Zip Co's stock suffered a sharp decline on Thursday after the company signalled that earnings in the second half of its fiscal year are likely to be largely unchanged from the first half. The Sydney-listed buy-now-pay-later specialist saw its shares fall as much as 39% to A$1.725, marking the lowest intraday level since early May.
Management reported strong first-half financial performance, with cash earnings before tax, depreciation and amortisation (EBTDA) for the six months ended Dec. 31 rising 85.6% to A$124.3 million. Executives attributed the jump to higher transaction volumes across Zip's markets and improving operating leverage in both the U.S. and Australia-New Zealand regions.
Alongside the profit improvement, Zip disclosed that total transaction volume increased 34.1% to A$8.4 billion, while revenue grew 29.2% to A$664 million for the period. Those metrics underpinned the first-half EBTDA advance and were highlighted by management as drivers of the stronger margin profile.
Despite the solid half-year results, investors homed in on the company's outlook for the remainder of the year. Zip said second-half cash EBTDA is expected to be "broadly in line" with the first half, a projection that suggests limited sequential growth even though seasonal consumer activity is typically stronger in the latter half of the year.
On a corporate guidance note, Zip raised its fiscal-year 2026 operating-margin target to above 18%, adjusted from a prior range of 16% to 19%. The company also lifted its forecast for cash EBTDA as a share of transaction volume to above 1.4%.
The combination of an upgraded full-year margin outlook and robust first-half financials did not prevent the steep share price reaction after the tempered message about second-half momentum. Market participants appeared to prioritize the expectation of flat sequential cash EBTDA when reassessing near-term valuation and positioning.
Contextual summary: Zip reported strong first-half growth in EBTDA, transaction volumes and revenue, but flagged that second-half cash EBTDA would be "broadly in line" with the first half. The market reacted negatively, pushing the stock down to A$1.725.