Going into PayPal's (NASDAQ:PYPL) first-quarter financial report, investors were still digesting the announcement made in February by eBay (NASDAQ:EBAY). The company revealed that it had decided to process its own payments as soon as allowable under its separation agreement with PayPal. The news sent PayPal's shares falling by as much as 10%, while eBay climbed 15%. As I pointed out at the time, many investors didn't understand the context of this announcement, and that it wasn't unexpected -- or even that big of a deal.

PayPal's earnings release once again showed its massive growth potential, as if to reassure investors that the future would be just fine, and the company would continue to thrive, even in a future with a much smaller contribution from eBay.

PayPal logo on an opaque surface in front of HQ building.

PayPal is still putting up impressive growth. Image source: PayPal.

Growth is intact

For the just completed first quarter, PayPal reported revenue that grew to $3.69 billion, up 24% year over year, or 22% on a constant currency basis. These results exceeded the high end of the company's own forecast of a range between $3.58 billion and $3.63 billion, as well as trouncing analysts' consensus estimates of $3.59 billion. 

PayPal reported net income of $511 million, up 33% year over year, producing earnings of $0.42 per share, compared to earnings of $384 million and $0.32 per share in the prior-year quarter. On an adjusted basis, PayPal generated earnings per share of $0.57, besting consensus estimates for $0.54.

Growth as far as the eye can see

Other operating metrics reinforced PayPal's strong financial results. The company's foundation of active customers continued upward, adding 8.1 million accounts, with net new actives growing 35% over the prior-year period and totaling 237 million.

PayPal's payments continue to grow at a torrid pace, processing 2.2 billion transactions, up 25% year over year. The company's strong record of increases in customer engagement also continued, growing to 34.7 payment transactions per account over the trailing-12-month period, up 8% over the year-ago period.

The company processed total payment volume (TPV) of $132 billion, up 32% over the prior-year quarter, or 27% on a currency-neutral basis.

The Venmo app on a smartphone.

Younger consumers love Venmo for splitting a bill. Image source: PayPal.

Venmo me!

Person-to-person (P2P) volume increased to $30 billion, up 50% year over year, accounting for 23% of TPV during the quarter. Venmo, the company's social payments platform, continues to be a hit with millennials, processing more than $40 billion in payments during the past 12 months. In the current quarter, Venmo payments grew to $12 billion, up 80% over the same period last year, and the service acquired more net new active users in the first quarter than in any previous quarter. The Venmo app is free for consumers, so PayPal has yet to profit. That is changing, as PayPal merchants are adding a dedicated "Pay with Venmo" button, moving the service from the social arena to the retail realm, which will earn PayPal transaction fees for processing those payments.

Mobile engagement continued to shine, with mobile payment volume growing to $49 billion, up 52% year over year, while 92 million customers opted-in to One Touch, the company's easy-to-use checkout tool.

Looking ahead

For the second quarter, PayPal guided for revenue to grow in a range of $3.78 billion to $3.83 billion, which would represent growth between 21% and 22% year over year. The company forecast GAAP earnings per diluted share in the range of $0.41 and $0.43, which would represent growth of 31% year-over-year growth at the midpoint of its guidance. The company expects adjusted earnings per share between $0.54 and $0.56, which excludes stock-based compensation.

PayPal sought to reassure investors that there would be life after eBay. The company went out of its way to point out that merchant services -- the non-eBay portion of its business -- grew to 87% of total payments processed in the current quarter, and while those payments were growing at a rate of 30% year over year, eBay Marketplace payments grew at only 6%. This shows that eBay is becoming a smaller and less significant part of PayPal's business with each passing quarter.

Investors have overestimated the contribution from its former sidekick, and PayPal showed that its future is bright, even without its former partner.