PayPay - Double digit gains on earnings and OpenAI cooperation

• Net revenue amounted to $8.42 billion, growing by 7% compared to the same period last year, surpassing market expectations of $8.24 billion.
• The company recorded the largest growth in the "Value-Added Services" segment, with revenue reaching $895 million, growing by 15% year-over-year.
• The USA accounted for $4.75 billion in revenue, marking a 5% year-over-year increase.
• The number of active users increased to 438 million.
• The total payment volume amounted to $458 billion, representing an over 8% year-over-year increase.
• As a result, the "adjusted" EPS indicator reached $1.34, compared to market expectations of $1.2.
• Significant is also the massive increase in free cash flow, up 48% year-over-year, currently amounting to $2.3 billion.

By the end of the quarter, the company forecasts an increase in Adj. EPS to $1.31, which aligns with market expectations.
In the communication regarding the year-end forecast, the company assured investors of an EPS increase from $5.35 to $5.39, compared to market expectations of $5.25.
The company is also increasing its CAPEX to $1 billion by the end of the year.
Additionally, the company announced the next dividend, which will be 14 cents per share this quarter.
These results alone were enough to satisfy investors, as the company delivered results noticeably above expectations. However, what caused the double-digit valuation increases is the agreement with OpenAI. PayPal will be the first platform to implement its digital wallet directly into ChatGPT.

Considering very optimistic sentiment towards AI in the market, especially among institutional investors, any collaboration with OpenAI has recently been a sufficient reason for a company's valuation increase. However, in this case, considering over 800 million ChatGPT users, and acknowledging that many of these users already use AI for product searches — direct integration with the wallet could generate enormous, yet currently difficult to accurately estimate, revenue.
The company also received a vote of confidence from Blue Owl Capital, which purchased $7 billion worth of receivables from PayPal for the "Buy Now, Pay Later" service.
After today's increases, the company managed to return to levels from July this year when the stock price fell by 15%. However, the company is still about 20% away from local peaks from 2024.

PYPL.US (D1) 

Source: xStation5