J.P. Morgan: PayPay’s second-quarter results beat expectations, but catalysts for a share-price recovery are limited

Where did the second-quarter beat come from?

PayPay’s second-quarter fiscal 2026 total revenue was 118.1 billion yen and adjusted EBITDA was 42.1 billion yen, both above the upper ends of company guidance of 116 billion yen and 39.5 billion yen, respectively, and JPMorgan’s forecasts of 115.7 billion yen and 38.6 billion yen.
Total payment transaction value and other operating metrics were broadly in line with the bank’s expectations. JPMorgan believes lower-than-expected loyalty-point expenses were one reason for the beat, rather than a notable surprise in transaction volumes.

Payments revenue grew 27% year over year, while total payment transaction value grew 20% year over year, in line with JPMorgan’s expectations. Segment profit was 26.5 billion yen, above the bank’s forecast of 25.4 billion yen; the bank believes slightly lower-than-expected loyalty-point expenses for PayPay Credit and card transactions contributed.
Financial services revenue grew 38% year over year, in line with the bank’s expectations; however, interest expenses increased by 1.5 billion yen quarter over quarter, a rise of 60%. JPMorgan believes the increase in expenses due to higher policy rates was not unexpected, but the rise was relatively large, and it is watching how closely deposit rates track policy-rate increases.

Equity-method investments not allocated to segment profit recorded a loss of 4.6 billion yen. This was the main reason net profit came in below JPMorgan’s forecast, despite adjusted EBITDA being above its forecast.
JPMorgan views the core business fundamentals as solid, but believes this quarter’s results offer few catalysts to drive a share-price recovery.

The company raised its full-year fiscal 2026 revenue guidance from 465 billion–473 billion yen to 474 billion–478 billion yen, and its adjusted EBITDA guidance from 149 billion–155 billion yen to 159 billion–163 billion yen. Based on the midpoint of the ranges, the guidance implies an increase in the adjusted EBITDA margin from 32% to 34%.
JPMorgan believes the increase is mainly a fine-tuning based on first-half results and is not surprising, but the improvement in margin guidance is a positive signal. Over the long term, the bank expects growth in high-margin credit payments and a rising share of online payments to drive expansion in the payments business’s margin; financial services, meanwhile, may benefit from net interest income generated by balance-sheet expansion.
JPMorgan rates PayPay Overweight and sets a December 202723 price target in US dollars. The target is based on about 25 times its diluted earnings-per-share forecast for calendar year 2027; the bank takes into account the low free float, potential share sales by existing shareholders aside from possible future purchases, and uncertainty surrounding the acquisition of T&D Financial Life Insurance.