PayPal pivots back to tech identity with AI at the center

Although PayPal's stock is struggling and layoffs loom, the company is setting its sights on the future. During its first-quarter earnings call, CEO Enrique Lores told investors that PayPal must "recommit to the fundamentals," which includes "becoming a technology company again."

No subtlety was needed — PayPal is clearly banking on an AI-powered turnaround.

Lores stated it plainly, telling analysts on this week's call that leading companies differentiate themselves through innovation, and now is the time for PayPal to act. That means modernizing its tech platform, accelerating the shift to become "cloud-native," and "aggressively adopting AI in our development processes," Lores said. He added that this would boost developer productivity and shorten time to market.

It's a telling admission from PayPal that it hasn't fully integrated AI internally, especially given that AI-assisted coding is one of the standout areas where the technology has genuinely excelled.

Other consumer tech companies have rapidly adopted AI for coding in recent months — Spotify even declared in February that its top developers haven't written a line of code since December. Meanwhile, leading development teams try to outdo one another by tokenmaxxing, a proxy for measuring how often employees experiment with AI based on the number of AI tokens they use.

PayPal appears to be playing catch-up.

Lores said the company has created a new "AI transformation and simplification" team to drive its enterprise AI strategy. Combined with planned layoffs — which Lores described as removing layers from PayPal's organizational structure — the integration of AI-powered processes is expected to generate at least $1.5 billion in cost savings over the next two to three years, he noted.

Last week, the company announced a business reorganization that streamlines operations into three segments: checkout solutions and PayPal, consumer financial services (including Venmo), and payment services and crypto. Additionally, Bloomberg reported Tuesday that PayPal plans to cut roughly 20% of its workforce over the next two to three years as part of its cost-savings plan, equating to more than 4,500 jobs.

More savings will come from PayPal's plans to adopt AI beyond coding, executives said on the call. That includes areas like customer service, support operations, and risk management, among others.

"I think the changes that AI will enable us to do are going to be very significant," said Lores. "That's why we created a group last week, reporting to me, that will be responsible for driving this AI transformation — function by function, process by process. This isn't just about adopting AI as a technology; we've run many pilots and seen what's possible. It's really about understanding how we can redesign key processes — that's what we've seen will truly drive significant savings."

Announcing an AI-driven push to cut costs while eliminating thousands of jobs highlights a core criticism of the technology: it comes with a human cost.

It's worth noting that PayPal was already in need of restructuring. While the company beat first-quarter earnings with revenue of $8.4 billion, up 7% year-over-year, it issued weak guidance for the second quarter, sending the stock tumbling. That follows a long post-pandemic decline that has pushed the stock down more than 80% from its 2021 high and has stifled PayPal's growth.

When asked if separating Venmo into its own business meant the company might sell it, Lores said this structure currently makes the most sense for the turnaround plan. Still, he signaled openness to future deals by telling an analyst, "my number one priority is to maximize shareholder value."