 billion. Interest on these notes is payable on June 1 and December 1 of each year, beginning on December 1, 2022.In May 2020, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of $4.0 billion. Interest on these notes is payable on June 1 and December 1 of each year, beginning on December 1, 2020. In September 2019, we issued fixed rate notes with varying maturity dates for an aggregate principal amount of $5.0 billion. Interest on these notes is payable on April 1 and October 1. The notes issued from the March 2025, May 2024, June 2023, May 2022, May 2020, and September 2019 debt issuances are senior unsecured obligations and are collectively referred to as the “Notes.” Interest on the Notes is payable in arrears.

INCOME TAXESThe components of income before income taxes were as follows: Year Ended December 31, 202520242023(In millions)United States$1,453 $946 $993 International4,839 4,383 4,418 Income before income taxes$6,292 $5,329 $5,411 The income tax expense was composed of the following: Year Ended December 31, 202520242023(In millions)Current:Federal$(116)$342 $1,031 State and local65 107 145 Foreign893 502 657 Total current portion of income tax expense$842 $951 $1,833 Deferred:Federal$295 $278 $(490)State and local(15)(29)(79)Foreign(63)(18)(99)Total deferred portion of income tax expense (benefit)217 231 (668)Income tax expense$1,059 $1,182 $1,165 The following is a reconciliation of the difference between the effective income tax rate and the federal statutory tax rate:Year Ended December 31, 2025$ Amount (in millions)%Tax provision at the U.S. federal statutory rate$1,321 21.0 %State and local income tax, net of federal income tax effect(1)(22)(0.3)%Foreign tax effects:SingaporeStatutory tax rate difference between Singapore and the U.S.(155)(2.5)%Incentive agreement(466)(7.4)%Qualified domestic minimum top-up tax370 5.9 %Other2 — %Other foreign jurisdictions14 0.2 %Effect of cross-border tax laws21 0.3 %Tax credits:Research and development(99)(1.6)%Changes in valuation allowances(2)312 5.0 %Nontaxable or nondeductible items47 0.7 %Changes in unrecognized tax benefits(3)225 3.6 %Other:Internal legal entity restructuring(2)(518)(8.2)%Other rate drivers7 0.1 %Income tax expense and effective income tax rate$1,059 16.8 %(1) The state that contributed to the majority (greater than 50%) of the tax effect in this category was California.(2) “Internal legal entity restructuring” includes $299 million of U.S. tax attributes generated, which are not more-likely-than-not to be realized, and is offset in “Changes in valuation allowances.” (3) PayPal made a policy election to aggregate changes in unrecognized tax benefits for all jurisdictions in this line item. As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the following is a reconciliation of the difference between the effective income tax rate and the federal statutory tax rate: Year Ended December 31, 20242023Federal statutory rate21.0 %21.0 %Domestic income taxed at different rates0.1 %(1.5)%State taxes, net of federal benefit1.1 %1.1 %Foreign income taxed at different rates(4.3)%(5.1)%Stock-based compensation expense2.6 %3.5 %Tax credits0.6 %(0.

STOCK-BASED AND EMPLOYEE SAVINGS PLANSEQUITY INCENTIVE PLANUnder the terms of the Amended and Restated PayPal Holdings, Inc. 2015 Equity Incentive Award Plan (the “Plan”), equity awards, including restricted stock units (“RSUs”), restricted stock awards, performance-based restricted stock units (“PBRSUs”), stock options, deferred stock units, and stock payments, may be granted to our directors, officers, and employees. In June 2025, our stockholders approved the authorization of an additional 15 million shares to the Plan. At December 31, 2025, approximately 75 million shares were authorized under the Plan and approximately 45 million shares were available for future grant. Shares issued as a result of stock option exercises and the release of stock awards were funded primarily with the issuance of new shares of common stock.RSUs are granted to eligible employees under the Plan. RSUs issued on or after January 1, 2022 generally vest over three years at a rate of 33% after one year, then in equal quarterly installments thereafter. RSUs are subject to an employee’s continuing service to us, and do not have an expiration date. The cost of RSUs granted is determined using the fair market value of PayPal’s common stock on the date of grant.Certain of our executives and non-executives are eligible to receive PBRSUs, which are equity awards that may be earned based upon the Company’s performance relative to pre-established market or performance targets over performance periods of one to three years. We estimate the fair value of market-based PBRSU awards at the date of grant using a Monte Carlo valuation methodology that incorporates into the valuation the possibility that the market condition might not be satisfied. The total estimated fair value is amortized over each award’s performance period regardless of whether the condition is satisfied. The number of shares that vest at the end of each performance period will vary based on the performance against specified market conditions. PBRSUs that are subject to a performance condition may vest and settle depending on the Company’s performance against pre-established performance metrics over a predefined performance period. PBRSUs with only a performance condition generally are cliff vested following the completion of the performance period, subject to the Compensation Committee’s approval of the level of achievement against the pre-established performance targets.

LEASESPayPal enters into various leases, which are primarily real estate operating leases. We use these properties for executive and administrative offices, customer services and operations centers, product development offices, and data centers. PayPal also enters into computer equipment finance leases.While a majority of our lease agreements do not contain an explicit interest rate, certain of our lease agreements are subject to changes based on the Consumer Price Index or another referenced index. In the event of changes to the relevant index, lease liabilities are not remeasured and instead are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. The short-term lease exemption has been adopted for all leases with a duration of less than 12 months.PayPal’s lease portfolio includes a small number of subleases. A sublease situation can arise when currently leased real estate space is available and is surplus to operational requirements.The components of lease expense were as follows:Year Ended December 31,202520242023(In millions)Operating lease expense$162 $159 $156 Finance lease expense - amortization of ROU lease assets16 8 — Sublease income(8)(12)(9)Total lease expense, net$170 $155 $147 Supplemental cash flow information related to leases was as follows:Year Ended December 31,202520242023(In millions)Cash paid for amounts included in the measurement of lease liabilities:Operating cash flows from operating leases$178 $169 $174 Financing cash flows from finance leases$6 $60 $— ROU lease assets obtained in exchange for new operating lease liabilities$68 $343 $(1)ROU lease assets obtained in exchange for new finance lease liabilities$— $82 $— Other non-cash ROU lease asset activity(1)$(5)$— $(40)(1) ROU lease asset impairmentSupplemental balance sheet information related to leases was as follows:As of December 31,20252024(In millions, except weighted-average figures)Operating leasesFinance leasesOperating leasesFinance leasesROU lease assets$539 $56 $599 $73 Current lease liabilities148 7 135 5 Long-term lease liabilities548 10 629 18 Total lease liabilities$696 $17 $764 $23 Weighted-average remaining lease term5.4 years3.4 years5.9 years4.

BUSINESS COMBINATIONS AND DIVESTITURESIn the second quarter of 2025, we completed an acquisition with a total purchase price of $19 million, consisting of cash consideration, which was accounted for as a business combination. There were no acquisitions accounted for as business combinations completed in 2024 or 2023.On November 1, 2023, we completed the sale of Happy Returns to United Parcel Services, Inc. for approximately $466 million in cash, net of cash divested, and derecognized the assets held for sale, consisting primarily of $81 million of goodwill and $13 million of net intangible assets. The sale of Happy Returns enabled us to focus on our core business and priorities. A pre-tax gain of $339 million, net of transaction costs, was included in restructuring and other in the consolidated statements of income (loss) for the year ended December 31, 2023. There were no divestitures completed in 2025 or 2024.