PayPal bets on AI to revive its tech company roots

Despite a declining stock price and impending workforce reductions, PayPal is placing a bold bet on artificial intelligence to reclaim its identity as a technology company. During the first-quarter earnings call, CEO Enrique Lores delivered a clear directive to investors: the company must “recommit to the fundamentals,” which includes “becoming a technology company again.”

Lores didn’t mince words. He told analysts that market leaders differentiate themselves through innovation, and that PayPal must act now. The strategy involves modernizing its tech platform, accelerating the shift to a cloud-native architecture, and aggressively adopting AI across development processes. According to Lores, these moves will boost developer productivity and shorten time to market.

This admission reveals a surprising gap. While other consumer tech giants have rapidly integrated AI into coding workflows , Spotify, for example, declared in February that its top developers haven’t written a line of code since December , PayPal is only now catching up. Some elite engineering teams even compete on tokenmaxxing, using AI token counts as a proxy for experimentation.

To close that gap, PayPal has created a new “AI transformation and simplification” team tasked with driving enterprise AI adoption. Combined with planned layoffs , which Lores described as removing organizational layers , these AI-enabled processes are expected to generate at least $1.5 billion in cost savings over the next two to three years.

The restructuring, announced last week, splits PayPal into three segments: checkout solutions and PayPal, consumer financial services (including Venmo), and payment services and crypto. Bloomberg also reported that PayPal plans to cut roughly 20% of its workforce , more than 4,500 jobs , over the same period.

Cost savings will extend beyond coding. Executives said AI will also be deployed in customer service, support operations, and risk management. Lores emphasized the scale of the transformation: “I think the changes that AI will enable us to do are … going to be very significant. 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.” He clarified that this isn’t about piloting AI technology, but about redesigning core processes to unlock substantial savings.

Of course, announcing AI-driven cost cuts alongside mass layoffs highlights a central criticism of the technology: the human cost of automation.

Still, PayPal’s restructuring was arguably overdue. The company beat first-quarter earnings with revenue of $8.4 billion, up 7% year-over-year, but its weak second-quarter guidance sent the stock tumbling. That follows a prolonged post-pandemic decline, with shares down over 80% from their 2021 peak.

When asked whether spinning off Venmo as a separate business signaled a willingness to sell it, Lores said the current structure makes the most sense for the turnaround plan. But he left the door open, telling analysts, “my number one priority is to maximize shareholder value.”