By Narottam Medhora
(Reuters) - PayPal Holdings Inc (O:PYPL) reported a better-than-expected 18.1 percent rise in quarterly revenue, helped by a surge in payment processing volumes and customer additions.
Shares of PayPal were up 2.5 percent at $41.15 in after-hours trading on Thursday.
The payments processor, which signed network deals with Mastercard Inc (N:MA) and Visa Inc (N:V) this year, has focussed on growing transaction volumes and expanding its share of the digital payments market.
Active customer accounts rose 11 percent to 192 million in the third quarter, beating the average analyst estimate of 191.6 million (156.34 million dollars), according to research firm FactSet StreetAccount.
Total payment volumes surged 25 percent to $87 billion.
PayPal's transaction margins, which have been steadily declining for the last five quarters, fell to 58.7 percent from 59.8 percent in the second quarter.
However, the company said that it expects adjusted operating margin to be stable or grow in the next three years.
"The fact that they are saying that the three-year outlook has stable to growing margins is going to be seen as pretty good," said Susquehanna Financial Group analyst James Friedman.
In its second stint as a public company, PayPal has witnessed rapid growth at a number of services such as Venmo, which allows person-to-person payments, and Braintree, a payment gateway used by larger merchants.
Payment volumes at Venmo, whose customers are mainly millennials, surged 131 percent to $4.9 billion in the third quarter. In the preceding quarter, they soared 141 percent.
PayPal processed 1.5 billion transactions in the latest quarter, slightly lower than the average estimate of 1.52 billion.
The company, spun off from e-commerce company eBay Inc (O:EBAY) last year, said its revenue rose to $2.67 billion in the quarter ended Sept. 30, from $2.26 billion a year earlier.
Net income rose to $323 million, or 27 cents per share, from $301 million, or 25 cents per share.
Excluding items, the company earned 35 cents per share.
Analysts on average had expected a profit of 35 cents per share and revenue of $2.65 billion, according to Thomson Reuters I/B/E/S.
Up to Thursday's close, shares of the company had risen 10.7 percent this year, outperforming the 4.8 percent gain in the broader S&P 500 (SPX).