Even though officials stated they anticipate improvement towards the end of the year, investors were disappointed by the payments company’s quarterly operating margin, which caused shares of PayPal Holdings to drop 7% in extended trading on Wednesday.

In previous quarters, analysts have expressed concern about PayPal’s underwhelming margins. Low-margin commercial items have seen significant growth from the corporation, but growth in its branded products has stalled as a result of greater competition from companies like Apple.

“When we think about the back half, in Q3, we’ll still see some pressure on transaction margin performance. In Q4, we expect to see an improvement,” acting CFO Gabrielle Rabinovitch said on a call with analysts.

PayPal’s adjusted operating margin for the quarter was 21.4%, underperforming the 22% expectation.

In a positive development, PayPal CEO Dan Schulman stated that the business anticipates that when inflation slows, consumer discretionary spending would increase and support e-commerce growth.

“So one of the headwinds we faced was e-commerce growth slowing. Now it’s accelerating again,” he added.

PayPal’s overall payment volume increased 11% to $376.5 billion in the second quarter thanks to robust consumer spending trends.

“TPV growth above consensus affirms the ongoing theme of resilient consumer spending in the face of broader macroeconomic uncertainty,” said Kevin Kennedy, analyst at research firm Third Bridge.

PayPal anticipates third-quarter revenue of roughly $7.4 billion, above analysts’ projections of $7.32 billion, based on the ongoing consistent use of its platform, according to Refinitiv data.

In comparison to analysts’ expectations of $1.22, PayPal expects its adjusted profit per share for the current quarter to be between $1.22 and $1.24.

In the second quarter, PayPal’s revenue increased to $7.3 billion from $6.8 billion the previous year. On an adjusted basis, it earned $1.16 per share, in line with Wall Street projections.

Schulman added that the process of choosing his successor was nearly complete at the business. PayPal revealed his retirement in February.

(Adapted from MoneyControl.com)