SoFi beats revenue targets as banking-as-a-service unit stumbles
Adjusted net revenue surges 41% to a record $1.1 billion, yet the stock falls in premarket trading following the departure of a major client.
SoFi Technologies has reported a robust first quarter, with adjusted net revenue climbing 41% to a record $1.1 billion. This figure exceeds analyst estimates of $1.05 billion, driven by strong growth across its core lending and financial services segments. The company added 1.1 million new members during the period, increasing its total user base by 35% to 14.7 million.
On a non-adjusted basis, profits reached $167 million, or $0.12 per share, aligning with market expectations. Adjusted EBITDA also performed well, rising 62% year-on-year to $340 million. Proceeds from core lending offerings increased 55% to $642 million, while the financial services segment, which includes the investing platform and credit cards, climbed 41% to $429 million.
Despite these positive financial results, SoFi's stock fell 6% in premarket trading. The decline comes as revenue from the technology platform, which provides banking-as-a-service, dropped 27% to $75 million. This contraction is largely attributed to the departure of a large client, Chime, which fully transitioned off the platform before the end of last year.
The company has also expanded its product offerings recently, launching crypto trading for customers and its own dollar-pegged stablecoin. However, the firm faces scrutiny from activist short seller Muddy Waters, which disclosed a short position in March claiming the company used aggressive accounting to hide credit risk. SoFi has denied these allegations and expressed its intent to explore potential legal action.
Risk management metrics showed mixed results, with the net charge-off ratio falling to 2.07% from 2.37% the previous year. This improvement occurred across all loan categories except student loans, where the ratio rose 18 basis points. Investors remain concerned about the degree of consumer credit risk the fintech bank carries against a potential downturn in the labour market.
Since reaching lofty highs last autumn, SoFi's shares have faced significant pressure, falling 30% year to date as of Tuesday's close. Analyst Dan Dolev from Mizuho previously suggested that concerns over the loss of Chime were a major source of the weak stock reaction, though he later characterised those concerns as overblown.
