Zip rallies as FY26 clears all targets and FY27 guidance tops analyst forecasts
Cash earnings rose 58% and Zip cleared every FY26 target. The $340m FY27 guidance sits 10% above UBS and 6% above where consensus sat.
KEY POINTS
- Cash EBTDA rose 57.9% to $268.9 million on transaction volume of $16.7 billion, with operating margin expanding 420 basis points to 20.0% and every FY26 target met or exceeded.
- FY27 cash EBTDA guidance of $340 million implies 26% growth and sits 10% above UBS estimates and around 6% above where consensus sat in early July, with US transaction volume growth guided above 30%.
- The US now accounts for 76% of group volume after 42.5% TTV growth, while Australian app downloads and monthly active users were down 22% and 24% year-on-year in the fourth quarter.
After a weaker-than-expected 1H26 result in February and ongoing global macro uncertainty spanning high inflation, oil prices and interest rates, Zip (ZIP) had struggled to find its groove, with the stock down around 24% year-to-date heading into today's FY26 result.
But Zip revealed a clean sweep of its FY26 targets, hitting or clearing all five on cash earnings, US volume growth, revenue margin, net transaction margin and operating margin. More importantly, FY27 guidance for cash EBTDA and US transaction values topped analyst expectations
Group CEO Cynthia Scott said: "Consistent execution has built the platform to deliver our next phase of growth and innovation. In FY26, we exceeded our targets with record cash earnings of $268.9m, up 57.9%, underpinned by material cash earnings growth in both markets. We maintained strong unit economics, expanded operating leverage and reinforced the value of our differentiated business model."
FY26 at a glance
Beats across income, gross profit and cash earnings, though active customers slightly missed.
Total transaction volume up 27.2% to $16.7bn vs $16,681m UBS ests (in line)
US TTV up 42.5% in USD, with the US now 76% of group volume
US revenue up 44.3% in USD, above 40% for a second consecutive year
ANZ revenue up 4.6%, with Australian receivables up 9.4%
Total income up 24.6% to $1,347.4m vs $1,334m UBS ests (1.0% beat)
Revenue margin of 8.1%, from 8.3%, on the higher US weighting
Cash gross profit up 26.2% to $642.3m vs $628m UBS ests (2.3% beat)
Cash net transaction margin unchanged at 3.9%
Cash EBTDA up 57.9% to $268.9m vs $263m UBS ests (2.2% beat)
Net bad debts of 1.77% of TTV, from 1.52%, with US net bad debts at 1.73% and 1.67% in Q4
Active customers up 3.7% to 6.5m vs 6.6m UBS ests (2% miss)
Zip had guided: FY26 to cash EBTDA of no less than $260 million, US TTV growth above 40% in USD, a group revenue margin circa 8%, cash net transaction margin of 3.8-4.2% and operating margin above 18%. It topped all five.
FY27 guidance
Group cash EBTDA of $340m, up 26%, vs $309m UBS ests and consensus of $322m as at early July
US TTV growth greater than 30% in USD, against UBS's ests of 25%
Group cash net transaction margin of 3.8-4.0%, against 3.9% in FY26
Group operating margin of 20% to 22%, against 20.0% in FY26
Zip completed $150 million of on-market buybacks in FY26, repurchasing 59.7 million shares, and announced a further $50 million program for FY27. The board is considering a share consolidation and intends to put it to the 2026 AGM.
In the lead up
UBS previewed the result on 9 July, reiterating Buy and lifting its target 32% to $4.10 from $3.10. The analysts made minimal changes to portfolio income and lifted cash EBTDA by 11% for FY27 and 12% for FY28, citing interest expense relief from recent facility refinancing and the prospect of US rate cuts into CY27.
Two things UBS flagged going in are worth carrying out of the result:
Net bad debts. UBS forecast a rise to 1.9% of TTV in FY27 from 1.8% in FY26. FY26 landed at 1.77%, and there's no FY27 guidance to measure against.
Regulation. UBS rated the regulatory environment as getting tougher over the following six months, and its formal risk statement lists BNPL regulation, competition, credit and funding risk.
The bottom line: Zip delivered a clean FY26 and better-than-expected FY27 guidance. Short interest has eased in recent months, from April peaks of 12.7%, but sitting at a still-elevated 8.26% as of 14 August.
Zip short interest chart (Source: Shortman)
Despite the solid result, Zip continues to trade as volatile as ever, with the stock rallying as much as 20.5% in early trade to $3.11 but currently up just 8.9% to $2.81.
