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PayPal Revenue Misses Expectations

PayPal Holdings Inc. PYPL 1.61 % issued lackluster sales growth in its first report as a stand-alone company in 13 years, a sign of possible struggles ahead to profit from new users.

The company narrowly missed analyst expectations for revenue and said a key metric measuring the profitability of each transaction, known as take rate, declined.

The San Jose, Calif., company said revenue rose 14% in the third quarter to $2.26 billion, which was below the average analyst estimate of $2.27 billion on Thomson Reuters. The take rate fell to 3.24% from 3.39% a year earlier and 3.4% in the second quarter.

“We did see some compression in our take rate,” said Chief Financial Officer John Rainey on a conference call with analysts. He said that was “validation we are executing on our strategy” because it means customers are using larger merchants who negotiate lower prices with PayPal.

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