Reviews already sent this season:

SoFi is a one-stop shop for financial services. It aims to provide consumers with excellent products for all major needs and events. It pushes to delight them to the point of never going anywhere else. That creates key cross-selling and acquisition cost benefits. It has a large lending business with an increasingly diverse array of funding options, as well as bank accounts, brokerage services, 3rd-party insurance options, credit cards and so much more. 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 each enjoy. It also sells its tech stack to customers like H&R Block. My SoFi deep dive can be found here. This gets into intricate detail on SoFi’s unique value proposition within banking, and everything else you need to know about the firm.

Fair Value Accounting Refresher:

Recall that net charge-off is a lagging credit indicator, while delinquency rates are more of a leading indicator. Also note that SoFi doesn’t practice current expected credit loss (CECL) accounting. Instead, based on its desire to frequently sell loans into capital markets, it uses fair value accounting. This uses an independent 3rd-party auditor, conservative macro assumptions and overly harsh delinquent loan write-down standards to set fair value markings on loan pools every quarter. To avoid pent-up unrealized losses, markings and changes in fair value flow through the income statement every single quarter. It hedges away these changes to eliminate the conflict of interest coming from unfairly propping loan valuations up.

Credit Health:

As seen below, SoFi’s credit health remains wonderfully resilient and healthy, while they remain uniformly optimistic about their ability to stay below loss limits. The modest rise in Q/Q personal loan (PL) net charge-off (NCO) rate was entirely driven by portfolio seasoning and was not related to any worsening in credit quality. It’s also worth mentioning that the last two quarters of NCO data have been the two best for SoFi in the last 3 years. And on a Y/Y basis, as seen below, NCO meaningfully improved. Like during previous quarters, there was some help from selling late-stage delinquent loans. Without this help, NCO trends would have been roughly the same, with the metric rising 20 bps Q/Q from 4.2% to 4.4% and improving by 50 bps Y/Y. Delinquency rates are also stable, offering encouraging evidence for future trends.

We again got detailed vintage-level analysis to make it clear just how good of shape SoFi’s credit business really is. Their Q4 2022 - Q1 2025 vintages have a cumulative loss rate of 4.55% vs. 6.27% the last time they approached their 7%-8% life of loan loss rate tolerance. That lead rose 8 bps from last quarter and 37 bps from two quarters ago. Q1 2020 - Q3 2025 vintages have delivered repayment strength that means remaining principal would need to come with a 10%+ NCO to breach their limit. They've never come close to that across chaotic cycles. Simply put, credit health looks great.

On the student loan side, NCO moved from 0.62% to 0.76% Y/Y due to a student loan repurchase it made during the period. Delinquency rate was roughly stable Q/Q and Y/Y at 14 bps, showing resilient forward-looking credit durability. No issues on credit health for this bucket (or its smaller home loans) either.

Capital Market Activity – LPB & Loan Sales:

Quick lending refresher: The company has a traditional lending business, SoFi Lantern and the loan platform business (LPB). Traditional lending 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. Lantern is a great way to keep rejected borrowers in the SoFi ecosystem, collect more revenue and enjoy more cross-selling. Lantern is financial service revenue. LPB is where it signs forward flow agreements with partners like Blue Owl. SoFi originates loans using partner capital (not its balance sheet) right from its app.

If consistent, wonderfully boring, cross-cycle underwriting strength is the cause, the great credit health above is effect number one and strong capital market demand is effect number two. That demand gives SoFi vastly more access to liquidity to service its borrowers and lets it cater to demand well beyond what its balance sheet alone permits. That means more referral fees and servicing fees without added balance sheet bloat and saying yes to more borrowers without taking more risk themselves. These borrowers routinely purchase more SoFi products (with little added acquisition cost) once they’re in the ecosystem.

Whether it’s due to SoFi’s pristine borrower quality, its conservative underwriting practices or its demonstrated ability to deliver strong returns amid poor backdrops, it has earned a boatload of capital market trust. And that was on full display again this quarter. Through traditional whole loan channels and LPB it sold or transferred $4.5B in total loans during the period, marking 30%+ Y/Y volume growth. While most of this is now happening through LPB, it did sell $100M in personal loans at a 106.5% gain on sale margin, which represents an 80 bps premium to its fair value marking. That offers more evidence of its loan valuation practices being overly conservative, if anything. This is a quarterly theme.

Finally, SoFi again closed a securitization deal for loans originated previously via LPB. The deal closed with an “industry-leading” ~100 bps credit spread, which is in line with last quarter and should offer these capital partners more confidence in liquidity for SoFi’s loans. Secondary market demand means they’re less at risk of being stuck with unwanted assets and should feel more confident in leaning in with this specific vendor.

More Balance Sheet & Capital Ratio Data:

The massive spike in capital ratios was mainly thanks to 2025 capital raises. This creates a giant cushion and a lot of financial flexibility. With some of these proceeds, it paid down the rest of its warehouse debt. The recent $1.5B raise in December allowed them to reduce funding costs by $110M, which offset the dilutive impact to earnings per share, effectively allowing SoFi to add cash to the balance sheet and use only a piece of it to control the negative aspect of capital raises (dilution). They “fully paid down” these lines as of Q4, so there will not be another surprise capital raise to opportunistically do this again. It has $5.4B in cash and equivalents.

They might do some M&A, but most likely not. They explored several SMB banking platforms and encouragingly decided they can do a better job than all of them on their own. They might buy some new tools for Galileo to expand into areas like revolving credit program support.

The nearly $5B jump in Q/Q deposits was excellent to a point of me assuming there was a weird one-off item. There wasn’t. This was an acceleration in sticky direct deposits, with 97% of new funds being from that source. SoFi has an ability to outcompete giant banks on yield, as those incumbents would take a gigantic margin hit if they tried to come close to emulating SoFi’s levels. For non-banks, their inability to efficiently use deposits in a highly-profitable lending business limits their ability to rationally outcompete SoFi on rates. All of this is to say SoFi should stay near the top for APY, and could be offering a lot more yield right now. They just don’t need to. Deposit and member growth are already outperforming.

Annual revenue guidance beat estimates by 2.4% while EBITDA beat by 5.3% and $0.60 EPS guidance beat $0.55 estimates by $0.05 or 9.1%. This is really good. And? New 2028 targets were even better. 

SoFi guided to 30%+ revenue compounding for 2026-2028. That puts them at $7.93B in 2028 revenue, which is 31% higher than Bloomberg consensus estimates. Again, that’s SoFi’s minimum growth guidance vs. consensus sell-side estimates. For EPS, they guided to a 40% CAGR from 2026-2028. That puts them at $1.08 in 2028 EPS, which is 20% above Bloomberg consensus.

This type of report being sold off by Mr. Market after the stock had already declined by 25% just tells you how awful market sentiment is for most things today.

SoFi trades for 37x 2026 EPS guidance and 19x 2028 EPS guidance. EPS is expected to rise by 53% Y/Y this year.

Other guidance notes:

Thriving Financial Services:

Financial services growth remains impressively rapid and encouragingly driven by more asset-light, fee-based revenue streams. Fee-based revenue overall rose by 53% Y/Y to $1.8B annualized (+50% Y/Y) thanks to this segment’s 160% Y/Y non-interest income growth.

LPB is a big piece of this, which means a lot of this revenue is still lending-related. That needs to be said. Still, it’s not balance sheet growth-related, which will mean this success should fetch a higher multiple than that traditional lending outlet. Furthermore, although capital market demand is cyclical, SoFi’s prime niche, funding diversity and track record make it more insulated than most. Specifically, LPB generated 190% Y/Y revenue growth to reach $194M and is up to a $775M revenue run rate.

While LPB is prospering, there are several other financial service products ramping nicely as well. Its interchange fee revenue rose 66% Y/Y and that business reached $22B in annualized spend. An acceleration in its brokerage business and across other products helped as well. And customers aren’t just adding more products, they’re growing usage. Revenue per product rose 29% Y/Y to $104. SoFi expects that to keep steadily rising.

Financial services is the fuel to SoFi’s cross-selling fire. This is where most of the customer acquisition cost-free demand comes from, and that’s merely becoming more true with time. 40% of its new products were opened by existing members, which marks a 7 point Y/Y improvement.

Financial Services Roadmap Review:

Leadership reviewed all the good work they’ve done with blockchain during the last year. They became the first bank to offer crypto trading and a stablecoin, and can offer that through their traditional bank account interface. That makes accessing yield on insured deposits easier.

They also now enjoy a charter-powered edge within their SoFiUSD stablecoin. For review, this comes from treating customer assets as tokenized deposits to unlock yield opportunities. Coinbase and Robinhood can’t do that (yet). 

They also provide blockchain-powered international remittances via SoFi Pay to 30+ countries, with faster settling, lower fees and a planned app for international users to access this tool through. That’s likely a couple years away, but could be seen as a precursor for eventual international expansion. With their tech stack fully integrated, pace of product introduction and improvement should stay rapid. Looking ahead, SoFi USD will be fully integrated into SoFi Pay this year in tandem with the company adding more countries. And over the coming years, they have their eyes on secured lending products with lower rates and more ways to offer customer perks.

Lending:

All in all, SoFi originated $10.5B in total volume, representing 46% Y/Y growth. This includes $6.8B in traditional lending originations (+13% Y/Y) and $3.7B from LPB (rapid growth from small base). Personal loan origination volumes were in line with estimates, while student loan activity levels were 15% higher than expected and home originations were $1.1B vs. $890M expected. This outperforming strength in student lending and within the secured business drove the aforementioned mix shift that slightly pressured NIM.

More 2026 Priorities:

As already announced, they’ll expand into business banking, with tools including stablecoin services and an ability to operate with fiat and digital currency under the same system. They’ll also get access to 24/7 transaction settlement. These are compelling tools and they should drive traction.

Brand Building:

SoFi’s growth is a direct byproduct of merging great products with effective marketing. Their Josh Allen campaign has been their best ever, and they enjoyed 22% Y/Y viewership growth for their TGL sponsorship. These things helped propel unaided brand awareness from 7.1% to 9.6% Y/Y. They’re getting better at productively spending dollars, as they’re now selling to people who have largely heard of them before, rather than being new to most of them like it was just a few years ago. Noto is confident that once this matches big banks in the years to come, they’ll be a top ten financial institution by market cap. Long way to go… and progress should be fruitful for the company.

Galileo:

The 20% normalized growth figure for Galileo is encouraging and based on a broadening in customer interest. That was expected to come, and now it’s starting to happen.

One more quick note here. The SoFi Smart Card took just a few months to build and launch for its consumers. This is because SoFi owns its own tech stack and can freely iterate with it. They move more quickly and effectively on the consumer side because they own the backend foundation that powers it. Many think Galileo is a failed segment for SoFi, but they’re wrong. It’s a secret weapon for its app and is also accelerating as a stand-alone product.

Growth was better than expected. Margins were better than expected. The balance sheet is beautiful. 2026 guidance for a team that loves to sandbag is comfortably better than expected. 2028 targets are far better than expected. This team is executing at a masterful clip and continuing to earn my support as a shareholder. Everything in this quarter looks very good and I am happy with this near the top of the portfolio.