Zip Co reported a 41.5% jump in third quarter cash EBTDA to $65.1 million, driven by accelerated US transaction volume growth of 43.1% and steady credit losses. The company upgraded its FY26 cash EBTDA guidance to at least $260 million, highlighting robust profitability and expanding customer engagement.
- Record 3Q cash EBTDA of $65.1m, up 41.5% year-on-year
- US total transaction volume surged 43.1% in USD, with steady net bad debts
- Operating margin expanded to 19.4%, reflecting strong unit economics
- Upgraded FY26 cash EBTDA guidance to no less than $260m
- New product launches including Pay-in-2 (US) and ZMobile (ANZ) broaden revenue streams
Strong 3Q Momentum Drives Earnings Upgrade
Zip Co Limited (ASX:ZIP) posted a standout third quarter with cash EBTDA soaring 41.5% year-on-year to a record $65.1 million. This surge was fuelled by a 22.4% lift in total transaction volume (TTV) to $4 billion, underpinned by an impressive 43.1% growth in the US market measured in USD. Operating margins expanded sharply to 19.4%, up nearly 300 basis points from a year earlier, signalling the company’s growing profitability at scale.
Management’s confidence in the company’s trajectory is clear, with the FY26 Group cash EBTDA guidance upgraded to no less than $260 million. This upgrade reflects continued momentum and disciplined execution across both the US and Australian/New Zealand (ANZ) markets, and builds on the strong half-year performance that saw record earnings and US growth accelerate earlier this year.
US Growth Accelerates While Credit Losses Hold Steady
The US business remains the engine room of Zip’s growth story, delivering TTV and revenue growth of 43.1% and 43.3% respectively year-on-year. Active customers increased 9% to 4.6 million, while merchants on the platform jumped nearly 18% to 29,000. Notably, Zip’s credit losses in the US remained steady at 1.86% of TTV, comfortably within management’s target range of 1.5% to 2.0%. The company forecasts a further decline in credit losses to below 1.75% of TTV in the December quarter, reflecting proactive credit management and portfolio seasoning.
Zip’s Pay-in-2 product, launched in February 2026, is gaining early traction with smaller everyday spenders, complementing the more established Pay-in-4 and Pay-in-8 offerings. The latter’s losses have peaked and are trending downwards, signalling improving portfolio health. The company continues to deepen its AI capabilities and recently partnered with IXOPAY to launch an AI-driven commerce framework, positioning Zip to capitalise on emerging agentic commerce opportunities.
ANZ Business Gains Traction with New Capital-Light Revenue Streams
In ANZ, Zip’s TTV rose 4.8% year-on-year, supported by growth in Zip Plus and higher customer engagement metrics. Revenue increased 5% while Australian consumer receivables grew 8.7%. The business expanded its excess spread by 189 basis points to 9.1%, benefiting from improved funding costs and tighter credit loss management despite a rising interest rate environment.
April 2026 saw the launch of ZMobile, a new mobile plan offering powered by TPG Telecom, designed to deliver a capital-light, subscription-based revenue stream. This initiative aims to enhance customer engagement and provide a recurring income source beyond traditional credit products. Merchant numbers in ANZ rose 10.5% to nearly 65,000, with new partnerships including The Warehouse Furniture Company and Samsung in New Zealand.
Capital Management and Funding Position Remain Robust
Zip maintains a solid funding position with $405.1 million in total cash and $234.8 million in available liquidity as of March 31, 2026. The company executed a $300 million five-year rated note issuance in Australia earlier this year at a competitive margin, and is progressing a US warehouse facility refinancing to optimise funding costs further.
Capital management remains a priority, with an on-market share buy-back program of up to $50 million underway since March 2026. As of the quarter end, 13.8 million shares had been repurchased for $21 million, reflecting management’s confidence in the company’s financial strength and growth prospects. This follows earlier moves to expand buy-back limits and underscores Zip’s commitment to balancing shareholder returns with growth investments, as seen in the recent $50 million share buy-back announcement.
Bottom Line?
Zip’s upgraded guidance and steady credit losses highlight a maturing growth phase, but sustaining US momentum and managing macro risks remain key challenges.
Questions in the middle?
- Will Zip’s US credit loss forecast below 1.75% in 4Q26 hold amid economic uncertainty?
- How will new products like Pay-in-2 and ZMobile impact Zip’s customer engagement and revenue diversification?
- Can Zip maintain its operating margin expansion as it scales further in competitive BNPL markets?