Square, PayPal deliver mixed Q1 results due to COVID-19 impact

Both payments providers have faced economic challenges during the COVID-19 pandemic shutdown.

It was a mixed bag for PayPal and Square earnings on Wednesday, as both payments providers faced economic challenges during the COVID-19 pandemic shutdown. 

Overall, e-commerce platforms have performed well even as businesses shut down and consumers tightened their budgets, but Square has faced additional challenges when it comes to revenue from its seller ecosystem.

In March the company withdrew its full-year 2020 guidance and adjusted its revenue and gross profit outlook for the first quarter due to the impact of COVID-19 on gross processing volume (GPV), a key metric that measures the total dollar amount of card payments processed by merchants using Square's system. Square said it began to see a slowdown in GPV from its seller ecosystem starting in March.

Square revealed today that its first quarter GPV came to $25.7 billion, an increase of 14% from the same period a year ago but down from $28.6 billion at the end of Q4. Looking at the rest of Square's balance sheet, the mobile payments processor reported a Q1 net loss of $106 million, or 24 cents a share. Gross profit was $539 million, up 36% over the same quarter last year, with an adjusted loss per share of 2 cents. Square no longer reports adjusted revenue. Nonetheless, Wall Street was looking for earnings of 13 cents a share on revenue of $620.3 million.

The company's first quarter transactional revenue came in at $758 million. Revenue from its software and data products, including Square Capital and Cash App, came to $296 million, up 35% compared to the year-ago period. The company's hardware revenue was $21 million. Square said revenue from the Cash App was $222 million.

For the current quarter, analysts are expecting Square to report earnings of 5 cents a share with revenue of $525.2 million. Shares of Square were down over 6% after hours.

As for PayPal, the San Jose, Calif.-based payments company has also taken some financial hits due the coronavirus pandemic, namely on its revenue from international crossborder e-commerce, as well volumes and revenue generated from travel and events verticals.

But the company notes that it has seen an unprecedented demand for its products and services, as well as a significant increase in daily usage in April. In addition, PayPal said May 1 was the largest single day of transactions in the company's history, larger than last year's transactions on Black Friday and Cyber Monday.

Looking at the numbers, PayPal reported a net income of $84 million, or 7 cents per share. Non-GAAP earnings were 66 cents per share on revenue of $4.62 billion, up 12% year over year. Wall Street was looking for earnings of 75 cents per share on revenue of $4.74 billion.

Elsewhere on the balance sheet, the company grew its active account base by 20.2 million during Q1, including a one-time addition of 10.2 million in January from the acquisition of Honey, bringing its total to 325 million active accounts.

PayPal says it processed $191 billion in total payment volume during the quarter. Breaking the numbers down further, PayPal says it processed 3.3 billion payment transactions, or roughly 39.4 payment transactions per active account. Its social payments platform Venmo processed more than $31 billion of TPV, up 48% over the same period last year. 

In terms of outlook, analysts are expecting second quarter revenue of $4.79 billion with earnings of 76 cents a share. PayPal responded with earnings guidance in the range of 81 cents and 85 cents a share. Shares of PayPal were down slightly after hours.