Mayank Bansal, CFA
Mayank Bansal is a CFA Charterholder and heads the Equity Research team at Kapitales Research, with over 5 years of experience analysing global equity markets. He leads fundamental, data-driven research combining rigorous financial analysis with macro trends.
Zip Co Shares Plunge 27% as US Fraud Incident and Rising Credit Losses Hit Earnings
Highlights
Zip Shares Crash Following Quarterly Results
Zip Co Limited (ASX: ZIP) experienced a sharp share price decline on 23 October 2026 after releasing its first-quarter FY27 trading update for the period ended 30 September 2026. Shares fell 27.053% to AU$1.510 as investors reacted to deteriorating credit loss metrics and unexpected expenses associated with fraudulent activity in the United States.
Despite stronger transaction volumes and revenue growth, weaker profitability indicators raised concerns about the buy-now-pay-later provider's earnings sustainability.
Why Did Zip Shares Fall So Sharply?
The substantial sell-off reflected several financial pressures highlighted in the quarterly announcement:
US net bad debt write-offs reached US$49.5 million, compared with US$29.0 million in the corresponding previous-year quarter.
These developments heightened concerns about credit quality, fraud prevention and the company's ability to convert expanding transaction activity into stronger earnings.
Revenue Growth Continues Despite Earnings Pressure
Total transaction volume (TTV) increased 18.0% year-on-year to AU$4.6 billion in 1Q FY27, while US transaction volume recorded 34.1% growth in US dollar terms. Total income increased 17% to AU$376.1 million, while transaction numbers climbed 21.8% to 31.6 million.
However, cash EBTDA increased 3.4% year-on-year to AU$65.0 million in 1Q FY27, including AU$10.1 million in operating expenses associated with a US fraud incident. Excluding these expenses, adjusted cash EBTDA rose 19.5% to AU$75.1 million, representing 28.7% growth on a constant currency basis.
Outlook: Can Zip Restore Investor Confidence?
Management reaffirmed FY27 cash EBTDA guidance of AU$340 million, representing anticipated annual growth of 26%.
The company also expects US credit losses to improve during the second quarter, maintaining its full-year target range of 1.5%–2.0% of transaction volume.
Although transaction growth remains encouraging, restoring investor confidence will depend on containing credit losses, strengthening fraud controls and delivering sustained margin improvement.
Note- All data presented is based on information available at the time of writing.
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