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Earnings

PayPal earnings: Cashing out

PayPal logo
PayPal
  • Q1 revenue: $4.62 billion (12% YoY vs. $4.74 billion expected)
  • Q1 earnings: $400 million (-23% YoY, below expectations)
  • Q2 guidance: It's expecting revenue to grow by about 15% and EPS to decline by 28% to 34%

The big number: PayPal's biggest metric for success is the number of active accounts it has across all its services. The number was up by more than 20 million to 325 million in the quarter, although that was partially because it acquired the rewards company Honey during the quarter, and it's including its users in its number. Even still, its own user base grew by 10 million outside of the acquisition, a first-quarter record for the company.

People are talking: The pandemic is global, but so is PayPal's user base. "The diversity of our platform and customer base across products and geographies positions us well during this unprecedented time," CFO John Rainey said in a statement. "Our free cash flow and strong balance sheet allow us to continue investing to serve the needs of our customers."

Opportunities: Even into April, PayPal said that it was still acquiring new users, adding an additional 7.4 million accounts in the month alone. Payment volumes and revenue were also up over 20% for the month (as compared to the period last year), presumably as more people sign up to pay for goods and services while stuck at home. Everyone's favorite emoji-friendly payments system, Venmo, processed more than $31 billion in payments in the first quarter, growing 48% over last year. If PayPal can keep that momentum going, it'll likely be in a good position moving forward.

"It is clear that PayPal's products are more important and relevant than ever before," President and CEO Dan Schulma said in a statement. "The strength of our customer value proposition combined with the acceleration of digital payments adoption significantly accelerated in April, with increased demand and engagement."

Threats: Not every part of PayPal's business is growing. The company said that PayPal and Venmo revenue were "partially offset by lower revenue from travel and events verticals and credit," presumably because no one's going anywhere. The company's operating margin fell from 12.5% in the first quarter of 2019 to 8.6% this quarter.

The power struggle: Growing while still generating income is an issue PayPal will have to contend with in the coming months. It's racking up new users, but it's still expecting earnings to fall for the second quarter of the year.

Microsoft wants to replace artists with AI

Better Zoom calls, simpler email attachments, smart iPhone cases and other patents from Big Tech.

Turning your stories into images.

Image: USPTO/Microsoft

Hello and welcome to 2021! The Big Tech patent roundup is back, after a short vacation and … all the things … that happened between the start of the year and now. It seems the tradition of tech companies filing weird and wonderful patents has carried into the new year; there are some real gems from the last few weeks. Microsoft is trying to outsource all creative endeavors to AI; Apple wants to make seat belts less annoying; and Amazon wants to cut down on some of the recyclable waste that its own success has inevitably created.

And remember: The big tech companies file all kinds of crazy patents for things, and though most never amount to anything, some end up defining the future.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

Reinvention of Spending

No more cash: People flock to PayPal

PayPal SVP Jim Magats on what the pandemic says about the future of payments.

PayPal SVP Jim Magats discusses the future of money.

Photo: PayPal

The pandemic has forced many people to get creative just to survive.

Countless plumbers, gardeners, trainers, builders, tutors and everything in between, who would've liked to be paid in cash pre-pandemic, have had to go digital, whether they wanted to or not. And one of the companies that has been reaping all the conversions to digital payments, whether on Venmo, Xoom or other services, is PayPal.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

Power

Sonos CEO Patrick Spence: There’s money in ad sales for us

The smart speaker maker adds in-house ad sales as radio service continues to grow.

"Given the kind of customer base that we have and given the adoption we've seen in Sonos Radio, there's absolutely advertising revenue there," Patrick Spence says.

Photo: Andrej Sokolow/Picture Alliance via Getty Images

Sonos is doubling down on its efforts to monetize services on its platform, and is now looking to build out an in-house ad sales team for its free Sonos Radio service. Sonos CEO Patrick Spence confirmed the news in a conversation with Protocol on Wednesday, saying that in-house ad sales could help the company attract the right kind of brand advertisers to its platform. "Given the kind of customer base that we have and given the adoption we've seen in Sonos Radio, there's absolutely advertising revenue there," he said.

Spence made these remarks ahead of the release of the company's fiscal Q4 2020 earnings results. The company grew its revenue 16% year-over-year, to the tune of $339.8 million for the quarter. Earnings per share came in at $0.15, ahead of the $0.02 that analysts had expected. The company added 1.8 million new households to its customer base in its fiscal 2020, and close to 11 million households now own Sonos products, with an average of 2.9 Sonos products in each of those households.

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Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

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Investors didn’t like Ubisoft and Activision’s earnings

Both stocks plunged on the companies' forecasts.

The outlook is good for console manufacturers, but not so much on the software side.

Image: Protocol

Big Tech companies weren't the only ones reporting earnings this week; some of the biggest players in the gaming industry were, too. And there was a sharp divide: While the outlook's good for console manufacturers, things are less peachy on the software side.

Sony and Microsoft both reported earlier in the week, and both companies' gaming divisions had pretty good quarters. While PS4 sales dropped, unsurprisingly, software and subscription revenue soared. And an optimistic outlook for the PS5 — Sony's hoping to sell 7.6 million by the end of March — and the subscription and software sales that should entail, led Sony to raise its full-year operating income forecast by 13%.

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Shakeel Hashim

Shakeel Hashim ( @shakeelhashim) is a growth manager at Protocol, based in London. He was previously an analyst at Finimize covering business and economics, and a digital journalist at News UK. His writing has appeared in The Economist and its book, Uncommon Knowledge.

Power

Despite an early-week scare, cloud earnings finish strong

SAP's disappointing results had investors worried that a weak economy had finally caught up with the titans of enterprise tech, but AWS, Microsoft and Google are still going strong.

All three major vendors reported strong revenue growth this week.

Image: Protocol and Gonza

At a moment of great uncertainty for the world economy, with a new wave of the pandemic looming and one of the most consequential U.S. elections in decades around the corner, it's still a pretty good time to be in the cloud computing business.

AWS, Microsoft and Google all continued to benefit from the generational shift away from self-managed data centers to at least some degree of cloud computing during the third quarter of 2020. All three major vendors reported strong revenue growth this week but appear to be very closely watching an unsteady economy that could be forced into lockdown once again this winter.

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Tom Krazit

Tom Krazit ( @tomkrazit) is a senior reporter at Protocol, covering cloud computing and enterprise technology out of the Pacific Northwest. He has written and edited stories about the technology industry for almost two decades for publications such as IDG, CNET, paidContent, and GeekWire. He served as executive editor of Gigaom and Structure, and most recently produced a leading cloud computing newsletter called Mostly Cloudy.

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