Views Expressed Disclaimer:
You are reading a free article with opinions that may differ from the recommendation given by Kalkine in its paid research reports. Become a Kalkine member today to get access to our research reports, in-depth technical and fundamental research.

Highlights

  • Zip Co Limited reports record cash EBITDA but shares fall after earnings miss.
  • Total transaction volume jumps 34.1% to a new high.
  • Operating margin improves to 18.7% with upgraded FY26 margin outlook.
  • Revenue margin declines due to higher US business contribution.
  • Active customers and merchant numbers continue to expand.

Zip Co Limited (ASX:ZIP) dropped 37.77% to AUD 1.76 on 19 February 2026 after releasing its 1H26 results, with the market reacting to a first-half earnings shortfall despite record transaction volumes and higher cash EBITDA. The sharp decline came as investors focused on the miss relative to expectations and the moderation in revenue margin.

Volumes and income reach new highs

Total transaction volume increased 34.1% to AUD 8.4 billion, while total income rose 29.2% to AUD 664.0 million. Transactions grew 20.2% to 54.9 million.

Cash EBITDA reached a record AUD 124.3 million, up 85.6% year on year. Cash gross profit climbed 33.5% to AUD 314.3 million, and the cash net transaction margin remained at 3.8%.

Margin shift reflects US mix

The group revenue margin declined to 7.9% from 8.2% in the prior period, reflecting the increased contribution from the US business, which accounted for 75% of total transaction volume.

Net bad debts were 1.7% of TTV, broadly in line with management targets. Active customers increased to 6.6 million and merchants on the platform rose to 90.6 thousand.

Operating leverage and upgraded margin guidance

The group operating margin improved to 18.7% from 13.0% in the prior corresponding period. Based on first-half performance, Zip upgraded its FY26 group operating margin expectation to above 18.0% and lifted guidance for cash EBITDA as a percentage of TTV to above 1.4%.

The company expects second-half cash EBITDA to be broadly in line with the first half.

Outlook and growth focus

Zip reconfirmed expectations for US TTV growth of more than 40% in USD for FY26, with group revenue margin around 8% and cash net transaction margin between 3.8% and 4.2%, subject to market conditions.

Consensus Target Points to Triple-Digit Upside

The estimates snapshot for Zip Co Ltd (ASX: ZIP) from Refinitiv shows a current recommendation of 1.5, classified as “Strong Buy,” alongside a consensus target price of AUD 5.21, implying a potential upside of about 196% from the last traded level. This comes at a time when the stock has undergone a steep correction, falling around 42.58% over the past month to AUD 1.76, with the latest session also showing a sharp intraday decline and elevated trading volume.

The contrast between the bullish analyst rating and the heavy recent price drawdown indicates that while market sentiment has weakened in the short term—likely reacting to the earnings outcome—broker estimates are still pricing in a materially higher valuation over the longer term.

FAQs
1. Why did Zip shares fall on 19 February 2026?
The stock declined after the company reported a first-half earnings miss despite delivering record transaction volumes and cash EBITDA.
2. What were the key operating highlights for 1H26?
Record TTV of AUD 8.4 billion, total income of AUD 664.0 million and cash EBITDA of AUD 124.3 million.
3. Did Zip change its FY26 guidance?
Yes, it upgraded its group operating margin and cash EBITDA-to-TTV guidance while reconfirming other targets.