PayPal shifts back to its tech roots with a stronger focus on AI

PayPal is looking ahead to a major transformation despite declining stock performance and anticipated layoffs. During its first-quarter earnings call, CEO Enrique Lores told investors that the company needs to “recommit to the fundamentals,” including “becoming a technology company again.”

The message was direct — PayPal is aiming for an AI-driven turnaround.

Lores made that clear during the call, explaining that leading companies differentiate themselves through innovation and that PayPal must act now. The plan includes modernizing its technology platform, accelerating its transition to a cloud-native infrastructure, and “aggressively adopting AI in our development processes.” According to Lores, these steps are expected to boost developer productivity and reduce time to market.

The comments also highlighted how far behind PayPal may be in adopting AI internally, especially at a time when AI-assisted coding has become one of the most impactful applications of the technology.

Other consumer tech companies have rapidly integrated AI into their workflows. For example, Spotify stated earlier this year that its top developers had not written code manually since December. Across the industry, engineering teams are increasingly competing through “tokenmaxxing,” a practice that measures how frequently developers use AI tools based on token consumption.

PayPal, by comparison, appears to be catching up.

Lores said the company has established a new “AI transformation and simplification” team to drive its enterprise-wide AI strategy. Combined with planned layoffs — which he described as removing layers from the organization — the company expects to achieve at least $1.5 billion in cost savings over the next two to three years.

The restructuring follows PayPal’s recent announcement that it is reorganizing into three core business segments: checkout solutions and PayPal, consumer financial services (including Venmo), and payment services and crypto. According to reports, the company plans to reduce its workforce by around 20% over the next few years, potentially affecting more than 4,500 employees.

Executives also indicated that AI will be deployed beyond software development. Planned applications include 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,” Lores said. “This is why we created a group last week, reporting to me, that is going to be in charge of driving — function by function, process by process — this AI transformation. And this is not about adopting AI as a technology; we have run many pilots in the company and have seen what is possible. It’s really about understanding how we can redesign the key processes … this is what we have seen that really will drive significant savings.”

The strategy of using AI to improve efficiency while cutting jobs highlights a broader concern about the technology’s impact on employment.

At the same time, PayPal’s restructuring reflects deeper business challenges. While the company exceeded expectations in the first quarter with $8.4 billion in revenue — a 7% year-over-year increase — it issued weaker guidance for the second quarter, leading to a decline in its stock price. This comes after a prolonged downturn since the pandemic, with shares falling more than 80% from their 2021 peak and overall growth slowing significantly.

When asked whether separating Venmo into its own segment could lead to a potential sale, Lores said the current structure supports the turnaround strategy. However, he left the door open for future deals, stating that his “number one priority is to maximize shmaximizer value.”