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PayPal is looking towards the future, despite its falling stock and looming layoffs. In its first-quarter earnings call, CEO Enrique Lores told investors that PayPal needs to \u201crecommit to the fundamentals,\u201d which included \u201cbecoming a technology company again.\u201d <\/p>\n
There was no need to read between the lines \u2014 PayPal was pitching an AI-powered turnaround.<\/p>\n
Lores explicitly said so, telling analysts on this week\u2019s call that leading companies find ways to differentiate themselves by innovating, and that now is the time for PayPal to take action. This includes modernizing its tech platform, moving faster to become \u201ccloud-native,\u201d and \u201caggressively adopting AI in our development processes,\u201d Lores said. The latter would increase developer productivity and shorten time to market, he added.<\/p>\n
It\u2019s a startling admission from PayPal that it has yet to fully embrace AI in-house, when AI-assisted coding is one of the breakout areas where the technology has truly excelled. <\/p>\n
Other consumer tech companies have rapidly adopted AI in recent months to assist with coding, with Spotify even declaring in February that its top developers haven\u2019t written a line of code since December. Meanwhile, top dev teams are trying to outcompete one another by tokenmaxxing \u2014 a proxy for understanding who at the company is experimenting with AI more often, based on the number of AI tokens they use.<\/p>\n
PayPal is only now catching up, it seems.<\/p>\n
Lores said the company has formed a new \u201cAI transformation and simplification\u201d team to help with its enterprise AI agenda. Combined with the planned layoffs, which Lores characterized as PayPal removing layers from its organizational structure, the addition of AI-enabled processes is expected to bring the company at least $1.5 billion in cost savings over the next two to three years, he said.<\/p>\n
The company announced last week it was reorganizing its business, which streamlines the operation into three segments: checkout solutions and PayPal, consumer financial services (and Venmo) as well as payment services and crypto. In addition, Bloomberg reported on Tuesday that PayPal plans to cut around 20% of its workforce over the next two to three years as part of its cost-savings plan, equating to north of 4,500 jobs.<\/p>\n
More cost savings will come from PayPal\u2019s plans for AI adoption, company execs said on the call. That includes bringing AI into areas beyond coding, like customer service, support operations, and risk management, to name a few.<\/p>\n
\u201cI think the changes that AI will enable us to do are going to drive \u2014 are going to be very significant,\u201d said Lores. \u201cThis is why we created a group last week, reporting to me, that is going to be in charge of driving \u2014 function by function, process by process \u2014 this AI transformation. And this is not about adopting AI as a technology, where we have done many pilots in the company, and we have seen what is possible. It\u2019s really about understanding how can we redesign the key processes \u2026 this is what we have seen that really will drive significant savings.\u201d<\/p>\n
Announcing an AI-driven push to cut costs while eliminating thousands of jobs underscores a core criticism of the technology \u2014 it comes with a human cost<\/p>\n
It\u2019s worth noting that, in this case, PayPal was already in need of restructuring. The company may have beat on its first-quarter earnings with revenue of $8.4 billion, up 7% year-over-year, but it forecast weak guidance for the second quarter, sending the stock tumbling after earnings. That follows a long post-pandemic decline that has sent the stock down over 80% from its 2021 high and has stunted PayPal\u2019s growth.<\/p>\n
Asked if separating Venmo into its own business meant the company would be open to selling it, Lores said that, for now, this is what made the most sense in terms of the turnaround plan. Still, he signaled openness to future deals by saying \u201cmy number one priority is to maximize shareholder value,\u201d in answer to an analyst\u2019s question about a sale.<\/p>\n<\/div>\n