Highlights

  • Share price declined 3.45% to AUD 1.54 on 17 March
  • Record cash EBTDA of $124.3 million, up 85.6% year-on-year
  • Operating margin expanded to 18.7% from 13.0% in 1H25
  • Total transaction volume (TTV) reached $8.38 billion, up 34.1%
  • Active customers at 6.6 million; merchants on platform increased to 90.6k
  • US business accounted for 75% of TTV, growing TTV and revenue over 44%
  • $100 million on-market share buyback completed in 1H26

Shares of Zip Co Ltd (ASX:ZIP) fell 3.45% on 17 March, closing at AUD 1.54, following the release of its half-year results for the six months ended 31 December 2025. The share price movement contrasts with a period of record earnings and operational growth, highlighting the sometimes disconnect between short-term market reactions and underlying business performance.

Financial Performance Overview

Zip delivered an encouraging first half of FY26, underpinned by accelerated growth in both the US and ANZ markets. Total transaction volume climbed to $8.38 billion, marking a 34.1% increase versus the prior corresponding period. Revenue expanded 29.2% to $664.0 million, while cash gross profit increased by 33.5% to $314.3 million.

The company achieved record cash EBTDA of $124.3 million, reflecting both volume growth and operational leverage. Operating margin expanded sharply to 18.7%, demonstrating Zip’s ability to scale profitably. The company also maintained disciplined credit management, with net bad debts at 1.7% of TTV, consistent with management targets.

US Market Performance Drives Growth

The US segment was the primary driver of Zip’s results, contributing 75% of total transaction volume. US TTV grew 44.7% to US$6.31 billion, with revenue up 46.4% to US$292.0 million. Active US customers increased 9.7% year-on-year to 4.63 million, while merchant count grew 9.5% to 26.7k.

Significant milestones included the expansion of the Pay-in-Z platform through the Pay-in-2 instalment solution, making it available to all US customers from February 2026. Early pilot results indicated 95% of participants would reuse the feature, particularly for everyday essentials like groceries and utilities.

Strategic partnerships and marketing initiatives, such as collaborations with the Philadelphia Phillies, Comcast Spectacor, and Google Pay, further supported engagement and transaction growth. The US business also leveraged AI technology, including the launch of Zia, an AI-powered customer service agent, which materially improved self-service and customer satisfaction metrics.

ANZ Market Performance

In ANZ, Zip reported TTV growth of 9.7% to $2.07 billion and revenue growth of 3.1% to $212.8 million. The region’s performance benefited from the continued adoption of Zip Plus, targeted merchant additions, and a strong holiday trading season, including Black Friday and Cyber Monday.

Active customers in ANZ remained relatively stable at 1.97 million, while merchant additions grew 10.9% to 63.8k. The group’s operational efficiency was reflected in the expansion of excess spread to 9.3%, supported by favourable funding outcomes and improved credit performance.

Product Innovation and Technology Integration

Zip’s first half of FY26 showcased significant product and technological innovation. Key initiatives included:

  • Pay-in-2 Instalments: Expanded in the US to all customers, facilitating higher-frequency, non-discretionary spending.
  • AI Integration: 80% of code developed across the group was AI-assisted, enhancing productivity and operational efficiency.
  • Customer Tools: Launch of Zia in the US and enhanced personalization of the Zigi chatbot in ANZ, improving self-service capabilities.
  • Financial Education: Partnerships such as the US TV series Opportunity Knocks reinforced Zip’s focus on financial inclusion.

These innovations strengthened Zip’s value proposition and underpinned growth in customer engagement and transaction volumes.

Balance Sheet Strength and Capital Management

Zip ended 1H26 with $537 million in total cash, including $239 million in available liquidity, up significantly from $137.8 million at 30 June 2025. This robust balance sheet provides flexibility for future growth initiatives and potential strategic transactions.

In capital management, Zip completed a $100 million on-market share buyback, repurchasing 34.9 million shares at an average price of $2.86. This reflects a commitment to returning capital to shareholders while managing equity dilution from incentive plans.

The company also strengthened funding capacity in both regions: a $283.4 million US warehouse facility with Atlas Funds Management and Victory Park Capital, and a $400 million Australian rated note issuance at a weighted average margin of 1.37%. These measures improve funding diversity and reduce costs, supporting continued expansion.

Leadership and Strategic Focus

CEO Cynthia Scott plans to relocate to the United States in 2H26, reflecting the strategic priority of the US market as the primary driver of earnings. Her relocation will allow closer engagement with US stakeholders and facilitate execution of growth initiatives.

Zip continues to evaluate a dual listing on a US stock exchange following the submission of a confidential draft registration statement to the US Securities and Exchange Commission. The timing will be determined based on market conditions and regulatory approvals.

FY26 Guidance and Outlook

Following strong 1H26 results, Zip has upgraded its FY26 guidance:

  • Group Operating Margin: Greater than 18.0% (previously 16.0%-19.0%)
  • Cash EBTDA as % of TTV: Greater than 1.4% (previously >1.3%)
  • US TTV Growth: Expected to exceed 40% (in USD)
  • Group Revenue Margin: Around 8%
  • Cash Net Transaction Margin: 3.8%-4.2%

The company expects 2H26 cash EBTDA to be broadly in line with 1H26, reflecting continued momentum and operating leverage.

Zip Co’s half-year results for FY26 reflect a business achieving significant scale, profitability, and technological advancement.  Investors will likely focus on 2H26 performance, execution of AI-driven customer initiatives, and the potential for a dual US listing, which could unlock additional shareholder value and broaden investor access.