Yahoo Finance

Jamie Miller

Alex. Moving to slide 5. PayPal delivered a strong quarter to start the year. Our results reflect another positive step forward, with multiple drivers contributing to an acceleration in profitable growth. We are improving our speed and focus across the organization, working hard to transform the company, while improving our value proposition for consumers and merchants.
Excluding interest on customer balances, transaction margin dollars grew 7% or 8% ex leap day accelerating from last quarter. We outperformed the TM dollars and EPS guidance we provided in February with upside driven by a combination of sources, including PSP profitability, Venmo, credit and transaction expense improvement and a more favorable tax rate.
Non-GAAP earnings per share were $1.33 in the quarter, up 23%. And PayPal generated $1 billion of free cash flow in the first quarter, bringing trailing 12-month free cash flow to $6 billion. Adjusted free cash flow, which excludes the net timing impact between originating and selling European Buy Now, Pay Later receivables, was $1.4 billion in the first quarter and $6.2 billion over the past 12 months.
Turning to slide 6. Total active accounts increased by about 1.5 million from the fourth quarter and over 8 million versus the prior year's first quarter to 406 million. Monthly active accounts continue to show good progress, up 2% year-over-year to 224 million, with contributions from PayPal consumer accounts and Venmo. Transaction per active account, excluding PSP processing, grew 4%.
Moving to slide 7. Total payment volume grew 3% at spot and 4% on a currency-neutral basis to $417 billion. As we highlighted at our Investor Day in February, this slide now includes a simpler and more relevant TPV breakout. This view reflects how we think about our product portfolio today, the go-forward strategy and our customer needs.
Looking across these categories, we are encouraged to see signs that both consumers and merchants are demanding how and where they use PayPal. Winning checkout remains our most critical priority, and our teams remain laser-focused on advancing the many initiatives that reinforce our checkout business.
In the first quarter, online branded checkout volumes grew more than 4% on a currency-neutral basis. And excluding last year's leap day, which contributed over 1 point to growth, online branded checkout volumes increased nearly 6%.
Branded experiences TPV, which includes online checkout, PayPal and Venmo Debit, as well as Tap to Pay, grew 8% ex leap day accelerating from the prior year. We're excited about this momentum as we work to drive greater awareness that both PayPal and Venmo are ways to pay any time and any place. Ultimately, our goal is to form deeper consumer relationships to bring habituation across online and off-line channels.
Turning to PSP, which spans both large enterprise and SMB processing as well as parts of our OVAS portfolio, like payout, invoicing and point-of-sale solutions, volume grew 2% compared to 6% in the fourth quarter. As we've discussed throughout the past year, the shape of this growth is intentional, we are prioritizing healthy quality growth within our Braintree business, and have made deliberate choices to shift away from unprofitable volume.
Shifting away from this volume pressures gross revenue but is accretive to transaction margin dollars and should result in more than 1 point of TM benefit this year. We continue to expect benefit to build over time as we drive more value-added services.
Moving to more financial detail on slide 8. Transaction revenue was up on a spot basis or up 1% on a currency-neutral basis to $7 billion, driven primarily a branded checkout, Venmo and SMB processing. This growth was offset by the shift away from unprofitable Braintree volume that I just mentioned.
Importantly, other value-added services revenue grew 17% to $775 million driven primarily by healthy performance in consumer and merchant credits. We ended the quarter with $6.5 billion in net loan receivables, up 1% sequentially, and we continue to be pleased with the quality, the diversification and the performance of our credit portfolio.
We take a prudent approach to managing the portfolio's exposure and our goal is to sustain a balance sheet-light business model, while providing our customers with more ways to manage their cash flow spending and borrowing needs.
Transaction take rate declined by 6 basis points to 1.68%, driven largely by product and merchant mix. The two largest drivers of this change were momentum and payouts, and shifting away from unprofitable volume on Braintree, some of which carries a higher gross take rate due to card funding.
There was also impact from faster growth of large price volume within branded checkout, adoption of the PayPal debit card and growth of Venmo and PayPal P2P. These are positive trends for our business, demonstrating the relevance and importance of PayPal to consumers and merchants around the globe as well as the process we are making to improve profitability.
Our focus on profitable growth and the progress we are making across our strategic growth drivers is most clearly demonstrated by the acceleration in transaction margin dollar growth that we have delivered over the past year. Branded checkout, PSP and value-added services, credit and Venmo were all meaningful contributors to transaction margin dollar growth in the quarter. These drivers also include improvement in transaction expense.
Transaction margin rate increased by more than 270 basis points year-over-year, reflecting our focus on price to value and profitable growth. Non-transaction-related OpEx increased 2%, as we continue to actively manage our cost structure while reinvesting in key growth initiatives. This includes marketing to support the rollout of new products and initiatives.
Non-GAAP operating income grew 16% in the quarter to $1.6 billion and non-GAAP operating margin increased about 260 basis points to 20.7%. In the quarter, we completed $1.5 billion in share repurchases, bringing share repurchases over the past four quarters to $6 billion. Finally, we ended the quarter with $15.8 billion in cash, cash equivalents and investments and $12.6 billion in debt.
Moving to guidance on slide 9 for the second quarter and the full year of 2025. Our team is focused on execution and capturing the opportunity in front of us. We are confident that our scale, diversification and balance sheet enable us to keep advancing our strategic growth drivers through different operating environments.
As we continue making progress on PayPal's transformation, we have multiple growth levers, and are well positioned to help merchants and consumers navigate the environment. Importantly, with a strong first quarter behind us and a good start to the second, we believe we are on pace to outperform our original expectations for the first half of 2025.
At the same time, given uncertainty in the environment, and the potential for a wide range of outcomes, we are appropriately cautious. Consumer spending and the labor market have proven resilient, but it remains to be seen how tariffs and other trading friction will impact global economic activity, consumer spending and supply chains over time.
As Alex mentioned, despite our strong start to the year, we're maintaining our full year guidance. And this guidance now implicitly builds some incremental flexibility into the second half of the year for macroeconomic uncertainty.
Throughout different macro environments, we will remain focused on making the right long-term decisions for the business, striking an appropriate balance between investment and productivity.
For the second quarter, we expect low to mid-single-digit revenue growth on a currency-neutral basis, which is impacted by the Braintree renegotiation efforts I discussed earlier. We've seen a good start to April, and are watching trends closely. Tariff-related concerns and news flow have likely resulted in some spend being pulled forward for certain verticals in the US.
We are not assuming that those higher activity levels persist for the entire quarter. We expect second quarter transaction margin dollars to be between $3.75 billion and $3.8 billion, which represents 4.5% growth at the midpoint. Excluding interest on customer balances, we expect transaction margin dollars to increase by approximately 6.5% in the midpoint.
We are planning for mid-single-digit non-transaction OpEx growth in the quarter due to the timing of initiatives and marketing spend. We expect to deliver non-GAAP EPS in the range of $1.29 to $1.31, or 9% growth at the midpoint.
For the full year, we are maintaining our guidance, as I mentioned earlier, and I'll just highlight a couple of lines. Excluding interest on customer balances, we expect transaction margin dollars to grow by at least 5% compared to 4.6% growth in 2024. And we expect to deliver full year non-GAAP EPS in the range of $4.95 to $5.10, representing about 8% growth in the midpoint.
This includes negative impact from lower interest rates and compared to our prior guidance of smaller headwind from our expected non-GAAP effective tax rate. Our guidance continues to assume approximately $6 billion in share buyback for the full year, and we continue to expect full year free cash flow of approximately $6 billion to $7 billion.
I'd like to wrap up by thanking the PayPal team for their continued focus and dedication. We have a solid foundation to build on as we execute on the second year of PayPal's transformation.
With that, back to you, Alex.

Alex Chriss

Thanks, Jamie. To summarize, we had a great start to the year and our strategy is taking hold. We've built a solid foundation and have multiple ways to win. A huge thank you to the PayPal team for their focus on delivering for our customers and our business.
Steve, let's go to Q&A.

Steven Winoker

(Operator Instructions) Paulie, please open the line.

Question and Answer Session

Operator

(Operator Instructions)
Tien-Tsin Huang, JPMorgan.

Tien-tsin Huang

Hi, thanks for the progress report here. Lots to talk about. Just wanted to maybe ask the obligatory macro question, if you don't mind. I'd love to hear a little bit more on how you characterize consumer and SMB health overall. And I know you touched upon it a little bit, but is the macro or the geopolitical stuff that's going on in the world, is that changing enough for you to reorder some of your priorities? It does sound like you're leaning harder into NPL and Venmo. But yeah, just a broader macro question. Thank you.

Alex Chriss

Hey Tianjin, thanks for the question. I wouldn't say we're reordering any priorities, and I don't think we -- we're obviously watching it very closely to see what plays out. But things have been pretty consistent so far. Obviously, we think there's an opportunity. You mentioned Buy Now, Pay Later.
We think with our strong position there and strong product, there's obviously an opportunity to continue to lean in. I think from a consumer standpoint, we've been building over the last few quarters to really be the most rewarding way for consumers to pay.
And we think that's an opportunity for us to continue to get our message out. Our rewards coming back on debit card, the rewards we just put out on crypto. These are things that put more money in the pockets of consumers, and that's a positive thing and an opportunity for us.
On small business, again, we know that cash flow is the most critical part for small businesses. We haven't seen a big impact yet. But as they think about money in, money out and access to capital, we know that we have tremendous opportunity when it comes to providing capital to our small business customers, and we think we can be a place for them to come in times of need.
But I'd say we're still early and we haven't seen any big shifts yet, but we feel confident in our position if those things happen.

Jamie Miller

Yeah. And Tien-Tsin, I would just add, that when you looked at the core credit portfolios as a monitor of some of your question around consumer health or merchant health, we monitor that very closely. Charge-off rates are [full] and, in some cases, improving. And in particular, with respect to the consumer portfolios, we've actually seen delinquencies over the last 30 days improve.
And also as it relates to just broader consumer trend, the first part of April, we saw an uplift as well in terms of TP, and a lot of folks have referenced that as pulling. But when you look at just general consumer health coming into what could be a more uncertain time is looking pretty healthy and pretty good.
And then with respect to SMB, good, continued, consistent performance there, too. And on the merchant lending side, as we monitor that, honestly, pretty consistent with what I'd say about consumer charge-offs also improving. And obviously, we're monitoring the whole thing very, very carefully, but it looks pretty steady right now.

Operator

Dan Dolev, Mizuho.

Dan Dolev

Hey guys, great results here. Really appreciate it. Can you give us like a sense of looks like the branded experience CPV strategy is doing really well. Can you give us maybe a sense of like how much traction you're getting there and what you're doing to get those nice results and thanks again.

Alex Chriss

Yeah, Dan, let me start. So good to hear from you. We've got -- this is the strategy that we've laid out really coming to light. So first, we have a branded checkout strategy that is really about driving habituate everywhere that the customer wants to pay. We have such strong brands in both PayPal and Venmo, and our customers are asking to be able to leverage that trust, the safety, the brand, the rewards in every purchase that they make.
And so we've been focused on not only improving that online experience that we've talked about, and I'm sure we'll talk about more, making it available for them exactly how they want to pay, whether that's immediately or with pay later scenario, Buy Now, Pay Later, but then also offline. And you mentioned branded experiences. This really is enabling our PayPal debit card, our Venmo debit card to be accessible to our consumers. We saw PayPal debit card TPV growth over 100% in Q1.
And that really is driving habituation. This is driving our consumers to actually start to come back, move online and start to pay with PayPal wherever they see it. So the strategy is working, TPV, up 8% overall in branded experiences. And this really is the metric that we are focused on and we hope you're focused on as well, because, again, it is really all about the strategy that we've laid out.

Operator

Ramsey El Assal, Barclays.

Ramsey El Assal

Hi, thank you very much for taking my question this morning. I wanted to ask about the de minimis tariff exemption for China, I think that's scheduled to be eliminated on May 2. Do you expect an impact from that, I guess? And if so, if you could help us dimensionalize the impact, I would appreciate it.

Jamie Miller

Yeah, good morning. So obviously, the whole situation around tariffs is really changing daily, and there's multiple scenarios that could unfold. And maybe I'd first start by saying I think we come into this from a position of strength. We are globally diversified. Our merchant base, our region based, it's just very, very global and diverse.
And we're well positioned to capture shifts in spending as they happen. And the other thing I would just add is, in particular, in the US, we are about 50-50 between retail and services. So diversification there as well. But when you talk about de minimis, the way I'd size that for you, our Chinese merchants selling into the US is less than 2% of our branded checkout TPV.
And this includes both direct China to US cross-border transactions and volume from Chinese merchants with US entities, but -- where they're shipping from China. So from that perspective, that's probably how I'd size it there.

Operator

Darrin Peller, Wolfe Research.

Darrin Peller

Hey guys, thanks. Maybe just go a little further, if you don't mind, into what's embedded in your outlook around KPIs and modeling assumptions. Totally understand not changing guidance like the beat. But if you could help us with assumptions on the macro front and what you're embedding in your outlook, especially on cross-border in China and just what we should think about being included.
As well as even just give us a little more color on branded growth expectations. What are you seeing specifically in April right now from a branded growth rate point? And then branded versus unbranded growth as the year progresses would be really helpful. Thanks guys.

Jamie Miller

Sorry, Darrin. I'm just writing down all your questions here. Let me start with the macro question. I think Alex was alluding to this before. But I would start by saying, as we look at this year, we are laser-focused on what we can control, staying focused on delivering for customers and really executing around our core initiatives and our investments.
And when we look at the macro and forecasting, it's really difficult to predict kind of which way all these scenarios could land. I would just say maybe that we're prudently guiding.
So despite a strong first quarter and second quarter guide, we're maintaining our full year guide, just the macro uncertainty. And it builds in room for a range of consumer activity softening in the second half. Overall, I'd say it covers about 2 points to 3 points of deceleration in overall e-com trends in the second half, which is not what we see in rate. Current performance is really trending well.
But when you think about 2 points to 3 points of e-com, I think about that as 2 points to 3 points of TPV, plus some level of lower credit originations and maybe a little bit of credit losses, maybe some FBO impact or interest rate impact from some shifting. But -- so that's roughly how I package it from that perspective.
When you asked about April and branded trends, branded has had pretty consistent trending as what we saw in the fourth quarter. And April, in particular, we saw some US consumer activity accelerating. I mentioned before, it's likely a pull forward. We're not assuming that continues. But all in, we're on track for a mid-single-digit branded checkout TPV guide, what we gave earlier this year.
And then you also asked about branded and unbranded and how to think about, I think, the revenue side of that. And maybe to just anchor there around the unbranded side of that, you saw that pull back this quarter that was expected. That deceleration really began in the second half of last year. The one thing I would say about unbranded, PSP and OVAS is that it's been a very strong and growing contributor to transaction margin dollars.
So while revenue is shifting down, we're seeing a nice contribution to TM and really just sort of shift that margin profile of the business over time. Second quarter revenue, we expect a pretty similar profile to the first quarter and then a second half ramp. Overall, continuing to contribute to that transaction margin growth for '25.

Operator

Jason Kupferberg, Bank of America.

Jason Kupferberg

Good morning guys. Thank you. So, it looks like online branded, you were stable on an underlying basis here in Q1 at up 6%. But now we've got almost half the US on the new checkout experience, it sounds like Europe is untapped pretty soon. So could we start to see some initial acceleration in online branded volume growth by the end of this year if the macro stays stable? And can you just give us a word on what the US. first International branded split looked like in terms of Q1 growth rates? Thank you.

Alex Chriss

Hey, Jason, thanks. So again, just to unpack our branded strategy, I'd really think about it as three parts. One is the improved branded checkout experience. And as you mentioned, we're -- we've moved very quickly up now over 45% in the US. Again, that still is -- think of that as sort of double digits of our global transactions. And so we're really excited. We think we've got a really strong playbook now. And we think, as we start to roll this out into Europe, we'll actually accelerate even faster.
But our PSP redesign is holding, the improvement is holding and now this is just about scaling. Second lever is really accelerating Pay with Venmo, and you've seen the results there. So very, very fast flywheel starting to happen from a Pay with Venmo perspective. TPV up over 50%, and MAAs up over 30%. And then the third lever is by now Buy Now, Pay Later and our pay later products.
And again, TPV up over 20%. So you add all three of those together, and as we continue to see leaning into those three levers, I don't know the exact timing of when we'll start to see branded checkout, but we put pretty strong growth numbers of 8% to 10% by 2027. And I think those three levers are -- continue to give us confidence that we're executing well and heading in that direction.

Jamie Miller

Good. And then, Jason, what I would just add to that. When you look at the patient redesign, I would say we think about that as ramping over time. I mean this is something that as things come on, transactions start flowing, it's not something that is an immediate translation. And we do see impact coming through the numbers, but it's very small so far.
So maybe that's how I would position that piece of it. When you look at the US and international, I guess I'd start with the US by saying performance was relatively consistent with the fourth quarter. And we are beginning to see good traction across US MAAs, across TPA, across shifting to power -- more upstream to more power users.
And Alex mentioned Pay with Venmo, which is really had good traction there. It is early, but we talked in the fourth quarter about seeing some shifting in our US branded checkout levels. We saw that hold this quarter, watching it very closely but cautiously optimistic about that.
And then on the outside the US side, relatively consistent as well, a little bit of macro volatility across the markets. But in Europe, we continue to take share in Continental Europe, including in Germany. Really strong brand presence, as you know, across merchants, across consumers. And I think what we're really excited about is that we're bringing our new product innovation to the market in Europe starting this quarter.
So we'll start with Germany and the UK. And this is the checkout redesign, it is Buy Now, Pay Later. It is omni and NFC launches. And brand marketing to accompany all of that, with a fast follow to other countries after that. So I think the overall look right now, we feel put about branded checkout and just laser-focused on our ambition.

Operator

Andrew Schmidt, Citi.

Andrew Schmidt

Hi Alex. Hey Jamie, good morning. Thank you for taking the questions. Maybe just switch gears to the consumer side. I was wondering if you could just talk a little bit about the PayPal Everywhere program. Obviously, some rich rewards across categories there. But could you talk a little bit about table effect, if any, that you're seeing outside of those categories? I'm curious if -- just about adoption and spend trends in that program now that it's been in place for some time. Thank you so much.

Alex Chriss

Yeah, thank you, Andrew. And again, what you mentioned is exactly what we're starting to see. So just as a reminder, rolled out PayPal Everywhere, we're really -- launched sort of August, September of last year. Since then, 4 million new debit card active.
So really starting to see strong demand from our consumer base that loves the brand and wants to be able to use PayPal Everywhere that they shop.
TPV growth, again, up over 100% in Q1, with active -- attractive economics in off-line as well. And so it's not just doing the habituation that we want for every purchase. But the off-line spend is actually quite attractive. What's exciting is though that halo effect. So we're starting to see that debit card users have a 5.5% to 6% lift in transaction activity and over 2 times increase in average revenue per active user versus just a checkout only.
So this is the strategy starting to take hold. This is a consumer that's now becoming habituated with PayPal. They're enjoying the rewards in the category of their choice. And we're also starting to see the spend and the category demand actually extend to other categories out. So we started with things I mentioned in the past, gas, groceries, restaurants, things that consumers have never used PayPal for before.
Now we're starting to add new everyday spend categories, like ride share and transit. So demand is really strong from these consumers. We're starting to see the halo effect of not just offline, but now moving into online. And again, this is why this all comes back to this habituation and this branded experiences journey that we think is going to work. First in the US and, as Jamie just mentioned, really excited to see this roll out in Germany and in the UK.
With Germany, as an example, coming this quarter, we've got some really exciting Buy Now, Pay Later opportunities, which are, I think, going to be very, very powerful in a market that has traditionally not been a credit market, but one that's been connected to bank that we think we can come in with our already connected bank and actually give consumers the ability to make the purchases they need on a Buy Now, Pay Later product. So again, lots of exciting innovation coming and the flywheel starting to spin.

Operator

Harshita Rawat, Bernstein.

Harshita Rawat

Good morning, Jim, I have a clarification question about the conversion of (technical difficulty)

Alex Chriss

You broke up a bit, Harshita. But I think -- Jamie.

Jamie Miller

I think so, yeah. So first, I think the first part of the question was talk about conversion uplift as we roll out the new checkout redesign. We talked about 100 bps of conversion uplift, is that holding. And I'd say, yes, that is what we're seeing continue to come through in the results that we have.
And then your second part of your question, how quickly can we roll this out in Europe. And what I would say is a really important point here is that a much higher proportion of our European merchants are already on our latest integration. So this makes a much faster and easier rollout process for them as we tackle Europe.

Alex Chriss

If we didn't get that whole question, Harshita, we can follow up later.

Operator

Sanjay Sakhrani, KBW.

Sanjay Sakhrani

Thank you. Good morning. OVAS revenue growth was quite strong. I was wondering, Jamie, if you could just walk through sort of where the strength was and if it outperformed relative to your expectations, and if you expect that strength to continue over the course of the year? Thanks.

Jamie Miller

Yeah, good morning. So when we look at OVAS, there's one thing I would just call out before I talk about the actual quarter, which is that in the first quarter of '24, we did have lower credit revenue with a lower gain share with our consumer credit partner. As we had -- coming through COVID, we had some loss normalization happening there.
Last year's first quarter was slightly lower in that regard. And if you remember, we had also pulled back on our merchant lending portfolio. So revenue was lower there as well. So as we come into this year, I mentioned on our fourth quarter call that we're really back in the market with a rebuilt credit team and just really good capability, and we saw that growth come through.
And again, OVAS growth this quarter was primarily credit driven, both consumer and merchant. Small contribution from interest. But I mentioned the portfolio is performing well. We feel really good about it. We're very actively managing it. And as we look at the year, we continue to expect mid-single-digit OVAS growth.
So credit will continue to be a primary driver this year. But you might remember that we also have baked into our forecast about $150 million of impact of interest rate headwinds, which also runs through OVAS as well.

Operator

Timothy Chiodo, UBS.

Timothy Chiodo

Great, thank you for taking the question. I want to dig in a little bit more to Germany and the UK. I believe they're the two largest branded markets outside of the US, particularly from a gross profit standpoint. I believe they are two of the largest markets for branded. Two topics I was hoping we could touch on one a little bit about the competitive landscape in those two markets specifically.
And then on UK, I know there were some efforts to roll out biometrics to help with two-factor authentication. And I was hoping you could talk a little bit about the progress and the phasing of that.

Alex Chriss

Let me get started, Tim. So as you said, two very important markets for us and strong markets outside of the US. Competitive dynamics is a little bit different, so let me unpack them. Germany, we are really the market leader there.
We're -- I think we're the number one brand in Germany for the last three years. So very, very strong consumer presence. Very strong merchant presence.
It's also a different type of market. As I just mentioned, it was not a -- it's not a credit-heavy market. So the way PayPal is used is we're connected to bank and then PayPal is used as really the way to make an online purchase. And so our transactions in e-commerce in Germany are extremely high.
That's what gives us a lot of confidence as we now move into off-line, is we're really going to be really one of the first at-scale, bank -- off-line wallets, that we think will be able to drive significant penetration into the market. So we're really excited about that, as well as bringing some new innovations to market with not only our rewards program, but the Buy Now, Pay Later connected element as well.
So with the brand presence we've got in Germany with the banks already connected and the onboarding experience that's just really delightful and literally one click from your bank to be able to set up your off-line wallet. And with the innovation rewards and Buy Now, Pay Later, we're really excited to get into the market there.
UK, much more competitive dynamic there. We've really suffered in the last few years with what I would consider to be one of our poorest app experiences for consumers. We're rolling out a new app experience in the UK shortly. But we've already started with, as you mentioned, the biometrics.
Actually got a favorable connection with the regulator there to enable us to -- enable our biometrics to be considered two-factor authentication. That's rolling out quickly and enabling a much better experience. Whereas before, it really was choppy and created a lot of friction and a lot of latency in the experience.
Biometrics is now really creating a seamless experience. You add on top of that the new app that's going to be rolling out and then our rewards program and all the other innovation that we brought to bear. And we think we're going to be competing quite well in the UK. And you'll see us leaning in from a go-to-market perspective as well to really remind consumers that we now have the best product in the market.
The last thing I'd say is I was actually just there a few weeks ago, and I think there's a big opportunity for us in Buy Now, Pay Later. Actually, I sat down with a lot of merchants in the market, and they're really looking for PayPal to come in. There's a lot of different options that are available now.
And I think we're hearing from merchants that PayPal is a beloved, trusted brand that they would love to be able to have their consumers have a single onetime checkout or Buy Now, Pay Later option from a single brand. And so we're going to lean in heavily and buy now pay later in the UK as well.

Operator

Dan Perlin, RBC Capital Markets.

Dan Perlin

Thanks, good morning. I just wanted to revisit cross-border for a moment, and kind of maybe the puts and takes in terms of dynamics that we need to be thinking about. But one of those is just kind of now that we have a situation where we have this weak dollar, how does the like purchasing power parity associated with a weaker dollar typically play out for you guys in terms of cross-border behavior?
And then if you could just also give any color, as a reminder, kind of discretionary versus nondiscretionary spending banks that tend to fall heavy in cross-border. Thank you.

Jamie Miller

Yeah, so good morning, Dan. How are you? I'll start with the discretionary side of it. So when you look at PayPal today, I would say discretionary spend, we are a lot more diversified today than we were a few years ago. Now we're about 50-50 split in our US TPV between goods and services.
And even in those categories, we are diverse as well. I mean when you look at that -- just breaking down retail as an example, about 10% of that is fashion, but then it's really across a lot of different things between variety and discount, beauty, sports, pets, toys, like lots of different things.
And so when you look at those, I mentioned before, I think we're really positioned well to capture spend as it may shift amongst categories, and we're well positioned around that. When you look at the order side of it, what I would really say there, Dan, is it's really diversified. I talked before about the China to US direct, a large portion of our cross-border is intra-European corridors.
And so when you start to look at how this looks over the globe, it's just very well diversified. And it's really hard to say how a shifting dollar is going to impact that. And honestly, what will actually happen there. But I would just say, if we take a step back and think about our guidance here, our process, we're just planning prudently and preparing for some level of uncertainty.

Steven Winoker

Paulie, we'll make time for one more question.

Operator

Will Nance, Goldman Sachs.

Will Nance

Hey, I appreciate you taking the question. I just wanted -- you said several times on the merchant lending portfolio that you guys are actively managing standards in the current environment. I'm just wondering if you've made any changes to underwriting or how you would think about changes to underwriting in the face of merchant-facing kind of cash flow strains on the back of sort of supply chain dynamics, tariffs specifically?
And if you guys have any way of sort of dimensionalizing, like what sort of cash flow strains your merchants may experience if tariffs do go into effect in terms of things like importing inventory and things of that nature? Thank you.

Jamie Miller

Yeah, I think it's difficult to answer the latter part of your question. But if we go back to the merchant lending part of it, this is a portfolio that is actively managed. And it's something that, a year ago when Michelle Gill came in and really reconstituted the team, they're very focused on how we can help our small businesses really navigate growth.
And so the portfolio has a couple of different things in it. One is just really helping small businesses with working capital and inventory buy. And we monitor that and underwrite it with an eye towards credit, towards cash flow. And when you look at this, these are things where we've got cash sweeps with sales as sales come in, it's just a very well-constructed portfolio from both an underwriting and from a risk management perspective.
And the other side of it is PayPal business loans, which are cash flow based. They're typically personally guaranteed. And again, these are things that we monitor all the different indicators of the portfolio. And we adjust as we go. I mean we did make some adjustments in March to tweak and fine-tune and make our underwriting slightly more conservative, but it's something the team is all over. And I think we can react very quickly in a changing environment.

Steven Winoker

Thanks, Jamie. Alex, any final thoughts?

Alex Chriss

Thanks, Jamie. Alex, any final thoughts? Yeah, thanks, everyone, for the call this morning. I'm very proud of the quarter that the team delivered, not only great results, but also just the innovation and the pace that the teams are moving.
We didn't get a chance to talk a lot about Venmo, but I know I mentioned it on the call, we've leaned in there and the innovation is really starting to take hold. We talked about moving into monetization and debit card. Just to give you another data point, 10% of the new cohort of users are now adopting the debit card, right? This is showing our innovation come to life.
And from then, Venmo users that are using and keeping funds in. We're seeing funds beyond P2P up over 100%. And ad funds and auto reload, really, as we've innovated, they're starting to become the habituation consumers. So just goes to show that as we are executing and leading into our strategy, our innovation is really taking hold.
So we're focused. We'll continue to scale our innovation. And look forward to updating you along the way. Take care, everyone.

Operator

Thank you. This concludes today's conference. Thank you for participating. You may now disconnect.