SoFi is a one-stop shop for financial services. It aims to provide consumers with excellent products for all major needs and events. It further pushes to delight them to the point of never going anywhere else. That creates key cross-selling and acquisition cost benefits. It also owns its tech stack, has no branches and possesses a bank charter, which all give it the rare ability to combine the cost edges that incumbents and fintechs separately enjoy. It also sells its tech stack to customers like H&R Block and Robinhood. My SoFi deep dive can be found here.

Like last quarter, SoFi walked us through some compelling vintage-level analysis to explain why they remain so confident in credit health trends. I love when optimism is backed up by data, rather than a “take my word for it.” The Net Charge-Off (NCO) rate improving Q/Q is encouraging, but it was again aided by (entirely normal and kosher) late-stage delinquent loan sales. What’s more heartening? Excluding the impact of these sales this quarter and last quarter, NCO improved from 5.0% to 4.9%. That keeps it on pace to meet or beat its 7%-8% life of loan loss rate target for the cycle. They added new language about things “continuing to trend below 7%-8%.”

For the batch of current loans with enough repayment history (Q4 2022 - Q1 2024), overall loss rates are 3.8% vs. 5.25% the last time it approached its loss rate target 8 years ago. Better yet? The lead for new vintages vs. 2017 vintages improved by 15 bps Q/Q. When widening the vintage analysis to Q1 2020 - Q3 2024, its 6.5% cumulative loss rate means remaining losses on these loans would have to be more than 25% worse than they’ve ever seen to breach their 8% loss rate limit.

Simply put, it’s great to see backward-looking (NCO) and more real-time (delinquency) metrics both improving for SoFi. It’s great to see it consistently meet its credit risk promises.

SoFi added $2.6 billion in member deposits to keep its streak of $2 billion per quarter alive and well. Non-member deposits fell $1.2 billion Q/Q to offset some of this strength.

I’ve said it before and I’ll say it again. The clearest sign of fair value markings being fair is capital market sales happening at gain-on-sale margins in excess of that marking. We have plenty of evidence this quarter. SoFi sold $2.3 billion in total loans, excluding the Loan Platform Business (LPB) (discussed later), which is its largest quarterly volume since the IPO.

It specifically sold $950 million in personal loans with a 105.5% gain-on-sale margin vs. its 104.9% fair value marking. This represents a continuation of SoFi uniformly selling loans above fair value marks. The chart below depicts that clearly.

This is capital market buyers, with access to better data on these underlying assets than you or I have, explicitly telling you they think the fair value markings are too conservative, if anything. A prominent bear case against this name is the markings being unfair. That argument is not based on data or reality.

2025 guidance was adventurous, but I found it quite positive when considering all needed context. SoFi has been operating well beyond its 30% incremental EBITDA margin target for more than a year now (44% for 2024). It has been forced to pull back on growth amid poor macro and to defensively guard its balance sheet via lower origination appetite. That poor macro backdrop has convincingly flipped, and so lending massively outperformed expectations. As management said over and over again… They needed a couple rate cuts. Those cuts would lower hurdle rates for capital market buyers, improve risk appetite, bolster liquidity, shrink credit spreads and allow SoFi to reignite the origination engine. Well? We got those cuts. And? Those cuts came while unemployment and economic growth metrics all remained relatively resilient.

This all gives SoFi “the most favorable” operating environment in 2025 that it has enjoyed in many years. And it wants to meaningfully capture this positive exogenous momentum by shifting priorities back to growth. In 2025, it will invest all excess margin beyond 30% into more revenue-generating opportunities.

“After a year of bolstering the capital base, reaching GAAP profitability, as well as the scale required to drive continued profitability, management wants to better tilt the incremental revenue growth toward investment.”

CFO Chris Lapointe

For 2025, this led to revenue guidance beating estimates by a whopping 6.5%. Financial services growth is expected to be around 62.5%, while lending and tech platform growth are expected to both be around 13% Y/Y. Guidance outperformance came from financial services.

But this significantly outperforming growth is not free. It requires more investment to position SoFi for more years and decades of profitable compounding. This meant that its EBITDA guidance missed by 9.7% and its $0.26 EPS guidance missed by $0.02 or about 8%. I saw some saying the profit misses were due to its effective tax rate rising from an immaterial level to 26% for 2025. If that were the case, the EBITDA guide wouldn’t have been similarly light (that’s pre-tax). This is related to the aforementioned change in strategy, and it is a change that I wholeheartedly support. As it told us, it has proven that more investments lead to more growth at high returns. The backdrop is now more conducive to supporting those high-return investments.

Guidance includes expectations for 1.5 rate cuts, 1.5% GDP growth, a 5% unemployment rate and stable consumer credit. SoFi also expects to add at least 2.8 million members in 2025, which represents 28% Y/Y growth. It sees a 20% incremental net income margin for the year after excluding large, one-time profit benefits from 2024 convertible note transactions. Finally, for 2025, it expects total capital ratio (TCR) to remain over 15% vs. its 10.5% regulatory minimum.

Updates to its 2026 guidance made the profit disappointment for 2025 all the more easy to digest. SoFi now expects to do better than the 22.5% revenue CAGR through 2026 guidance it issued in Q4 2023. This was already better than the 19.9% CAGR that analysts expected, and the gap just grew. At the same time, it reiterated expectations for $0.68 in 2026 EPS and 20%-25% EPS compounding in the years after. Ideally, I want revenue raises to coincide with profit raises, as that shows the incremental revenue is not coming at the expense of lower margin. On the other hand, the $0.68 target is $0.19 or 39% ahead of current forecasts while representing a 100%+ CAGR from now to then, so it’s very hard to complain.

This is SoFi showing you they expect to retain precise control over their profitability. They can choose when to lean into growth to support faster expansion and brand awareness proliferation, like they will this year. And? They can (according to this guidance) let those investments take hold and seamlessly scale to deliver an expected 152% Y/Y EPS growth rate from 2025 to 2026. They have firm control over every line item on their income statement (barring macro chaos) and can elect to flex whichever part of it they’d like to.

One more note here. SoFi guided to 10%-15% lending revenue growth in 2025 and reiterated its previous multi-year targets for that segment. So? The raise to revenue assumptions is coming from the more asset-light financial services segment.

“In 2023, we had set guidance with a 30% incremental EBITDA margin. We wanted to show evidence of that. In 2024, we took a very conservative stance at the same point last year relative to others based on interest rates, the economy, inflation, geopolitical, etc. And because we took that very conservative stance, we drove margin expansion at the expense of revenue growth. And we delivered well more than 30% incremental EBITDA margins, which is evidence that we can do that and maintain growth having just grown 25%... And in 2025, we're just tilting the balance back… I want to make sure we're taking a long-term view to drive revenue growth for as long as we can. And when it slows, then we'll drive the margin growth.”

CEO Anthony Noto

SoFi trades for 60x forward earnings. EPS is expected to compound at an 80% clip for the next two years per analysts. SoFi has guided to about 110% EPS compounding for the next two years. I think profit estimates will likely be relatively flat following this report. 2025 may fall a tad. 2026 profit estimates should be materially higher based on this team’s guide and track record, but I anticipate very modest upward revisions. Some analysts don’t believe in the targets… for whatever reason.

As a reminder, SoFi has a lending segment, SoFi Lantern and a Loan Platform Business (LPB). Lending segment revenue comes from originating loans for its own balance sheet and either holding them, or selling them to capital market buyers. When borrowers are rejected, SoFi can send applicants to its loan marketplace, called Lantern, to match them with other creditors in exchange for a referral fee. That’s financial service revenue. More recently, as of Q3 2024, it now signs agreements with partners like Fortress Capital to originate loans on their behalf – right from SoFi’s app or site. This is for borrowers within SoFi’s credit bands and outside of them too. Here, servicing revenue is part of its lending bucket, with everything else (origination & other up-front fees) part of financial services revenue.

LPB gives SoFi yet another outlet for originating more loans without more balance sheet pressure, and allows it to expand to riskier borrowers without more unwanted credit risk. Some of these subprime borrowers will also eventually be great candidates for a loan. This wider top-of-funnel means SoFi can say yes to them today rather than directing them to a competitor. In turn, that makes cross-selling other products much easier and gives SoFi a better chance of securing repeat loan business down the road.

“One of the things that we contemplate is could we push all of our lending into LPB over time. I'm not opposed to that at all. The economics are very attractive. The velocity is much higher. The capital is lower. You have a lighter balance sheet. It would really support high ROE. Listen, we're students of the industry and we see what drives high multiples; it's high ROE.”

CEO Anthony Noto

I would personally love to see SoFi minimizing balance sheet exposure during fun times like these to maximize origination volume through LPB and its capital ratio cushions. This will leave it with far more room to address capital market funding weakness the next time that inevitably surfaces.

Net interest income (NII) rose by 47% Y/Y due to consumer deposit growth. That continues to be mightily helped by balance sheet optimization, or making sure funding is as cheap as possible and assets are earning optimal yield. When SoFi secured its bank charter, that significantly bolstered its deposit usage & funding source flexibility. The process of it fully taking advantage of this is still ongoing, but is quickly wrapping up. The more important piece of this bucket is non-interest income. That’s what will need to thrive in the years to come if this segment remains a hyper-grower. 

Fortunately, things look very good here, with 220% Y/Y non-interest income growth thanks to LPB. Specifically, LPB collected $63.2 million in high-margin, asset-light financial service revenue as part of $1.1 billion in volume for the quarter. That brings total loan volume funneled through this platform to $2.1 billion for 2024, despite this launching at scale in Q3. This helped power 63% Y/Y growth in overall asset-light fee revenue to reach $289.5 million for the quarter (74% Y/Y growth for 2024 overall). This significantly outpaced 21% Y/Y net interest income (NII) growth, as SoFi continues to successfully shift away from traditional lending revenue. 

LPB is off to a great start this year. SoFi announced a 2-year, $5 billion personal loan arrangement with Blue Owl to originate loans for them on SoFi’s app. This is its largest LPB deal yet.

SoFi plans to debut its paid member subscription in the coming weeks. This will unlock its highest savings account yield (now 3.8%) for non-direct deposit customers in exchange for a monthly payment. Per the team, between 1% recurring invest deposit matches, SoFi travel rewards, interest rate discounts and more, it plans to offer “more than $1,000 in value” for a very low fee.

Beyond LPB, interchange volume also continued to support the segment’s 200%+ non-interest income growth. Specifically, interchange revenue rose 63% Y/Y as it reached $14 billion in annualized spend across its debit and credit offerings.

All in all, product monetization continues to move quickly in the right direction, and that should mean far more upside for this segment’s contribution margin. Per Noto, this category is just “scratching the surface” in terms of profit ceiling. Annualized revenue per product was $81, representing 37% Y/Y growth. They see “continued upside as newer tools mature.” For example, its card businesses and small-medium business projects are all “under-monetized today.” Last quarter, it also told us that SoFi Invest was 50% under-monetized, and that will be the focus area for 2025.

It has effectively turned SoFi Money into a large profit driver to nurture the rest of the business, and it thinks the potential within SoFi Invest could make this as big as its entire business today. It thinks new product offerings and iterations can 2x engagement and monetization in the “intermediate term.”

“We believe SoFi Invest is the next business to follow the footsteps of money and we plan to allocate greater resources in 2025 to scale this business.”

CEO Anthony Noto

The revenue miss is disappointing and revising the CAGR estimate through 2026 from about 22% to 15% is too. At the same time, this is still coming from sales cycle elongation associated with switching go-to-market to larger clients. It hasn’t lost any deals or pipeline volume, things are just going more slowly. Encouragingly, account growth outperformed, pointing to stronger revenue growth down the road. And as SoFi told us, the accounts added in recent months are higher-quality, larger revenue opportunity contracts than it has enjoyed in the past. They’ll just take time to ramp.

During the quarter, the U.S. Department of the Treasury picked Galileo as its “Direct Express” processor as a “testament to its differentiated offering and reliability.” As previously covered, this is its largest prepaid debit card program within the realm of federal benefits. Galileo will help this program offer online access to funds and bill paying. This should be a material revenue driver for the company in 2026.

It also secured the business of a “large US-based financial services firm” during the quarter. It will use Galileo for its “large, loyal & highly active debit card portfolio.” Once ramped in “early 2026,” this will be a top ten client for the segment. Finally, it signed a new contract to create a co-branded card with a hotel rewards company in 2025. This was the most news we’ve gotten on tech platform client growth in a very long time, and again this bodes well for the segment accelerating growth. That’s what management fully expects.

As SoFi delights more customers with its products, the cross-selling flywheel continues to spin. 70% of SoFi Invest sign-ups were from existing members; 30% of all new products were opened by current members and 40% of new members added a 2nd product within a month. These percentages continue to rise with newer and newer cohorts. This means lower customer acquisition cost, with the ability to pass savings onto customers for unique deals, better customer data to underwrite borrowers and higher quality revenue. It has a proven formula, and its main obstacle to more growth is informing more people about this formula. So? It continues to invest in brand building, with unaided brand awareness rising from 5.3% to 7.0% Y/Y. New marketing initiatives like its sponsorship of The Golf League (TGL) should keep this moving in the right direction. And despite this investment and many others, sales & marketing expense rose by just 10% Y/Y for 2024 as a whole.

Origination volumes for both student and home loans set 3-year records. Specifically, home loan volume rose 87% Y/Y to $577 million (tiny base) while student loan origination volume rose 71% Y/Y to $1.3 billion. Personal loan volume rose 63% Y/Y, but this includes $1.1 billion originated for 3rd parties within LPB, which didn’t exist a year ago. Excluding this, personal loan origination volume rose by about 29% Y/Y. Lending net interest income rose 31% Y/Y thanks to a 23% rise in interest-earning assets and cost of funds relief that was mostly, but not entirely, offset by lower average yields.

SoFi thinks its balance sheet is now largely optimized. This is why it’s so important for non-interest income to be as strong as it is. Optimizing the balance sheet propped up interest income growth and overall revenue and that was never going to be permanent. Now, it’s time for everything else to kick in, which is happening based on the brightening revenue guidance.

It wants deposit growth to mirror loan growth in 2025, which means adding somewhere below $10 billion in overall deposits for the year. This is lower than it was in 2025, and means SoFi can do things like cut its savings APY a bit more aggressively than it otherwise would while reducing incentives. There was zero mention of any negative pushback to the recent APY cuts that it has made.

It also sounds like if the environment for member growth turns out to be better than expected (like it has been in every previous quarter), then deposit growth will outperform this current expectation. I think that’s likely.

They will be as aggressive as they can be with reentering this space. They want to do a lot more here than solely facilitating trading.

I thought the quarter was mostly positive, but there are three things to pick at. I don’t love the tech revenue guidance revision, but I don’t hate the reasoning for it. I also don’t love the profit miss, but support the idea of spending more on growth amid a great backdrop. That’s the correct decision and is why the 2025 revenue outlook is so strong. Finally, I don’t love that 2026 EPS targets weren’t raised alongside revenue, but I’m admittedly being highly picky, as the current target is 40% better than expected and the EPS range is very large.

What do I love about this quarter? Everything else. The company continues to lean on its broad base of products to deliver stable, increasingly asset-light, margin-accretive growth. It has successfully managed credit risk and its balance sheet through a daunting cycle and it has shown you how eager capital market buyers are to step in and fund its credit. I love the 2026 revenue raise and reiterating 20%-25% EPS compounding beyond 2026. I am heartened by three notable Galileo client wins during the quarter. That’s more than we’ve gotten in a long time. Finally, I think its financial services segment is one of the most underrated businesses on the planet, with miles of margin expansion and explosive growth ahead (without relying on balance sheet optimization).

As I finish digesting this quarter, I feel the same way about SoFi as I did in the earnings preview I published late last week. This is a fundamental darling that continues to masterfully execute. Its stock was far extended from a moving average perspective, and likely needed to cool off. This cooling off is very orderly and healthy. It’s to be expected for a volatile stock up 100% in a very short period of time.

Moving ahead one quarter, the stock now trades for a roughly 0.6x PEG ratio using forward 2-year earnings growth guidance and 0.75x if we assume consistently wrong analyst estimates are suddenly correct. I expect beats and raises throughout 2025 and another fantastic year for the company. If I didn’t already hold such a large position, I would be adding. Not perfect… but still very good.