The Truth Behind the 'Discrepancy' in SoFi's Earnings: Management Decisions Prioritizing Long-Term Revenue
I recently summarized the overview of SoFi's Q1 2026 earnings.
Looking at the overall figures, the content was impeccable. However, when looking at each business individually, there were many movements that differed from expectations.
I had projected the 2026 revenue as follows.
The result was"Total company revenue of $1.09 billion (+41.1% YoY)", and the breakdown was as follows.
・Loan business: $630 million (+52.6% YoY)
・Financial services business: $430 million (+41.4% YoY)
・Technology platform business: $80 million (-27.4% YoY)
In other words, the factors for the surprise were
・An upside in the loan business exceeding expectations
・A downside in the financial services business
・A downside in the technology platform business exceeding expectations
, which means there were movements in each business that differed from expectations.
In this article, I will first confirm the general situation of each business. Details will be provided later.
<Loan Business>
The loan business can be described in one word: "strong."
Revenue recorded a +52.6% year-on-year increase, and the contribution margin also rose to +60.8%, an increase of about 3% from the same period last year.
This is becausedue to "capital strengthening through capital increases" and "accumulation of deposits,"
・a decrease in funding costs andrepayment of debt with high interest burdensprogressed, and
・the loan-to-deposit ratio fell to about 90%, expanding lending capacity.
This seems to have brought about effects that exceededprior expectations.
<Financial Services Segment>
The Financial Services segment did not grow as much as expected.
However, the reason for this is clear, and it is easy to understand when breaking down the $430 million in Financial Services revenue into interest and non-interest income.
Interest income shows a trend in line with expectations for both deposit growth and yieldon the other handnon-interest income has turned to a decline.
The reason for this is also clear: a decrease in revenue due to a reduction in loans for the Loan Platform Business (LPB), which accounts for a large portion of non-interest income.
This reason is also clear, and Anthony Noto responded as follows in an interview with Bloomberg after the earnings call.
"The LPB was very strong. The reason it wasn't as strong as the previous quarter is that we made a conscious decision to put more of the loans we originated onto our own balance sheet. It was a choice we could make because we had the capital, and those loans will generate cash flow over the next three years. On the other hand, the LPB only generates revenue in the current quarter."
When checking the total loan origination volume, while it shows extremely strong growth of +68.1% year-over-year, the breakdown shows that the growth in loan volume (excluding LPB) became larger, while the growth in loan volume (for LPB) slowed down. as we can see.
As Anthony Noto's comments suggest, while the LPB allows for immediate monetization in the current quarter, that revenue is only temporary.
*Since the LPB is a business model where loans are sold immediately after origination, revenue can be recorded in a lump sum in the current quarter.
Therefore, by utilizing the surplus capital obtained through the capital increase, they have increased the loans on their balance sheet to generate more sustainable revenue. The fact that they prioritized long-term revenue over short-term revenue is highly commendable.
Although I mentioned at the beginning that the revenue for the Loan and Financial Services segments were +52.6% and +41.4% year-over-year respectively, the combined revenue for the two segments is +47.9% year-over-year.
My revenue forecast for the two segments is +46.0% year-over-year. (Combined revenue forecast for the two segments of $4.92 billion ÷ previous year's actual of $3.37 billion)
Therefore, this is also a trend that is almost in line with expectations. In reality, the weight of revenue recognition has simply shifted from the LPB to the loan business.
This can also be clearly seen when looking at the contribution margin basis.
Therefore, what can be said across the two segments is that there is 'nothing to worry about.' In fact, there are factors that can be expected to contribute to revenue from the second quarter onwards, such as the subscription contribution from SoFi Plus, which Anthony Noto described as 'surprisingly strong,' so the reality can be said to be better than expected.SoFi Plus
<Technology Platform Segment>
Revenue was $80 million (-27.4% year-over-year). Excluding the impact of Chime's departure, revenue was +12% year-over-year (The initial company guidance was +20% year-over-year, excluding the impact of Chime's departure).
Although I had forecasted revenue at +20% year-over-year, incorporating the impact of Chime's contract termination, it turns out that the revenue from that company was larger than expected.
Picking up comments primarily from the earnings call, it appears that the first quarter was the bottom and growth is expected moving forward. However, full-year revenue is expected to be approximately $325 million, so it seems difficult to expect significant growth.
Furthermore, the goal is to regain a compound annual growth rate of 20-25% over the next few years, and they plan to launch a new brand, “SoFi Technology Solutions,” within the next few months. I will explain the details of this at a later date.
<Summary>
・Although the financial services business fell short of expectations, this is a result of holding loans on the balance sheet to maximize revenue, and combined with the loan business, total revenue exceeded expectations.
・The technology platform business is expected to fall short of expectations, but because its composition ratio is small (see chart below), the impact on the whole is limited.
Therefore, at this time, I have determined that there is no need to change the EPS forecast of 0.70 that I presented the other day.
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