When we tried to update the expiry date of a gift card; after extending the validity of any expired gift card, customers are able to apply them on frontend. However, as the status remains as 'Expired', it causes an issue when customers checkout with PayPal. The gift card is automatically removed on PayPal and the subtotal returns the amount without discount (which differs from what the customers see on the frontend which is with the discount).
Feedback from Magento Support:
We contacted Magento Support and was asked to submit it as a new feature as this "looks like the expected behaviour for expired Giftcards. There could be other dependencies as to why it does not change the status of already expired codes."