Zip Co (ASX:ZIP) Shares Face Funding Questions After Profit Jumps

Zip Co walked into this result with a stock that had cooled in the short term, down about 5.9% over the past week and 7.6% over the past month, even after a strong 90 day run. The headline today is that the profit engine is starting to matter more than the hype. Full year net income reached A$116.4m on trailing twelve month revenue of A$1.34b, and the company continued to stack up profitable halves rather than one off wins.

Is Zip Co a genuine growth story trading at a discount, or are investors just paying up for momentum at a 27.5x P/E and with weak interest coverage? See how those risks and the A$3.88 DCF estimate compare with today’s share price in the valuation analysis for Zip Co

FY 2026 Earnings Summary

• Revenue FY 2026: A$1,336.0m vs. FY 2025 A$1,071.6m (up 24.7%)
• Net Income FY 2026: A$116.4m vs. FY 2025 A$79.9m (up 45.7%)
• Basic EPS FY 2026: A$0.0916 vs. FY 2025 A$0.0620 (up 47.7%)
• Operating Margin FY 2026: 20.0% vs. FY 2025 15.8% (up 4.2 percentage points)

Prefer clean charts instead of another wall of numbers and dense earnings tables? See Zip Co’s full visual breakdown, including how the company’s valuation compares with its current financial performance, in the company report for Zip Co.

Zip Co’s Bull Story Meets Hard Profitability Milestones

The bullish view on Zip Co hinges on scalable unit economics, disciplined credit risk and a capital light model that can support margins as volumes build. FY26 results go a long way toward proving that idea. Group TTV reached A$16.7b with 112m transactions and 6.5m customers, while operating margin moved to 20%. That is a concrete sign that higher volumes are now feeding through to profit, not just gross activity.

Credit quality is holding within the stated 1.5 to 2.0% of TTV range in the U.S., with Q4 losses at 1.67%. That is important because the thesis assumes growth without a blowout in losses. Funding costs per unit of TTV improved, and liquidity of A$247m plus operating cash inflows of A$257m leave the partnership driven, capital light pitch looking credible rather than theoretical.

Compare Zip Co’s internal profit momentum with how the street is updating its models, and see whether analysts think A$2.57 fairly reflects the story in the consensus price target analysis for Zip Co.

Zip Co Bears Focus On Credit And Funding Gaps

The bearish view on Zip Co argues that tight regulation, rising funding costs and credit losses will choke margins just as growth ambitions increase. This result weakens that claim on credit, but not on funding and macro exposure. U.S. losses sit at 1.67% of transaction value in Q4, which is inside the stated 1.5% to 2.0% range. ANZ also reports lower write offs versus FY25, although the small increase in macro overlays late in the year shows that management still sees economic risk building rather than fading.

The stronger part of the bear case now focuses on funding and capital. Zip Co still relies heavily on warehouses and an upcoming asset backed security deal to reduce spreads. Liquidity of A$247m and A$257m of operating cash inflow appear healthy. However, the business is not yet fully tested by tighter capital markets or more restrictive BNPL regulation.

After interest cover and warehouse funding, is this just the first crack in Zip Co’s capital structure? Review our full risk analysis for Zip Co which shows 1 important warning sign.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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