Axos Financial (AX)

Digital banking company Axos Financial (NYSE:AX) beat Wall Street’s revenue expectations in Q3 CY2025, but sales were flat year on year at $323.4 million. Its non-GAAP profit of $2.07 per share was 10.3% above analysts’ consensus estimates.

Company Overview

Originally founded as Bank of Internet USA in 1999 before rebranding in 2018, Axos Financial (NYSE:AX) is a diversified financial services company that provides digital banking, securities clearing, and investment advisory solutions to retail and business customers nationwide.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Axos Financial competes with digital banks like Ally Financial (NYSE:ALLY) and SoFi Technologies (NASDAQ:SOFI), traditional banks with strong digital offerings such as JPMorgan Chase (NYSE:JPM), and in its securities business with firms like Interactive Brokers (NASDAQ:IBKR) and Charles Schwab (NYSE:SCHW).

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities. Luckily, Axos Financial’s revenue grew at an incredible 15.3% compounded annual growth rate over the last five years. Its growth surpassed the average banking company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Axos Financial’s annualized revenue growth of 15.8% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Axos Financial’s $323.4 million of revenue was flat year on year but beat Wall Street’s estimates by 1.4%.

Net interest income made up 85.9% of the company’s total revenue during the last five years, meaning Axos Financial barely relies on non-interest income to drive its overall growth.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

The underlying profitability of top-line growth determines the actual bottom-line impact. Banking institutions measure this dynamic using the efficiency ratio, which is calculated by dividing non-interest expenses like personnel, facilities, technology, and marketing by total revenue.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last four years, Axos Financial’s efficiency ratio has swelled by 1.3 percentage points, going from 48.7% to 47.4%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

In Q3, Axos Financial’s efficiency ratio was 48.3%, falling short of analysts’ expectations by 56 basis points (100 basis points = 1 percentage point). This result was 2.3 percentage points worse than the same quarter last year.

For the next 12 months, Wall Street expects Axos Financial to maintain its trailing one-year ratio with a projection of 47.2%.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Axos Financial’s EPS grew at an astounding 18.1% compounded annual growth rate over the last five years, higher than its 15.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Axos Financial, its two-year annual EPS growth of 16.4% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Axos Financial reported adjusted EPS of $2.07, up from $1.96 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 Axos Financial’s full-year EPS of $7.64 to grow 9.9%.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. EPS can become murky due to acquisition impacts or accounting flexibility around loan provisions, and TBVPS resists financial engineering manipulation.

Axos Financial’s TBVPS grew at an incredible 19.3% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 20.3% annually over the last two years from $31.22 to $45.21 per share.

Over the next 12 months, Consensus estimates call for Axos Financial’s TBVPS to grow by 21.7% to $55.01, elite growth rate.

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, Axos Financial has averaged a Tier 1 capital ratio of 12%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, Axos Financial has averaged an ROE of 17.7%, exceptional for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows Axos Financial has a strong competitive moat.

It was good to see Axos Financial beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its tangible book value per share missed. Overall, this print had some key positives. The market seemed to be hoping for more, and the stock traded down 2.1% to $77.48 immediately after reporting.

Updated: December 4, 2025 at 11:36 PM EST

Before investing in or passing on Axos Financial, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

There are numerous reasons why we think Axos Financial is one of the best banking companies out there. First of all, the company’s revenue growth was impressive over the last five years. On top of that, its admirable net interest margin a wonderful starting point for the overall profitability of the business, and its expanding net interest margin shows its loan book is becoming more profitable.

Axos Financial’s P/B ratio based on the next 12 months is 1.5x. Scanning the banking landscape today, Axos Financial’s fundamentals clearly illustrate that it’s an elite business, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $101.33 on the company (compared to the current share price of $84.80), implying they see 19.5% upside in buying Axos Financial in the short term.