PayPal Holdings’ PYPL cost savings plan is taking center stage as the company works to improve profitability. It is on track to deliver at least $1.5 billion in gross run-rate savings over the next two to three years. About $400 million of new run-rate savings are targeted by the end of 2026.
The savings plan comes as profitability faces pressure. In the second quarter of 2026, PayPal generated revenues of $8.68 billion, up 5% year over year, but non-GAAP operating income fell 8% to $1.51 billion. Non-GAAP operating margin dropped to 17.4% from 19.8%, highlighting the importance of improving cost efficiency.
The plan has three main drivers: a simpler structure, operational and portfolio changes, and wider use of artificial intelligence (AI). PayPal expects roughly 20-30% of total savings from structure and alignment, 30-40% from operating improvement and about 40% from AI-led productivity gains across the business.
AI is expected to be the largest contributor to the savings plan, and PayPal is already seeing productivity gains from its technology initiatives. The company’s AI-assisted coding is already improving productivity, while implementation time has fallen 25%. Management is also moving more infrastructure to the cloud and combining platforms to reduce complexity. These changes are designed to lower costs while helping teams release products faster.
PayPal is not planning to bank all those savings. Much of the money is expected to be reinvested in areas such as financial services, Buy Now Pay Later and Venmo. That makes execution important because savings must translate into stronger growth over time.
How Are Intuit & Block Restructuring?
IntuitINTU is tightening costs while reshaping its business around AI and faster decision-making. Its 2026 restructuring plan includes reducing management layers, cutting overlapping roles, consolidating locations and shifting resources toward core growth areas. The company expects to reduce its full-time workforce by approximately 17% under the plan by the first fiscal quarter ending Oct. 31, 2026.
BlockXYZ is pursuing an even sharper efficiency push, using AI to support a smaller, flatter organization. The company is restructuring its workforce while increasing automation and product-development speed, arguing that smaller teams can now accomplish more.
PYPL’s Price Performance, Valuation & Estimates
Shares of PayPal have gained 34.6% in the past three months compared to the broader industry and the S&P 500 Index.
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Image Source: Zacks Investment Research
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From a valuation standpoint, PayPal’s shares are trading cheaply, as suggested by the Value Score of A. In terms of forward 12-month P/E, PYPL stock is trading at 10.75X, which is at a significant discount to the Zacks Financial Transaction Services industry’s 18.92X.
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Image Source: Zacks Investment Research
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PayPal’s estimate revisions reflect a positive trend. The Zacks Consensus Estimate for full-year 2026 EPS has been revised upward to $5.37 in the past month. The consensus estimate for the metric indicates a year-over-year increase of 1.13%.
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