PayPal is looking to the future, despite its collapse and impending layoffs. In its first-quarter earnings call, CEO Enrique Lores told investors that PayPal needs to “recommit to the fundamentals,” including “being a technology company again.”
There was no need to read between the lines – PayPal was introducing an AI-powered transformation.
Lores made this clear, telling analysts on a call this week that leading companies are finding ways to differentiate themselves through innovation, and that now is the time for PayPal to act. This includes modernizing the technology platform, moving quickly to become “cloud native,” and “aggressively embracing AI in our development processes,” Lores said. The latter will increase developer productivity and reduce time to market, he added.
It’s a surprising admission from PayPal that it has yet to fully embrace AI in-house, where AI-assisted coding is one of the areas where the technology has really taken off.
Other consumer technology companies have quickly embraced AI in recent months to help with coding, with Spotify even announcing in February that its top developers haven’t written a line of code since December. Meanwhile, top dev teams are trying to outdo each other with tokenmaxxing – a proxy for understanding who in the company is testing AI the most, based on the number of AI tokens they use.
Only PayPal now participates, it seems.
Lores said the company has created a new “AI transformation and simplification” team to help with its business AI agenda. Combined with planned layoffs, which Lores characterized as PayPal removing layers in 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.
The company announced last week that it is reorganizing its business, simplifying operations into three divisions: payment solutions and PayPal, consumer financial services (and Venmo) and payment services and crypto. In addition, Bloomberg reported on Tuesday that PayPal plans to cut about 20% of its workforce over the next two to three years as part of a cost-savings plan, amounting to north of 4,500 jobs.
Additional cost savings will come from PayPal’s plans to adopt AI, 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 is going to enable us to make are going to drive — they’re going to be very important,” Lores said. “That’s why we created a team last week, which reports to me, that will manage to drive – work by work, process by process – this AI change. And this is not about accepting AI as a technology, where we have done many pilots in the company, and we have seen what is possible. It is about understanding how to redesign important processes … this is what we have seen that is important that will really improve.”
Announcing an AI-driven push to cut costs while eliminating thousands of jobs underscores a fundamental criticism of the technology — ask at the human cost.
It is worth noting that, in this case, PayPal was already in need of restructuring. The company may have succeeded in its first-quarter earnings with revenue of $8.4 billion, up 7% year-over-year, but it is predicting a weak guidance for the second quarter, causing the stock to slump after earnings. That followed a long post-pandemic slump that sent the stock down more than 80% from its 2021 high and crippled PayPal’s growth.
Asked if separating Venmo from its business means the company will be open for sale, Lores said, for now, that makes the most sense in terms of a turnaround plan. Still, he expressed openness to future deals by saying “my priority is maximizing shareholder value,” in response to an analyst’s question about the sale.
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