Table of Contents

• 1. PayPal (PYPL) – CEO Interview with Goldman Sach …

• 2. Oracle (ORCL) – Earnings Snapshot

• 3. Amazon (AMZN) – AWS CEO Interviews with Goldman …

• 4. SoFi (SOFI) – CEO Anthony Noto Interviews with …

I’ll finish reviewing the Oracle earnings call and the Uber conference for Saturday’s article. For now, here’s what Uber CEO Dara Khosrowshahi said about the consumer environment:

1. PayPal (PYPL) – CEO Interview with Goldman Sachs

PayPal Everywhere:

Last week, PayPal launched its “PayPal Everywhere” program. The initiative extends PayPal’s already compelling online rewards program to offline settings. Now, customers can select a category to receive 5% cashback and can stack these discounts with more savings from in-app promotions. PayPal has hundreds of merchants offering these deals including DoorDash, Instacart, Domino’s etc. More tools include an “auto-reload” minimum balance option to replenish when needed, a new PayPal Debit Card integration into the Apple Wallet and more in-person tap-to-pay functionality.

One may wonder: “How can PayPal profitably offer such deep cashback perks.” In practice, customers must be a PayPal debit card user to access the perks. That’s key. PayPal enjoys a powerful halo effect in which debit card users contribute materially more interactions, product uptake, engagement and profitable transaction revenue. The lifetime value of debit card users makes these hefty rewards more than worth it to pay. That’s the thought process. It’s a bet on the revamped rewards being compelling enough to spur more debit card usage.

And I’m quite confident in this bet paying off for a few reasons. First, the financial benefits highlighted above were already in place before extending rewards to brick-and-mortar. It’s very easy to see the incremental utility driving incremental volume and preference. Secondly, adoption of the card rose 30% Y/Y last quarter to already offer signs of things working. Finally, and most importantly, new CEO Alex Chriss has no interest in running cash-burning promotions to gain volume like the old team did. Considering that strict commitment and the other data cited, I find it highly likely that this 5% reward will work well from a unit economics standpoint.

PayPal Everywhere is meant to help the firm stand out in a hyper-competitive field and to drive offline shopping frequency. It wants to be more of an everyday staple for customers, and this is a big piece of that. PayPal Everywhere is a consumer’s tangible reason to use PayPal instead of anyone else. Early on, the top categories selected for cashback are groceries and gas, which points to its primary objectives being met thus far. 5 years ago (even 2 years ago), nobody would have considered using PayPal at a gas pump, which means this campaign is changing behaviors and PayPal’s entrenchment in daily lives. 

• The Will Ferrell marketing campaign will be PayPal’s largest to date and is meant to drive awareness of these new options.

Venmo:

Chriss split the Venmo path into short-term and long-term plans. Short-term plans are mostly review. Chriss aims to greatly enhance the appeal of keeping funds in a venmo account. Most of those funds immediately leave the ecosystem, and that is a massive wasted opportunity for this firm. Fixing that issue would mean more net interest income, more interchange revenue and more compelling unit economics for the large platform. If that’s the effect, the causes will be more rapid Pay with Venmo adoption (30% Y/Y growth last quarter) and more thoughtful integration/display of its cards in the app. I love my Venmo card and I know many more people would if only they knew it existed. That’s mainly PayPal’s fault, as driving awareness has (for whatever reason) been deprioritized until recently.

Longer term, Chriss wants Venmo to do a better job leveraging its innate strength. Venmo is the only platform in the world that merges its consumer scale, financial use cases and socialness all into one app. That’s impactful. It’s one thing to see a merchant advertise some random product. It’s a whole different thing to see your friend buy a product with a merchant, and then see that advertisement displayed right next to the notification. This is where Venmo can shine and leaves so much potential room to create two-sided value. Venmo can let local merchants easily tap into payment feeds to pay for highly targeted sponsored listings. These placements will be informed by unparalleled customer financial data profiles, thanks to all of the payment and transaction data PayPal has on these users.  That reality will mean hyper targeted marketing spend, which is only ever paid when PayPal actually drives conversions. Merchants will be highly motivated to tap into the Venmo ad product suite as it builds, and consumers will be more than happy to accept unique perks stemming from the app’s powerful scale. 

For now, foundational work is being conducted to ensure Venmo has the quality tools needed to be a player in this form of advertising. PayPal has been hard at work on building out an ads platform and team, and the financial benefits are ahead of us. This can be a very high margin growth lever for the company, without needing any further customer growth to create it. These advertising impressions are just sitting there with fees waiting to be harvested and PayPal is finally building the systems to take advantage.

Macro:

Chriss told us that the backdrop is shaping up about as expected this quarter. There was “nothing of note to call out” and no changes to current guidance. PayPal bears were out in full force for about 4 minutes during the event as the stock meaninglessly fell a bit and then recovered on these comments. Last quarter, Alex Chriss told us the quarter was trending ahead of expectations, so perhaps some wanted more commentary like that and algorithms did the rest. From my perspective, whether or not PayPal meets expectations or beats by a percent or two next quarter is not material to the overall investment case. And furthermore, I’d rather have Chriss save any positive surprise for the actual quarter to gear up for easier under-promise, over-deliver. As I frequently mention, that’s fixated on by a somewhat shallow, short-sighted Wall Street.

Braintree & Fastlane:

The shift to profitable Braintree growth is going well. Customer conversations on pricing to value remain in full force and will last for another few quarters. All of these conversations have been “very healthy” per Chriss. Braintree is determined to move on from its irrational pricing approach used to gain market share from 2020-2023. Now, it thinks best-in-class authorization rates afford it the luxury to command better pricing, along with software up-sells like Hyperwallet and its risk and foreign exchange services. Braintree also has another sales secret weapon in Fastlane guest checkout. It equips its go-to-market team with another wildly appealing tool in best-in-class guest conversion rates. More value means lower contract friction and larger deals.

As a reminder, Fastlane is a modern guest checkout. It can identify repeat shoppers at any onboarded Fastlane merchant (not only PayPal merchants… all partners too). Identification means customers skip manual, annoying card entry. That entry process routinely cuts shopper conversion rates down below 50%, while Fastlane is around 80% due to incremental convenience. Hard to overstate how game changing converting 30 more shoppers out of 100 is for any merchant. That’s life in the fast lane… a compelling new PayPal product and an elite Eagles song. This is where PayPal’s two-sided network shines, as it has the consumer scale to make this meaningful for PayPal and its partners. And? It has the merchant scale to make this work across much of the internet, with promotional and order tracking tools to augment consumer utility.

As Fastlane builds, PayPal can recognize more customers, the guest checkout edge can extend to a larger portion of the market and a network effect can grow. This is also why it’s so important that PayPal is signing new Fastlane distribution deals with Adyen and Fiserv. Competitors are acknowledging the superiority of this product and are thus motivated to offer it to its own clients. As this happens, integration will become less optional and more table stakes. All of this means more Braintree transaction revenue for merchants that aren’t even direct customers and a larger portion of customers who can enjoy this flow.

As an important aside, non-PayPal customers using Fastlane with other partners also means another touchpoint for PayPal to drive account growth. When it can create incremental delight via faster checkout and incorporate special merchant discounts (thanks to consumer scale), it’s likely that this touchpoint will be an impactful one. Early on, 40% of non-PayPal users are electing to have their data vaulted with the company for future checkout.

Shopify:

Shopify joins Fiserv and Adyen on the list of recently deepened PayPal partnerships. There’s nothing in the news about a Fastlane integration, but there are two exciting pieces of the development.

First, Braintree was named as a processor for some Shopify Payments in the USA. This news is far more encouraging than it would have been if announced last year. Why? Because again, Braintree isn’t undercutting the competition on price anymore. It’s competing on authorization rates, uptime, scalability and software. This hints at Braintree’s capability to win without accepting poor margins.

Secondly, PayPal wallet transaction data will be combined with Shopify payments for a broader view of business health and trends. Shared merchants (there is a lot of customer overlap) will now gain better interoperability and data from two of the leading commerce platforms on the planet. That should augment the value propositions and usability of both product suites vs. the rest of the competition.

Final Note:

There’s still a ton left to do on cost cutting via more automation and GenAI usage. Early innings here.

2. Oracle (ORCL) – Earnings Snapshot

Results:

• Beat revenue estimate by 0.5% & beat guidance by 0.8%. Beat 7% Y/Y FXN growth guidance with 8% Y/Y FXN growth.

• Cloud revenue met 22% Y/Y FXN growth guidance & 21% Y/Y growth guidance.

• Beat $1.33 EPS estimates & identical guidance by $0.06 each.

Guidance & Valuation:

• Oracle reiterated annual expectations for 10%+ revenue growth, which compares strongly to 9.4% Y/Y growth expectations. It also reiterated faster than 50% cloud growth for 2025.

• For next quarter, 9% Y/Y revenue growth guidance beat 8.7% Y/Y growth estimates. $1.44 EPS guidance missed $1.48 estimates by $0.04.

Oracle trades for 23x forward EPS. EPS is expected to grow by 13% this year and by 15% next year.

Balance Sheet:

• $10.9B in cash & equivalents.

• $84.5B in total notes.

• Diluted share count rose by 1.0% Y/Y.

3. Amazon (AMZN) – AWS CEO Interviews with Goldman Sachs

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