PayPal Deepens AI Commerce Push With Perplexity Shopping Partnership

What happened

PayPal has partnered with Perplexity to launch an agentic shopping application that uses personalized AI search to let consumers buy from more than 5,000 merchants through PayPal's rails. This expands PayPal's role from a payments endpoint toward an upstream commerce discovery layer, aligning with its 'PayPal 2.0' agenda around AI-driven personalization and a redesigned, higher-conversion checkout. For merchants, the new surface could funnel incremental, high-intent traffic into PayPal-branded checkout and Braintree processing, supporting transaction-margin dollars even as 2025 revenue growth is pressured by Braintree repricing. For consumers, combining AI product search with PayPal's brand and purchase protection may deepen wallet engagement and help defend share against OS-level wallets and marketplace-native payment options. Strategically, the initiative fits management's emphasis on capital-light growth, leveraging data and partnerships rather than balance-sheet-heavy lending to enhance the value of its two-sided network.

Implication

For investors, the Perplexity partnership is a strategically positive but financially immaterial development in the near term, so the core thesis around undervalued, cash-generative checkout scale remains intact. The project gives PayPal an early foothold in AI-native 'agentic commerce', which, if it gains adoption, could raise TPV per active user and increase the mix of higher-margin branded transactions over a multi-year horizon. Because economics, traffic commitments, and rollout scope have not been disclosed, it is prudent to view this as upside optionality rather than to embed material revenue into 2025 estimates. The main underwriting variables for the stock remain execution on branded checkout, management of Braintree repricing so that transaction-margin dollars are stable to up, and continued delivery of roughly $6B+ in annual free cash flow. At roughly 12x earnings and trading well below some DCF-based intrinsic value estimates, this announcement slightly reinforces the BUY case by improving the narrative on AI and commerce differentiation without adding notable risk.

Thesis delta

Our prior thesis already assumed that PayPal would use data and AI to improve personalization and conversion across its network; the Perplexity tie-up offers concrete execution evidence and a potential new, AI-driven discovery surface that can route incremental volume into PayPal’s ecosystem. We are not changing our rating or near-term estimates, but we modestly increase confidence that PayPal can participate in the emerging 'agentic commerce' layer above payments, adding longer-term upside optionality to TPV and engagement without increasing balance-sheet risk.