Zip Co Ltd (ASX:ZIP, OTC:ZIZTF) shares surged 17% to $2.97 in early trade after the buy now, pay later group reported a sharp rise in FY26 profit and guided to further cash earnings growth in FY27.
The mid-cap company was among the market’s strongest early performers after statutory profit for the 12 months to June 30 rose 46% to $116.4 million.
Cash earnings before tax, depreciation and amortisation (EBTDA) reached a record $268.9 million, up 58% on FY25.
Zip also provided FY27 cash EBTDA guidance of $340 million, representing growth of around 26% year on year.
US growth remains key
Total transaction volume (TTV) increased 23% to $16.7 billion during FY26, with US TTV rising 42.5% in US dollar terms.
Zip expects US TTV to grow by more than 30% in FY27 despite the increasingly larger comparison base.
The company is targeting a group revenue margin of around 8%, while operating margin is expected to expand to between 20% and 22% as management seeks to balance profitability with credit loss performance.
Net bad debts increased to 1.77% of TTV from 1.52% in FY25, although the result remained within management’s targeted settings.
Zip finished June with 6.5 million active customers and 97,400 merchants on its platform.
US listing and share consolidation considered
The company is also keeping open the possibility of a dual listing in the US as it looks to broaden its investor base.
Zip flagged a potential share consolidation, subject to shareholder approval at this year’s annual general meeting.
The company said the consolidation would “reduce the number of shares on issue to a level considered more appropriate for Zip’s size and market position and may broaden the appeal of Zip shares to a wider range of investors”.
The proposal comes as Zip seeks to increase its appeal to a broader pool of investors while continuing to expand its US operations.
$50 million buyback
Zip has announced an on-market share buyback of up to $50 million to be undertaken during FY27.
The buyback reflects its strong balance sheet, continued free cash flow generation and expectations for further growth.
The combination of stronger FY26 earnings, continued US transaction growth and guidance for another material increase in cash EBTDA helped drive the sharp rise in Zip shares in early trading.