Zip Co Ltd (ASX: ZIP) share are crashing on Thursday.
In early trade, the buy now, pay later provider's shares are down 33% to $1.90.
This follows the release of Zip's half-year results before the market open.
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Record earnings and margin expansion
For the six months ended 31 December, Zip reported record cash EBTDA of $124.3 million. This was up 85.6% on the prior corresponding period.
Key drivers of this growth were its total transaction volume (TTV), which rose 34.1% to $8.4 billion, and operating margin improvements. The latter increased significantly to 18.7% from 13% a year earlier.
Transactions increased 20.2% to 54.9 million, and the number of merchants on the platform grew 10.5% to 90,600. Active customers rose by 4.1% to 6.6 million.
Cash gross profit climbed 33.5% to $314.3 million, with a strong cash net transaction margin of 3.8%, in line with the prior period.
Importantly, net bad debts were 1.73% of TTV, which is broadly in line with management's strategic settings.
US growth
The US business continues to be the primary growth engine. The company revealed that US TTV increased 44.7% year on year to $6.3 billion, with revenue up 47% to $445.3 million. Active customers in the US rose 9.7% to 4.6 million.
Zip's CEO and managing director, Cynthia Scott, said:
We continue to execute strongly on our US growth opportunity, with TTV and revenue up 44.2% and 46.4% respectively (in USD), with active customers up 9.7% (407k) year on year. We also expanded our Pay-in-Z offering, giving customers greater flexibility for everyday purchases by making Pay-in-2 available to all customers in February 2026.
In the ANZ market, TTV grew 9.7% to $2.1 billion, with revenue up 3.1%. Management noted that revenue and Australian receivables returned to growth, supported by the rollout of Zip Plus and improved funding outcomes.
Guidance upgraded
Also failing to give Zip shares a boost today is management upgrading its FY 2026 guidance.
The company now expects its group operating margin to be greater than 18%, up from its previous 16% to 19% range. It also upgraded its guidance for group cash EBTDA as a percentage of TTV to be greater than 1.4%. This is up from greater than 1.3%.
Commenting on its outlook, Scott added:
We are well-positioned to continue executing against our FY26 strategic priorities and delivering profitable growth at scale. Following a strong first half, Zip has upgraded its FY26 guidance for operating margin and cash EBTDA as a % of TTV while reconfirming its other target ranges.
Why are Zip shares crashing today?
Despite delivering strong first-half growth and upgrading parts of its guidance, the market appears to be focusing on a few more cautious elements in the release.
Revenue margin edged lower to 7.9% as the higher-growth US business, which carries a lower margin profile, made up a larger share of total transaction volume. At the same time, net bad debts increased slightly to 1.73% of TTV, up from 1.56% a year ago, even though this remains within management's target settings.
Investors may also be reacting to guidance that second-half cash EBTDA is expected to be broadly in line with the first half, suggesting profit growth may moderate from here rather than accelerate further.
With Zip shares having rallied strongly since last April, the combination of margin mix pressure, slightly higher credit losses, and a more measured second-half outlook could have triggered heavy profit-taking today.
