TLDR
- SoFi reported record Q2 results with 44% revenue growth to $858 million, beating analyst expectations
- The fintech added 850,000 new members in the quarter, reaching 11.7 million total members
- Company raised full-year guidance for the second time, boosting revenue outlook to $3.375 billion
- Financial services segment saw explosive 106% growth while lending revenue climbed 32%
- Stock jumped 7.1% in premarket trading following the earnings beat and guidance raise
SoFi Technologies crushed Wall Street expectations with its second quarter results, delivering what CEO Anthony Noto called a rare combination of massive scale and explosive growth. The fintech powerhouse posted adjusted earnings of 8 cents per share, beating the consensus estimate of 6 cents.
Revenue surged 44% to $858 million, marking the company’s highest growth rate in over two years. This level of growth at such scale caught attention across the financial sector.
“I think it’s very rare that someone of our size can drive 44% revenue growth, at a scale of $858 million of revenue, and have 29% Ebitda margins,” Noto told Barron’s. The CEO positioned SoFi as tapping into American consumers’ need for a trusted financial services partner.
The company’s member base expansion continued its impressive trajectory. SoFi added a record 850,000 new members during the quarter, representing 34% growth to reach 11.7 million total members.
Every business segment delivered double-digit growth. The tech platform revenue increased 15% to $110 million while lending revenue grew 32% to $447 million.
Financial Services Segment Leads Growth
The financial services division stole the show with 106% revenue growth to $303 million. This surge reflects growing consumer demand for SoFi’s diversified financial products beyond its lending roots.
Management responded to the strong performance by raising full-year guidance for the second time. The company now expects adjusted net revenue of $3.375 billion, up from the prior range of $3.235 billion to $3.31 billion.
Adjusted Ebitda guidance jumped to $960 million from the previous $875 million to $895 million range. Per-share adjusted earnings guidance increased slightly to 31 cents from 27 to 28 cents.
The lending business showed particular strength with total loan originations climbing 64% to a record $8.8 billion. Home loan originations led the charge, surging 92% to $799 million.
High Interest Rates Drive Consumer Demand
Current high interest rate environment is actually working in SoFi’s favor. Noto explained that consumers are increasingly looking to refinance expensive credit card debt averaging over 25% interest rates.
“Consumers are looking to refinance very high-cost credit card debt that could average over 25% interest rates into much cheaper, more affordable debt at about 12% to 13% percent with us,” the CEO said. This dynamic is creating strong demand for the company’s lending products.
The company continues investing heavily in emerging technologies. SoFi is testing artificial intelligence capabilities across the entire organization, from back-office compliance to front-line customer service.
“We’re testing AI capabilities across the entire company,” Noto said. The technology is being deployed in chatbots, fraud prevention, and dispute resolution systems.
SoFi made headlines last month by announcing its return to cryptocurrency trading for the first time since 2023. Members can now use blockchain money-transfer features and hold select digital currencies including Bitcoin.
The crypto move aligns with Noto’s vision of providing global currency alternatives. “We can give people access to investing in this asset class and using it as a devaluation tool globally, in places where currencies aren’t as stable as the U.S. dollar,” he explained.
Despite the strong results, Wall Street analysts remain mixed on the stock. Goldman Sachs initiated coverage with a Hold rating and $19 price target, citing valuation concerns at 5.0x tangible book value.
Keefe, Bruyette & Woods raised their price target to $13 from $9 but maintained a Sell rating. The analyst believes the stock has moved beyond its fundamental value despite strong growth prospects.
Options traders are expecting about a 9.72% move in either direction following the earnings announcement. Wall Street consensus remains at Hold with an average price target of $17.08.
Shares climbed 7.1% to $22.53 in premarket trading Tuesday as investors digested the record quarterly performance and raised guidance.
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