What drove the third-quarter beat?

  • SoFi’s third-quarter adjusted net revenue was 1.371 billion dollars, up 44% year over year and 11% and 8% above Citi’s estimate and the market consensus, respectively. Adjusted EBITDA was 470 million dollars, up 70% year over year and 11% above Citi’s estimate.
  • The main driver was lending: segment revenue was 821 million dollars, up 66% year over year and 11% above Citi’s estimate. Personal loan originations reached a record 12.6 billion dollars, 52% above Citi’s estimate; fee income was also stronger than expected.
  • Loan growth was accompanied by improving credit performance: net charge-offs fell and the risk-adjusted margin rose. However, the lending segment’s contribution margin was 56%, below Citi’s estimate of 61%.

How is the loan platform changing the growth model?

  • The loan platform facilitated 3.8 billion dollars in loans in the third quarter. The company said the fourth quarter was already progressing faster than the third and added two partners in the third quarter. The platform covers personal loans, home equity lines of credit and small business loans.
  • Citi is optimistic about the model in which third parties fund loans: SoFi can expand fee income through the platform while freeing up capital for other businesses and improving balance sheet efficiency.
  • Management said that excess capital and future earnings would support growth in 2027 without raising external capital. Citi’s model also forecasts negative operating cash flow of 9.986 billion dollars and positive financing cash flow of 8.662 billion dollars in 2027; external capital raising and financing cash flow are different measures.

How are the businesses outside lending performing?

  • Financial services revenue was 525 million dollars in the third quarter, up 25% year over year and slightly above Citi’s estimate. However, continued investment weighed on the contribution margin, which was 50%, below Citi’s estimate of 65%.
  • Cross-buying among members is increasing: the number of products rose 44% year over year to 23.2 million in the third quarter, with an average of 1.56 products per member; more than half of new products came from existing members. Management sees this as a driver of long-term monetization and operating leverage.
  • Technology business revenue was 87.4 million dollars in the third quarter, down 24% year over year. The earlier loss of a client continues to affect the business; management said underlying business growth remained healthy excluding that client.

Why did Citi raise its forecasts, and what constraints remain?

  • The company raised its 2026 guidance and set targets of approximately 30% revenue growth and an adjusted EBITDA margin of approximately 35% for 2027. Citi raised its 2027 forecasts for adjusted net revenue, adjusted EBITDA and earnings per share by 5%, 6% and 2%, respectively, to 6.439 billion dollars, 2.237 billion dollars and 0.91 dollars.
  • The increases mainly reflect loan demand, credit trends and loan platform activity: Citi raised its 2027 forecasts for both lending revenue and contribution profit by 10%. At the same time, the bank lowered its financial services contribution profit forecast by 12% and its technology business revenue forecast by 6%.
  • Citi maintained its buy rating and 30 dollar price target, believing revenue expansion and operating leverage can support earnings growth. Credit performance and demand from loan-sale partners are key conditions underpinning its assessment.