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    PGY
    Earnings call· Jun 2026(Q2 FY26)

    Pagaya Technologies Q2 FY26 earnings call PGY

    Jul 30, 2026 Source

    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

    9
    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

    2
    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
    		————

    Operational metrics

    27
    Network Volume
    $3.5 billion33% year-over-year
    Q2 FY26

    Achieved a record high.

    Application Volume
    29%year-on-year
    Q2 FY26

    Application volume growth.

    Total Revenue
    $387 million19% year-over-year
    Q2 FY26

    Achieved a record high.

    Interest and Investment Income
    $22 milliondoubled
    Q2 FY26

    As the company continues to orient its investment portfolio toward cash interest bonds.

    Fee Revenue Less Production Costs (FRLPC)
    $147 million16% year-over-year
    Q2 FY26

    Achieved a record high.

    FRLPC as a percentage of Network Volume
    4.2%contracted 60 basis points sequentially
    Q2 FY26

    New products and partners initially enter at lower margins; elevated benchmark rates compress margin from funding side.

    Operating Income
    $106 millionup 87% year-over-year
    Q2 FY26

    Reflects the strength of the business model.

    Adjusted EBITDA
    $124 million43% year-over-year
    Q2 FY26

    Strong growth in adjusted profitability.

    Adjusted EBITDA Margin
    32%up 5 points over last year
    Q2 FY26

    Margin expansion due to operational leverage.

    Core Operating Expenses as a percentage of FRLPC
    31%8-point improvement versus last year
    Q2 FY26

    Hit a record low, demonstrating significant operational leverage.

    GAAP EPS
    $0.49
    Q2 FY26

    Achieved a record high.

    GAAP Net Income
    $45 millionincreasing $29 million
    Q2 FY26

    Driven by revenue growth and lower operating expenses.

    Net Income Margin
    12%compared to 5% last year
    Q2 FY26

    Significant margin expansion.

    Unrestricted Cash and Cash Equivalents
    $249 million
    as of June 30

    Balance sheet position.

    Investments in Loans and Securities
    $1.04 billion
    as of June 30

    Investment portfolio, with 50% in bond tranches.

    Investment Portfolio Adjustment
    -$42 million
    Q2 FY26

    Downward adjustment in line with expectations.

    New Investments (net of paydowns)
    $118 million
    Q2 FY26

    Additions to the investment portfolio.

    Funding Raised
    $3.7 billion
    Q2 FY26

    Largest funding quarter ever.

    ABS Transactions Closed
    6
    Q2 FY26

    Including the largest auto securitization ever.

    Largest Auto Securitization
    $600 million
    Q2 FY26

    Part of the 6 ABS transactions closed.

    Investor Network
    174+11
    Q2 FY26

    Growth in institutional demand for Pagaya's assets.

    Average Borrower Income
    $120,000
    Q2 FY26

    Reflects a stronger borrower profile due to moving up the funnel.

    Average Borrower FICO
    $680
    Q2 FY26

    Reflects a stronger borrower profile due to moving up the funnel.

    Borrower Homeownership
    37%
    Q2 FY26

    Percentage of borrowers who are homeowners.

    Average Borrower DTI
    28%
    Q2 FY26

    Debt-to-income ratio for borrowers.

    Applications Received
    >$300 billion
    Q2 FY26

    Total value of applications coming into the network, allowing for selectivity.

    Flow from Non-Decline Types
    >45%
    Q2 FY26

    Shift in business model from decline-only to more top-of-funnel engagement.

    Industry KPIs

    3
    MetricValueDetails
    Revenue growth$387 millionUSD
    Bookings billings$3.5 billionUSD
    Operating FCF margin rule of 4032%%

    Orderbook & backlog

    2
    Total Addressable Market (Consumer Credit Origination)~$1 trillionQ2 FY26

    Origination per year

    Network Volume Run Rate$14 billionQ2 FY26

    Origination per year

    Deals & partnerships

    5
    Experian ActivateOnboarding 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 BanksNew 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.

    SezzleRetail solutions for point-of-sale

    Existing partner in the point-of-sale business.

    Upgrade FlexPayTravel-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 ProvidersNew partners for point-of-sale

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

    Risks & headwinds

    4
    FRLPC percentage contractionQ2 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 ratesremainder 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 volumesremainder 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 adjustmentQ2 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

    5

    Auto segment growth momentum

    next quarter and future
    Currentstep function growth, >75% of YoY network volume growth
    Targetcontinued 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.

    Q&A highlights

    5

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.