Zip Co Shares Jump 8.68% as Buy Now, Pay Later Lender Extends Rally on Strong US Growth and Buyback Push

SYDNEY — Shares of Zip Co Ltd. climbed 8.68% on Monday, adding 25 cents to close at $3.13, as the Australian buy-now, pay-later provider extended a rally that has lifted the stock sharply over the past several weeks.

The gain capped off a session in which Zip was among the more actively traded names on the Australian Securities Exchange, building on momentum that has carried the stock from a low near $1.85 earlier this year to levels not seen since before a steep selloff in February. The stock had finished the previous trading session at $2.88, down 1.71% on the day after trading between $2.79 and $2.94.

Monday's advance comes as Zip works through one of the final stages of an on-market share buyback program launched earlier this year. As of a daily notice filed with the exchange on June 26, the company had repurchased nearly 24 million shares for roughly $47.7 million, edging close to the $50 million cap set for the program, which is authorized to run until March 2027. Capital management moves of that kind are typically read by investors as a signal that a company's board views its own stock as undervalued, and the buyback has been a recurring talking point in recent trading sessions as Zip shares have climbed.

The rally also continues to be underpinned by a string of stronger-than-expected quarterly results and an upgraded earnings outlook delivered earlier this year. Zip reported record cash earnings before tax, depreciation and amortization of $65.1 million for its fiscal third quarter, a 41.5% increase from the same period a year earlier. Total transaction volume across the company's buy-now, pay-later platforms reached nearly $4 billion for the quarter, up 22.4% year over year, while total income rose 20.2% to $335.2 million.

"Record cash earnings of $65.1m, up 41.5% year on year," Chief Executive Cynthia Scott said in describing the quarterly performance.

The United States remains the primary growth engine behind those numbers. Zip's American business, built around its Pay-in-4 and Pay-in-8 installment products, posted a 43.1% jump in transaction volume in U.S. dollar terms during the quarter, with active customer numbers and merchant partnerships both expanding at double-digit rates. The U.S. operation, which traces back to Zip's 2020 acquisition of QuadPay, has grown to become the company's largest and fastest-growing segment, increasingly diversifying the business away from its more mature home market in Australia and New Zealand.

On the back of that performance, Zip lifted its full-year guidance for group cash earnings to at least $260 million for fiscal 2026, up from earlier expectations that the second half of the year would track roughly in line with the first half's $124.3 million result. The upgrade marked one of the more bullish guidance revisions among Australian-listed financial technology companies so far this year and has continued to support investor sentiment toward the stock in the months since.

Zip has also been expanding its product lineup and merchant partnerships in the U.S. in recent weeks. The company said it would support Stripe's Shared Payment Tokens, a system designed to let artificial intelligence shopping agents complete purchases on a customer's behalf without exposing sensitive payment details, positioning Zip to participate in what payments companies broadly expect to be a growing category of AI-assisted online commerce. Separately, Zip expanded its U.S. merchant network with new retail partners and struck a partnership with InComm Payments to bring installment purchasing to gift cards, part of a broader push to widen the range of everyday purchases its payment products can cover.

The stock's run has not been without volatility. Shares fell sharply in February after Zip's first-half cash earnings came in below analyst expectations and the company signaled that second-half earnings would be roughly flat against the first half, a forecast that caught some investors off guard at the time. The stock has since recovered well beyond its pre-selloff levels as the subsequent quarterly results and guidance upgrade reshaped the narrative around the business.

Credit quality remains the primary risk that analysts continue to flag for Zip and other buy-now, pay-later operators. The company's group net bad debts came in at 1.93% of total transaction volume in the most recent quarter, above the 1.64% recorded a year earlier and up from 1.80% in the prior quarter, even as the loan book has expanded. In the U.S., credit losses held closer to steady at around 1.86% of transaction volume, with the company targeting further improvement. Active customer numbers in the Australia and New Zealand segment fell 7.4% year over year, even as growth from the U.S. business more than offset that softness at the group level.

Wall Street and Australian analysts have offered a mixed but generally constructive view on the stock following its rapid ascent. Some brokers have trimmed their price targets in recent updates, citing a more conservative outlook for revenue growth and profit margins after the stock's run-up, while other research desks have raised their fair-value estimates, pointing to continued execution in the U.S. market, expanding merchant partnerships and the prospect of further margin improvement as the company scales.

Zip does not currently pay a dividend, choosing instead to direct capital toward U.S. expansion, product development and the ongoing buyback program. The company's next major scheduled catalyst is its full fiscal 2026 results, due Aug. 20, which will give investors a fuller picture of how the U.S. growth trajectory, credit performance and capital management program have come together over the back half of the financial year.

For now, Monday's gain extends a recovery that has reshaped Zip's standing among Australian-listed financial technology stocks, even as the company continues to navigate the credit risk and regulatory scrutiny that remain defining features of the broader buy-now, pay-later sector.