Zip Co Limited (ASX: ZIP) has been hit by one of the most brutal selloffs of the February reporting season, with shares plunging as much as 38% to $1.72, marking their lowest level since May 2025. The collapse comes despite record first-half cash earnings and upgraded margin guidance — underscoring just how unforgiving this earnings season has become.
The buy-now-pay-later provider missed key analyst expectations on revenue, earnings, and US growth metrics, triggering what could be the largest single-day result reaction among S&P/ASX 200 stocks this reporting period.
Share Price Snapshot
At last check, Zip shares were trading around $1.72, down roughly 38% on the day. Trading volume surged to more than 166 million shares, far above the average daily volume of 15.7 million, highlighting the scale of the selloff.
The company’s market capitalisation has fallen to approximately $2.2 billion, with the stock now trading well below its 52-week high of $4.93.
What Went Wrong?
While growth figures appeared strong on the surface, they narrowly missed expectations:
Total Transaction Volume (TTV) rose 34.1% to $8.38 billion, slightly below the $8.43 billion expected.
Revenue increased 29.2% to $658.1 million, missing estimates of $667.2 million.
Cash EBTDA surged 85.6% to a record $124.3 million, but still fell short of the $130.3 million forecast.
Underlying NPAT came in at $52.4 million, a sharp turnaround from a $1.6 million loss a year earlier.
Even marginal misses have been punished heavily this season, and Zip was no exception.
Credit Quality Raises Eyebrows
Investors appeared particularly concerned about credit performance. Net bad debts rose to 1.7% of TTV, up from 1.34% in the December quarter and 1.65% in March. Analysts had expected 1.63%.
The fact that credit losses have not stabilised — despite strategic settings — added to market anxiety.
US Growth Slower Than Expected
The United States remains Zip’s key growth engine, but performance slightly undershot expectations:
US TTV grew 44.7% year-on-year to $6.3 billion.
US revenue rose 47% to $445.3 million.
Active US customers reached 4.63 million, below analyst expectations of 4.77 million.
Although still robust, the slower-than-anticipated customer growth and transaction momentum contributed to the negative reaction.
Margins Improved — But Mix Matters
Operating margin expanded to 18.7%, up from 13% a year ago, driven by cost discipline and scale benefits.
Management upgraded FY26 group operating margin guidance to greater than 18%, up from the prior 16%–19% range.
Group cash EBTDA as a percentage of TTV was also lifted to greater than 1.4%, from greater than 1.3% previously.
However, revenue margin edged lower to 7.9%, reflecting the growing contribution of the US segment, which operates at lower margins than ANZ.
Investors also noted that second-half cash EBTDA is expected to be broadly in line with the first half, suggesting earnings momentum may moderate.
An Unforgiving Reporting Season
This result lands during one of the harshest reporting seasons in recent memory. Several ASX stocks have suffered double-digit declines after earnings releases, reinforcing how little tolerance the market currently has for even minor disappointments.
Historical data compiled across past reporting seasons shows stocks that miss expectations fall an average of 6.3% on results day, with weakness often extending over the following months. Zip’s nearly 38% fall dramatically exceeds that average — highlighting how elevated expectations had become.
Valuation: Now More Attractive?
Following the selloff, UBS forecasts earnings of roughly 9 cents per share in FY26, placing Zip on around 19x forward earnings.
For a company still delivering revenue growth of nearly 30% and US TTV growth above 40%, the multiple is beginning to look more reasonable compared to recent trading levels.
The question now facing investors is whether today’s collapse represents a reset in expectations — or signals deeper concerns around margins, credit quality, and growth durability.
With the stock having rallied strongly over the past year, profit-taking likely intensified once the results failed to decisively beat forecasts.
Investors will now turn their focus to second-half execution, credit stability, and whether US expansion can re-accelerate above expectations.
For broader ASX coverage and related market updates, readers can also explore our latest analysis on global market movements and commodity rebounds.
For official company disclosures, refer to Zip’s latest filings on the ASX website.
