SoFi (SOFI)

Digital financial services company SoFi Technologies (NASDAQ:SOFI) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 37.9% year on year to $961.6 million. On the other hand, the company’s full-year revenue guidance of $3.54 million at the midpoint came in 99.9% below analysts’ estimates. Its non-GAAP profit of $0.11 per share was 33.4% above analysts’ consensus estimates.

Company Overview

Starting as a student loan refinancing company founded by Stanford business school students in 2011, SoFi Technologies (NASDAQ:SOFI) operates a digital financial platform offering lending, banking, investing, and other financial services to help members borrow, save, spend, invest, and protect their money.

Personal loan providers offer unsecured credit for various consumer needs. The sector benefits from digital application processes, increasing consumer comfort with online financial services, and opportunities in underserved credit segments. Headwinds include credit risk management in unsecured lending, regulatory oversight of lending practices, and intense competition affecting margins from both traditional and fintech lenders.

SoFi competes with traditional banks like JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC), digital-first financial services companies such as Robinhood (NASDAQ:HOOD) and PayPal (NASDAQ:PYPL), and specialized lenders like LendingClub (NYSE:LC) and Upstart (NASDAQ:UPST).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, SoFi’s revenue grew at an incredible 48.6% compounded annual growth rate over the last five years. Its growth surpassed the average financials company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. SoFi’s annualized revenue growth of 30.1% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, SoFi reported wonderful year-on-year revenue growth of 37.9%, and its $961.6 million of revenue exceeded Wall Street’s estimates by 6.3%.

The total number of transactions and loan originations flowing through a firm is a key driver of top-line growth. Taken together, this volume is the lifeblood of financial services companies, whether traditional banks or fintech disruptors.

SoFi’s volumes have grown at an annual rate of 24.6% over the last five years, much better than the broader financials industry but slower than its total revenue. When analyzing SoFi’s volumes over the last two years, we can see that growth accelerated to 43.5% annually. Its recent performance could be a sign of better days to come.

In Q3, SoFi’s volumes were $9.93 billion, beating analysts’ expectations by 9.1%. This print was 56.9% higher than the same quarter last year.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Personal Loan companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

This is because for financials businesses, interest income and expense should be factored into the definition of profit but taxes - which are largely out of a company's control - should not.

Over the last four years, SoFi’s pre-tax profit margin has fallen by 64.8 percentage points, going from negative 52.7% to 12.1%. It has also expanded by 32 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

SoFi’s pre-tax profit margin came in at 15.4% this quarter. This result was 6.3 percentage points better than the same quarter last year.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

SoFi’s full-year EPS flipped from negative to positive over the last four years. This is a good sign and shows it’s at an inflection point.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For SoFi, its two-year annual EPS growth of 93.8% was higher than its four-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, SoFi reported adjusted EPS of $0.11, up from $0.05 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects SoFi’s full-year EPS of $0.31 to grow 59.6%.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, SoFi has averaged an ROE of negative 3.5%, a disappointing result relative to the majority of firms putting up 25%+. But we wouldn’t write off SoFi given its success in other measures of financial health.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, SoFi has averaged a Tier 1 capital ratio of 15.8%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

It was good to see SoFi beat analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed. Overall, this print had some key positives. The stock traded up 3.2% to $31.02 immediately following the results.

Updated: December 4, 2025 at 9:24 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own SoFi, you should also grasp the company’s longer-term business quality and valuation.

There is a lot to like about SoFi. First of all, the company’s revenue growth was exceptional over the last five years. And while its relatively low ROE suggests management has struggled to find compelling investment opportunities, its expanding pre-tax profit margin shows the business has become more efficient. On top of that, SoFi’s transaction volume growth was exceptional over the last five years.

SoFi’s P/E ratio based on the next 12 months is 52.9x. There’s no doubt it’s a bit of a market darling given the lofty multiple, but we don’t mind owning a high-quality business, even if it’s expensive. Investments like this should be held patiently for at least three to five years as they benefit from the power of long-term compounding, which more than makes up for any short-term price volatility that comes with high valuations.

Wall Street analysts have a consensus one-year price target of $26.44 on the company (compared to the current share price of $28.65).