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SYDNEY — Zip Co Ltd shares climbed 7.73 percent to close at A$2.51 on Monday, extending gains for the Australian buy-now-pay-later provider after last week’s strong third-quarter results and an upgraded full-year profit forecast that highlighted accelerating growth in its key U.S. market.

The stock added 18 cents in trading on the Australian Securities Exchange, reflecting continued investor enthusiasm following Zip’s April 17 announcement of record cash earnings before tax, depreciation and amortisation. Volume remained elevated as traders digested the company’s improving profitability and strategic momentum amid a recovering fintech sector.

Zip reported a record cash EBTDA of A$65.1 million for the three months ended March 31, 2026, a 41.5 percent increase from the prior corresponding period. Operating margin expanded sharply to 19.4 percent from 16.5 percent a year earlier, demonstrating strong unit economics and operating leverage as the company scales.

Total transaction volume reached A$4.0 billion, up 22.4 percent year on year, while total income rose 20.2 percent to A$335.2 million. Transactions increased 20.3 percent to 27.4 million, and the group ended the quarter with 6.5 million active customers, up 3.5 percent.

The standout performer was the U.S. business, where transaction volume surged 43.1 percent in U.S. dollar terms to US$2.12 billion. Active customers grew 9 percent, adding 375,000 accounts, while merchants on the platform rose 17.9 percent. Zip expanded its Pay-in-Z offering with the launch of Pay-in-2, giving customers greater flexibility for everyday purchases.

In Australia and New Zealand, the business delivered steady profitable growth. Revenue and Australian receivables increased 5 percent and 8.7 percent respectively. Zip also announced the upcoming launch of ZMobile in April 2026, a new capital-light mobile offering in partnership with TPG Telecom that is expected to diversify revenue streams.

Net bad debts stood at 1.9 percent of total transaction volume, in line with management targets. In the U.S., credit losses remained steady at 1.86 percent of TTV, with expectations for further improvement below 1.75 percent in the fourth quarter.

On the back of the robust third-quarter performance, Zip upgraded its full-year 2026 group cash EBTDA guidance to no less than A$260 million, up from previous expectations that second-half performance would be broadly in line with the first half’s A$124.3 million. On a constant currency basis, the figure equates to at least A$271 million.

The company reaffirmed its other key FY26 targets, including U.S. TTV growth greater than 40 percent in U.S. dollars, group revenue margin around 8 percent, cash net transaction margin between 3.8 percent and 4.2 percent, operating margin above 18 percent, and cash EBTDA as a percentage of TTV above 1.4 percent.

Group CEO and Managing Director Cynthia Scott highlighted the resilience of Zip’s business model. “Zip’s resilient business model continues to drive increased profitability at scale, delivering record cash earnings of $65.1m, up 41.5% year on year,” Scott said in the results update. “Operating margin expanded 292 bps to 19.4%, reflecting strong unit economics and significant operating leverage. Momentum continued across both markets, underpinned by deepened customer engagement and disciplined execution.”

Scott noted particular strength in the U.S., where the company is balancing rapid growth with credit discipline. She also pointed to innovation in the ANZ market, including the ZMobile launch, as a way to broaden the customer proposition.

The upgrade and solid metrics triggered a sharp rally on April 17, with shares surging as much as 24 percent intraday before closing up around 13-14 percent on exceptionally high volume exceeding 26 million shares. Monday’s further 7.73 percent gain brought the two-day advance to roughly 22 percent, pushing the stock well above recent lows and reflecting renewed confidence in Zip’s turnaround story.

Analysts and market observers viewed the results as evidence that Zip is successfully executing its strategy of profitable scaling, particularly in the competitive U.S. buy-now-pay-later space dominated by players like Affirm and Afterpay’s parent Block. The improvement in operating margins and steady credit performance helped alleviate earlier concerns about profitability and asset quality that had weighed on the stock in prior periods.

Zip has faced volatility in recent years, including a significant share price drop earlier in 2026 after a first-half earnings miss. However, the company has since demonstrated consistent progress through cost discipline, product innovation and focused growth in higher-margin segments.

The U.S. market now accounts for the majority of Zip’s transaction volume, and management continues to see substantial runway for expansion. Recent merchant additions and enhancements to the Pay-in-Z product are designed to capture more everyday spending rather than large-ticket purchases alone.

In Australia, despite a more mature market, Zip is returning to growth in receivables and exploring adjacent opportunities such as ZMobile to drive engagement and new revenue without heavy capital outlay.

Investors have also noted Zip’s ongoing capital management efforts, including an on-market share buyback program that has repurchased millions of shares in recent months, signaling management’s view that the stock remains undervalued.

Broader market sentiment toward fintech and growth stocks has improved modestly in April amid easing geopolitical tensions and hopes for stable interest rates, providing a tailwind for Zip’s recovery. However, the company’s own operational delivery appears to be the primary driver of the recent outperformance.

Looking ahead, all eyes will be on Zip’s full-year results scheduled for August 20, 2026. The upgraded guidance sets a high bar, but analysts suggest the company is well-positioned to meet or exceed it if U.S. momentum persists and credit metrics remain controlled.

Challenges remain, including competition, regulatory scrutiny in the BNPL sector and potential economic slowdowns that could pressure consumer spending. Zip’s ability to maintain low bad debts while growing aggressively in the U.S. will be a key test.

For now, the market is rewarding the progress. At A$2.51, Zip’s market capitalisation sits around A$3.1-3.2 billion, still well below peaks seen in the post-pandemic BNPL boom but reflecting renewed optimism.

Shareholders and potential investors will monitor upcoming trading updates and any further product launches closely. The ZMobile rollout in Australia could provide an early indicator of success in diversifying beyond core lending products.

Zip Co has transformed from a high-growth, loss-making disruptor into a more mature player focused on sustainable profitability. Monday’s trading and last week’s results suggest investors are increasingly buying into that narrative.

As the buy-now-pay-later sector matures globally, Zip’s emphasis on unit economics, geographic diversification and innovation positions it to compete effectively. Whether the current rally sustains will depend on delivery against the upgraded targets in the critical fourth quarter.

For Australian investors, Zip remains one of the more prominent pure-play fintech stories on the ASX. Its recovery path offers a case study in how disciplined execution and market adaptation can rebuild shareholder value after periods of turbulence.

With the stock up significantly in recent sessions, some traders may take profits, but underlying fundamentals appear supportive for those with a longer-term horizon. The coming months will reveal if Zip can convert quarterly momentum into consistent full-year outperformance.