PayPal is looking to the future despite a falling stock price and impending layoffs. During the company’s first-quarter earnings call, CEO Enrique Lores told investors that PayPal needs to “recommit to its fundamentals,” including “becoming a technology company again.”
There was no need to read between the lines. PayPal was pitching an AI-powered turnaround.
Lores made that statement, telling analysts on a conference call this week that major companies are finding ways to differentiate themselves through innovation, and now is the time for PayPal to take action. This includes modernizing technology platforms, accelerating the transition to “cloud native,” and “aggressively incorporating AI in the development process,” Lores said. The latter will improve developer productivity and reduce time to market, he added.
It’s surprising that PayPal has admitted that it hasn’t yet fully implemented AI internally, even though AI-assisted coding is one of the breakthrough areas where this technology truly shines.
Other consumer tech companies have also rapidly adopted AI to aid coding in recent months, with Spotify even declaring in February that none of its top developers had written a single line of code since December. Meanwhile, top development teams are trying to compete with each other through tokenmaxxing, a way to understand who is experimenting with AI more frequently within a company based on the number of AI tokens they use.
It looks like PayPal is finally catching up.
Lores said the company has formed a new “AI Transformation and Simplification” team to help with enterprise AI challenges. Combined with planned headcount reductions that feature PayPal removing layers from its organizational structure, the addition of AI-enabled processes is expected to result in at least $1.5 billion in cost savings over the next two to three years, Lores said.
The company announced last week that it would restructure its business and streamline its operations into three segments: Checkout Solutions and PayPal, Consumer Financial Services (and Venmo), and Payment Services and Cryptocurrency. Additionally, Bloomberg reported Tuesday that PayPal plans to cut about 20% of its workforce over the next two to three years as part of a cost-cutting plan, which equates to more than 4,500 jobs.
PayPal’s AI plans will result in further cost savings, company executives said on a conference call. This includes bringing AI to areas beyond coding, such as customer service, support operations, and risk management.
“I think the changes enabled by AI will be very significant,” Lores said. “That’s why we launched a group last week, reporting to me, who will be responsible for driving this AI transformation, function by function, process by process. And this is not about adopting AI as a technology. We’ve done a lot of pilots internally and seen what’s possible. The key is to understand how we can redesign critical processes…This is what we’ve seen actually lead to significant savings.”
The announcement of an AI-driven push to cut costs while eliminating thousands of jobs underscores a core criticism of the technology: It comes at a human cost.
In this case, it is worth noting that PayPal already had a need for restructuring. The company posted revenue of $8.4 billion, up 7% from a year ago, which may have exceeded its first-quarter profit, but it expected a weak outlook for the second quarter, and its stock fell sharply after the earnings call. This follows a long post-pandemic decline, with the stock price down more than 80% from its 2021 high and hurting PayPal’s growth.
Asked whether spinning Venmo into its own business meant the company was open to selling, Lores said that right now, this is what makes the most sense in terms of its turnaround plan. Still, in response to an analyst’s question about the sale, he remained open to future deals, saying, “My number one priority is maximizing shareholder value.”
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