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Pagaya (PGY) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Jul 30, 2026

Source: earnings call transcript

Executive summary

Pagaya Q2 FY26 — Record Performance Driven by Auto Growth and Operational Leverage

Pagaya delivered a record quarter, showcasing its unique profit engine through accelerating growth in network volume, particularly in auto and personal loans. The company's B2B embedded platform and data moat are driving repeatable product and partner expansion, while disciplined cost management is leading to significant operational leverage and compounding EPS. Management remains confident in its ability to sustain profitable growth by deepening existing partnerships and onboarding new ones.

Highlights

5

  • Achieved record GAAP EPS of $0.49, contributing to a 25% raise in full-year net income guidance.

  • Network volume grew 33% year-over-year to a record $3.5 billion, primarily driven by auto and personal loans.

  • Adjusted EBITDA increased 43% year-over-year to $124 million, with a margin of 32%, up 5 points.

  • Core operating expenses declined 6% year-over-year and were lower sequentially, reaching a record low of 31% as a percentage of FRLPC.

  • Secured $3.7 billion in funding, closed 6 ABS transactions, and expanded the investor network by 11 to 174 investors.

Concerns

3

  • FRLPC as a percentage of network volume contracted 60 basis points sequentially to 4.2%, due to product/partner mix and elevated benchmark rates.

  • Lower point-of-sale volumes are expected to partially offset network volume growth for the remainder of FY26.

  • The investment portfolio was adjusted downward by $42 million in the quarter, in line with expectations.

Guidance & targets

CategoryTargetConfidence
Network Volume
$3.425 billion to $3.625 billion
high materiality
High
Total Revenue and Other Income
$370 million to $390 million
medium materiality
High
Adjusted EBITDA
$120 million and $130 million
medium materiality
High
GAAP Net Income
$42 million to $52 million
medium materiality
High
Network Volume
$12.5 billion and $13.25 billion
high materiality
High
Total Revenue
$1.425 billion to $1.525 billion
high materiality
High
Adjusted EBITDA
$460 million and $490 million
high materiality
High
GAAP Net Income
$155 million to $180 million
high materiality
High
FRLPC percentage
4% and 5%
medium materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Auto
Auto was a standout segment, showing significant growth driven by dynamic offer optimization and improved product-market alignment at the dealer level. This strategy enables lenders to make more competitive offers and access new flow.
Contribution to network volume growth: >75% of YoY growthMarket penetration: >40% of U.S. indirect auto market
—step function growth——
Personal Loans
The Affiliate Optimizer engine, a flagship personal loans product, contributed significantly to network volume. The company is onboarding partners onto Experian Activate and seeing traction with regional banks.
Network volume from Affiliate Optimizer engine: >$1 billion
————

Orderbook & backlog

Total Addressable Market (Consumer Credit Origination) ~$1 trillion Q2 FY26

Origination per year

Network Volume Run Rate $14 billion Q2 FY26

Origination per year

Deals & partnerships

Experian Activate Onboarding personal loan partners to the platform

Onboarded one leading personal loans partner, on track to add a few more personal loans partners this year, with line of sight to 2 more next year.

Regional Banks New partners for personal loans

Expect to go live with a few more new partners, including regional banks, in the second half of this year. Regional banks are looking at fee income as a major source of growth.

Sezzle Retail solutions for point-of-sale

Existing partner in the point-of-sale business.

Upgrade FlexPay Travel-focused BNPL product for point-of-sale

Existing partner in the point-of-sale business, enabling existing personal loan partners to grow their POS business.

Large Ticket POS Providers New partners for point-of-sale

Another large ticket partner is in the pipeline for point-of-sale.

Risks & headwinds

FRLPC percentage contraction Q2 FY26

contracted 60 basis points sequentially to 4.2%

Mitigation:Focus on volume growth, with new products and partners initially entering at lower margins; expectation that margin follows as volume grows. Pricing ABS transactions with more conservative loss assumptions for stable vintage performance.

Elevated benchmark rates remainder of 2026

compressing the margin we earn from the funding side

Mitigation:Assumed to remain elevated; company is optimizing cost of capital and access to liquidity through diversified funding strategies.

Lower point-of-sale volumes remainder of 2026

partially offset by lower point-of-sale volume

Mitigation:Expected to be offset by deeper engagement with existing partners and contributions from new partners in auto and personal loans. New POS partners are scaling for next year.

Investment portfolio fair value adjustment Q2 FY26

downward by $42 million

Mitigation:In line with expectations; portfolio consistently improved in quality and mix, with 50% in bond tranches with attractive yields and liquidity.

What to watch in Q3 FY26

Auto segment growth momentum

next quarter and future
Current step function growth, >75% of YoY network volume growth
Target continued strong growth

Why it matters

Auto is a key driver of network volume and overall growth, and its sustained momentum is critical for the investment thesis.

And that has drive a very major growth with that partner. But more interesting than that, we took that concept of kind of like meeting more what are the needs of the customer in the dealership moment through activating the best offer that could show to the customer, in this case, through reducing the amount of counter. And we took it to another few lenders. So what you see is really the product partner growth in actions, specifically in auto, where one product solution is happening to one is actually pushing to be deployed and sold across the platform. And therefore, you see that meaningful change in rather short term or short period of time to be able to drive meaningful growth, and it should remain the same in the future.

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Q&A highlights

What is driving the significant growth in auto, and how should we think about the product mix (auto, PL, POS) for 2027?

Auto growth is due to dynamic offer optimization, improved product-market alignment, and access to new flow from partners. The product-led growth playbook allows Pagaya to deploy successful solutions across multiple lenders. The product mix is expected to remain similar, with PL and auto continuing strong growth, and POS diversifying. New partners, especially regional banks, are showing interest across PL and auto.

“So what you see is really the product partner growth in actions, specifically in auto, where one product solution is happening to one is actually pushing to be deployed and sold across the platform.”

asked by John Hecht · answered by Gal Krubiner

2 min read 5 chapters

Detailed narrative

Auto Business Flywheel Driving Growth

Pagaya's auto segment was a standout this quarter, showing step-function growth and contributing over three-quarters of the year-on-year network volume increase. This was driven by the network's ability to calibrate every aspect of the offer (amount, rate, duration, documents) to optimize for conversion at the dealer's desk. By enabling lenders to make competitive, win-worthy offers and providing multiple choices to borrowers, Pagaya has created a self-reinforcing flywheel that increases application referrals and approval rates, leveraging its embeddedness in over 40% of the U.S. indirect auto market.

Product-Led Expansion and Partner Onboarding

The company's product-led growth playbook is unlocking significant volume by expanding product offerings and onboarding new partners. In personal loans, the Affiliate Optimizer engine contributed over $1 billion in network volume, with plans to add several more partners to the Experian Activate platform this year and next. Pagaya is also seeing strong traction with regional banks for personal loans and interest from OEMs and enterprise-grade dealers in auto, indicating a diversified pipeline across asset classes and partner types.

Operational Leverage and Cost Discipline

Pagaya demonstrated significant operational leverage, with core operating expenses remaining largely flat for the past 18 months, even as network volume grew 33% year-over-year and profits increased by nearly 200%. Core OpEx as a percentage of FRLPC hit a record low of 31%, an 8-point improvement year-over-year. This software-like business model requires minimal marketing spend to generate volume, allowing nearly all profit growth to flow to the bottom line and compound EPS.

Strengthening Funding Engine and Balance Sheet

The institutional demand for Pagaya's assets remains strong, with $3.7 billion raised in Q2 FY26 through 6 ABS transactions, including a record $600 million auto securitization. The investor network expanded to 174 investors, and the last three securitizations were upsized. The balance sheet is robust, with $249 million in unrestricted cash and $1.04 billion in investments, 50% of which are now in high-yield bond tranches. The company's funding diversification strategy, including prefunded ABS, seasoned ABS, committed long-term revolving structures, and forward flow, provides committed clarity and liquidity.

Prudent Underwriting and Borrower Profile

Pagaya maintains a prudent credit posture, consistently adapting to market conditions without changing its core underwriting stance. The growth is driven by new products and partners, allowing for selectivity. The average borrower for personal loans has a materially stronger profile than market assumptions, with an average income of $120,000, FICO of $680, 37% homeowners, and an average DTI of 28%. This healthy borrower base, combined with the ability to be discerning from a large application flow, supports stable credit performance.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.