Zip Co (ASX:ZIP) has been one of the ASX's great rollercoaster stories, and its FY26 results have reignited the debate over whether the buy-now-pay-later pioneer has genuinely turned the corner. After years in which the market questioned whether BNPL could ever be sustainably profitable, Zip has been reporting a very different picture, driven above all by its United States business. The scale of the online discussion reflects how sharply opinion is divided between believers in the turnaround and sceptics who remember the losses.

The Business in brief

Zip provides buy-now-pay-later and instalment consumer credit, letting shoppers split purchases into repayments. It operates across Australia and New Zealand and, increasingly, the United States, which has become its dominant growth engine. The company earns Revenue from merchant fees and from consumer charges, and its profitability hinges on the spread between what it earns and its funding and bad-debt costs. The shift in the centre of gravity toward the larger, faster-growing US market is the single most important change in the Zip story.

The bull case

Supporters argue that Zip has reached a genuine profitability inflection after years of investment, with strong US momentum driving Operating Leverage as revenue grows faster than costs. In this view, the company has moved from a cash-burning growth story to a business that can fund itself and return capital, and the large US market offers a long runway if Zip can keep winning consumers and merchants. The buyback and record cash Earnings are cited as evidence that the model works at scale when executed well, and that the market has been slow to re-rate the shares accordingly.

The bear case

The bears focus on the nature of the business. Buy-now-pay-later is, at its core, consumer credit, and Bad Debts can rise quickly if the US economy weakens and stretched borrowers stop repaying. The sector faces ongoing regulatory scrutiny that could change its economics, and competition is fierce, with rivals including Block's Afterpay, Klarna and Affirm all chasing the same customers. After a strong run, the shares may already price in continued success, leaving little room for disappointment if growth slows or Credit losses tick up. A cyclical, regulated, competitive business rarely earns a permanent premium.

What to watch

Key indicators include US total transaction value and revenue growth, cash earnings and margins, and above all credit performance, since bad-debt trends will make or break the profitability story in a downturn. Investors should also watch regulatory developments in the US and Australia, funding costs, and the pace of the buyback. Management commentary on the US consumer is often the most important signal between results.

The bottom line

Zip Co's FY26 results mark a genuine change from its loss-making past, with US-driven growth, record cash earnings and a buyback pointing to a real profitability inflection. Whether the comeback proves durable depends on the credit cycle, regulation and competition, none of which is fully in the company's control. It appeals to investors comfortable with the Volatility of a fast-growing, cyclically exposed fintech.