PayPal is looking towards the longer term, despite its falling stock and looming layoffs. In its first-quarter earnings call, CEO Enrique Lores told investors that PayPal must “recommit to the basics,” which included “becoming a technology company again.”
There was no have to read between the lines — PayPal was pitching an AI-powered turnaround.
Lores explicitly said so, telling analysts on this week’s call that leading firms find ways to distinguish themselves by innovating, and that now could be the time for PayPal to take motion. This includes modernizing its tech platform, moving faster to grow to be “cloud-native,” and “aggressively adopting AI in our development processes,” Lores said. The latter would increase developer productivity and shorten time to market, he added.
It’s a startling admission from PayPal that it has yet to totally embrace AI in-house, when AI-assisted coding is one in all the breakout areas where the technology has truly excelled.
Other consumer tech firms have rapidly adopted AI in recent months to help with coding, with Spotify even declaring in February that its top developers haven’t written a line of code since December. Meanwhile, top dev teams try to outcompete each other by tokenmaxxing — a proxy for understanding who at the corporate is experimenting with AI more often, based on the variety of AI tokens they use.
PayPal is just now catching up, it seems.
Lores said the corporate has formed a brand new “AI transformation and simplification” team to assist with its enterprise AI agenda. Combined with the planned layoffs, which Lores characterised as PayPal removing layers from its organizational structure, the addition of AI-enabled processes is predicted to bring the corporate not less than $1.5 billion in cost savings over the following two to 3 years, he said.
The corporate announced last week it was reorganizing its business, which streamlines the operation into three segments: checkout solutions and PayPal, consumer financial services (and Venmo) in addition to payment services and crypto. As well as, Bloomberg reported on Tuesday that PayPal plans to chop around 20% of its workforce over the following two to 3 years as a part of its cost-savings plan, equating to north of 4,500 jobs.
More cost savings will come from PayPal’s plans for AI adoption, company execs said on the decision. That features bringing AI into areas beyond coding, like customer support, support operations, and risk management, to call just a few.
“I believe the changes that AI will enable us to do are going to drive — are going to be very significant,” said Lores. “For this reason we created a bunch last week, reporting to me, that’s going to be in command of driving — function by function, process by process — this AI transformation. And this isn’t about adopting AI as a technology, where we’ve got done many pilots in the corporate, and we’ve got seen what is feasible. It’s really about understanding how can we redesign the important thing processes … that is what we’ve got seen that basically will drive significant savings.”
Announcing an AI-driven push to chop costs while eliminating 1000’s of jobs underscores a core criticism of the technology — it comes with a human cost
It’s price noting that, on this case, PayPal was already in need of restructuring. The corporate could have beat on its first-quarter earnings with revenue of $8.4 billion, up 7% year-over-year, nevertheless it forecast weak guidance for the second quarter, sending the stock tumbling after earnings. That follows an extended post-pandemic decline that has sent the stock down over 80% from its 2021 high and has stunted PayPal’s growth.
Asked if separating Venmo into its own business meant the corporate could be open to selling it, Lores said that, for now, that is what made probably the most sense when it comes to the turnaround plan. Still, he signaled openness to future deals by saying “my primary priority is to maximise shareholder value,” in answer to an analyst’s query a couple of sale.
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