PayPal (NASDAQ:PYPL) reported its second-quarter results after the market close on Wednesday, and surprised even the most bullish on Wall Street. What made its performance all the more remarkable was the already high expectations going into the report.

The digital payment processor reported revenue of $5.26 billion, up 22% year over year, easily surpassing the 13% growth management had forecast. Profits were even more impressive, with earnings per share (EPS) of $1.29, vaulting 86%, while adjusted EPS climbed 49%. Operating cash flow more than doubled, growing to $2.38 billion, up 103% year over year. Free cash flow also soared, climbing 112% to $2.19 billion. 

A person with a smartphone making a digital, touchless payment.

Image source: Getty Images.

Robust by every measure

Saying PayPal knocked it out of the park isn't just hyperbole, particularly when considering the size of its existing business. Total payment volume (TPV) of $222 billion grew 29% year over year, accelerating from the 18% growth in the first quarter.

PayPal reported a record 21.3 million net new active accounts, the strongest quarterly growth in the company's history. To give that number context, PayPal added just 37 million new accounts for all of 2019. Customer engagement remained strong as well, with 40.7 payment transactions per account on a trailing-12-month basis, up 4%.

Management also used the occasion of PayPal's fifth anniversary as a public company to share how well it has scaled since splitting from eBay in 2015. Revenue grew from $2.3 billion in the second quarter of 2015 to $5.26 billion this quarter, up 129%. TPV climbed from $69 billion to $222 billion, an increase of 221%. Active accounts have soared more than six-fold during the same period, from 3.4 million five years ago, to 21.3 million now.

Seizing the moment

PayPal said it accelerated several of the company's priorities in light of this unique moment in history. The company rolled out QR Code technology in 28 global markets, and has expanded the functionality to both the PayPal and Venmo apps to advance touchless payments. The company also enabled direct deposit for Venmo users, while launching Business Profiles on Venmo, allowing sole proprietors and casual sellers to have a professional presence on Venmo's platform. 

The company also expanded its international reach in several key markets. It entered into a commercial relationship with Gojek, a mobile e-commerce provider in Asia, gaining access to 170 million new users. PayPal's partnership with MercadoLibre (NASDAQ:MELI) took another big step forward, as PayPal became a payment option on the platform in Brazil and Mexico, as well as offering cross-border payment options.

A person using the Venmo app on a smartphone to send money to a friend for dinner.

Image source: PayPal.

The times, they are a' changing...

During the conference call, PayPal CEO Dan Schulman said the changes resulting from the pandemic "will have a lasting and profoundly positive impact on our business." He pointed out that the world "accelerated from physical to digital across multiple industries ... Merchants are embracing a digital-first strategy, and these trends have fueled the rapid rise of digital payments." 

On average, it takes 66 days for a new habit to take hold. As the pandemic stretches from weeks to months, the adoption of e-commerce and digital payments is accelerating, and once these practices became part of everyday life, users are unlikely to return to the way things were before.

This quarter helped to illustrate that PayPal's fintech payment tools are positioned to benefit from these ongoing changes in consumer behavior, and there's simply no going back.