PayPal is looking to the future, despite its falling stock and looming layoffs. In its first-quarter earnings call, CEO Enrique Lores told investors that PayPal needs to “recommit to the fundamentals,” which included “returning to being a technology company.”
There was no need to read between the lines: PayPal was launching an AI-powered change.
Lores said this explicitly, telling analysts on this week’s call that leading companies find ways to differentiate themselves through innovation and now is the time for PayPal to act. This includes modernizing its technology platform, moving faster to become “cloud-native” and “aggressively adopting AI into our development processes,” Lores said. The latter would increase developer productivity and shorten time to market, he added.
It’s a surprising admission by PayPal that it has yet to fully embrace AI internally, when AI-assisted coding is one of the disruptive areas where the technology has really excelled.
Other consumer technology companies have quickly embraced AI in recent months to help with coding, and Spotify even stated in February that its top developers I haven’t written a line of code since December. Meanwhile, top development teams are trying to compete with each other by tokenmaxxing – an indicator to understand who in the company experiments with AI most frequently, based on the number of AI tokens they use.
It seems that PayPal is only now catching up.
Lores said the company has formed a new “AI transformation and simplification” team to help with its enterprise AI agenda. Combined with the planned layoffs, which Lores characterized as PayPal removing layers of its organizational structure, the addition of AI-enabled processes is expected to provide the company at least $1.5 billion in cost savings over the next two to three years, he said.
The company announced last week that it was reorganizing your businesswhich streamlines the operation in three segments: payment solutions and PayPal, consumer financial services (and Venmo), as well as payment services and cryptocurrencies. Besides, Bloomberg reported Tuesday that PayPal plans to cut about 20% of its workforce over the next two to three years as part of its cost-savings plan, equivalent to more than 4,500 jobs.
More cost savings will come from PayPal’s plans for AI adoption, company executives said on the call. That includes bringing AI to areas beyond coding, such as customer service, support operations, and risk management, to name a few.
“I think the changes that AI will allow us to make are going to drive, they’re going to be very significant,” Lores said. “That’s why we created a group last week, reporting to me, that will be in charge of driving (function by function, process by process) this AI transformation. And it’s not about adopting AI as a technology, where we’ve done a lot of pilots in the company and seen what’s possible. It’s really about understanding how we can redesign key processes… this is what we’ve seen that will really drive significant savings.”
The announcement of an AI-powered push to cut costs while eliminating thousands of jobs underscores a fundamental criticism of the technology: It comes at a human cost.
It’s worth noting that, in this case, PayPal already needed a restructuring. The company may have surpassed its first-quarter earnings with revenue of $8.4 billion, up 7% year-over-year, but it forecast weak guidance for the second quarter. causing stocks to fall after earnings. This follows a long post-pandemic decline that has been seen shares fell more than 80% from its 2021 high and has slowed PayPal’s growth.
When asked if spinning off Venmo into its own business meant the company would be willing to sell it, Lores said that, for now, this is what made the most sense in terms of the turnaround plan. Still, he signaled his openness to future deals by saying that “my number one priority is maximizing shareholder value,” in response to an analyst’s question about a sale.
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