Highlights

  • Zip (ASX:ZIP) reported record FY26 cash EBITDA of A$268.9 million, alongside higher statutory profit and an expanded operating margin.
  • The United States remained the main growth engine, with US TTV rising 42.5% in local-currency terms and customer spending continuing to increase.
  • Available cash and Liquidity increased to A$246.5 million, while Zip completed a A$150 million share buyback and announced another A$50 million program for FY27.
  • Investors will be watching FY27 growth, US Credit quality and Bad Debts as the Business targets further expansion in its largest market.

Zip (ASX:ZIP) delivered its best-ever full-year result in FY26, supported by higher earnings, continued expansion in the United States and improved operating leverage. While the market response around the result highlighted changing investor expectations, the broader Investment debate increasingly centres on whether Zip can sustain US growth while keeping credit quality and funding conditions under control.

A results-day rally followed by a reversal

Zip's FY26 result initially received a positive market response before some of those gains were subsequently reversed. Rather than pointing to an immediate deterioration in the underlying business, the Reversal reflected a combination of profit-taking, changing growth expectations and broader sentiment toward higher-beta technology stocks.

The movement highlighted the sensitivity of Zip (ASX:ZIP) to expectations around Earnings growth and valuation. Following a substantial operational recovery in recent years, investors are increasingly focused not simply on whether earnings are improving, but on the pace at which that improvement can continue through FY27 and beyond.

Record earnings, and a US engine still humming

The FY26 result comfortably cleared expectations. Group cash EBITDA rose 57.9% to A$268.9 million, beating Zip's own upgraded guidance of at least A$260 million. Statutory net profit after tax climbed 45.7% to A$116.4 million, and the group Operating Margin expanded 420 basis points to 20.0%. Total transaction value (TTV) grew 27.2% to A$16.65 billion, with total income up around 24.7% to A$1.34 billion.

The United States remains the story. US TTV jumped 42.5% in local-currency terms and the Americas now account for roughly three-quarters of group TTV. US Revenue rose 37.3% in Australian-dollar terms to A$903.1 million, active US customers grew 9.3% to 4.65 million, and spend per customer lifted 30.5%. In-store transactions — a key strategic push via physical card and app integrations — surged about 67%.

The contrast with home is stark: Australia and New Zealand revenue rose just 4.6% to A$432.9 million, ANZ active customers fell 8.0% to 1.88 million, and Zip confirmed it began winding down its New Zealand operations from July 2026. The offset is that ANZ cash earnings roughly doubled to A$69.5 million as the division was run harder for profit rather than growth.

Financial performance: cleaner, cash-generative, and better funded

Beyond the growth optics, the quality of Zip's earnings improved. The group revenue margin edged down to 8.1% from 8.3% — a modest compression management flagged and guided to hold near 8% in FY27 — while the jump in operating margin shows Operating Leverage as US scale builds.

Crucially for a lender, liquidity strengthened materially: available cash and liquidity rose to A$246.5 million from A$137.8 million a year earlier. Zip also completed a A$150 million buyback involving 59.7 million shares and announced a further A$50 million buyback for FY27, indicating greater balance-sheet flexibility compared with the company's earlier restructuring period.

The one genuine watch-item is credit. Group net bad debts rose 25 basis points to 1.77% of TTV, up from 1.52%. US bad debts of about 1.7% remain inside the company's stated 1.5%–2.0% target band, but the trend bears monitoring as the US book scales and if the American consumer softens.

What is driving the stock

Two forces are pulling against each other. The bull case is a profitable, cash-generative BNPL business expanding in the world's largest consumer market and returning Capital through share buybacks.

Against that, expectations around Zip (ASX:ZIP) have risen considerably as the operational recovery has progressed. The FY27 guidance also sets a more moderate growth bar: cash EBITDA of roughly A$340 million implies about 26% growth, representing a clear deceleration from FY26's 57.9% increase.

For a momentum-sensitive stock, slower earnings growth can influence sentiment even when the underlying business remains profitable. The key question is therefore shifting from whether Zip can recover earnings to whether it can sustain sufficient growth to support investor expectations.

The growth story

The medium-term thesis rests on the US. Zip is layering in-store and app-based spending, deeper merchant integrations and higher engagement onto a customer base that is spending more per head.

If US TTV can keep compounding above 30% while bad debts stay within target, operating leverage should continue to support margins. The pivot to profitable growth — winding down New Zealand, harvesting ANZ for cash, and funding US expansion — represents a more disciplined model than the earlier growth-at-any-cost phase.

The reinstated buyback and rising liquidity give management additional flexibility as receivables grow and the company continues investing in its US operations.

The risks

BNPL is a credit business dressed as a technology one, and that remains the core risk. A weakening US consumer could push bad debts through the top of the target range and compress margins quickly.

Regulatory scrutiny of BNPL continues on both sides of the Pacific, including affordability and disclosure requirements. Funding costs and access to Warehouse facilities also matter for a lender scaling its receivables book.

Competition is substantial, particularly from other BNPL providers, digital payments companies and established card networks. Zip's US customer engagement and spending growth will need to remain competitive against that backdrop.

Finally, investor expectations remain an important consideration. Any slowdown in transaction growth, deterioration in credit quality or pressure on margins could affect sentiment toward the stock.

What Investors Should Watch Next

The next scheduled checkpoint is Zip's Q1 FY27 quarterly update, typically released in late October, which will provide further evidence on whether US TTV is tracking the company's guidance of above 30% and whether bad debts are stabilising.

Investors should also watch the FY27 cash EBITDA trajectory against the approximately A$340 million target, US active-customer momentum, execution of the new A$50 million buyback, and regulatory developments affecting BNPL in the United States and Australia.

The Bottom Line

Strip away short-term market Volatility and Zip (ASX:ZIP) delivered a notable FY26 performance: record cash earnings, expanding margins, continued US growth and a substantially improved liquidity position.

The more important issue for investors is now durability. FY27 is expected to bring slower earnings growth than FY26, while bad debts have moved higher and the US business is becoming increasingly important to group performance.

Zip's investment case therefore rests on whether continued US transaction growth, customer engagement and operating leverage can outweigh rising credit, regulatory and competitive risks as the company enters its next phase of expansion.