SoFi's revenue soars, but increased expenses hinder earnings

• Key insight: SoFi is growing in both its core lending products and its new banking and digital asset launches but didn't increase its full-year outlook.
• Supporting data: Operational expenses increased 30% year over year, which largely offset SoFi's record revenue growth of 40% year over year.
• Forward look: SoFi is expecting one to two interest rate hikes from the Federal Reserve in the latter half of 2026, even as the Fed held rates steady this week.

SoFi posted a record quarter for revenue growth and loan originations, especially for student loans, but is feeling the growing pains of increased operational expenses, an aggressive product growth strategy and an uncertain interest rate environment.

The digital lender-turned-bank reported an adjusted net revenue of $1.2 billion, up 40% year over year. In line with the company's approach last quarter SoFi did not adjust its full-year outlook for EBITDA, net income and EPS, even as the lender increased its revenue increase outlook from 30% to 32% to 35%.

According to Jeffries analysts, an approximately 30% increase in "primarily growth-related" operational expenses year over year from $733 million to $1 billion offset the company's revenue and led to an EPS of $0.12, which was in line with Wall Street estimates.

One operating expense that went up was SoFi's provision for credit loss, which rose by 37% year over year. SoFi attributed the expense increase to its portfolio growth. Credit card balances and products grew 38% and 48% year over year, respectively.

"We're required to reserve for those expected lifetime losses upfront," a spokesperson told American Banker. "Credit performance remains strong and in line with our expectations, with no meaningful change in credit trends."

TD Cowen analysts viewed the quarter as modestly positive since SoFi exceeded its quarterly guidance and beat consensus estimates, but said it was "tempered by the fact that the company maintained full year EPS guidance."

The company is also expecting one to two interest rate hikes from the Federal Reserve in the latter half of 2026, a change from the expectation of no rate cuts last quarter and two rate cuts when SoFi first provided its 2026 guidance. SoFi Chief Financial Officer Chris Lapointe said on the company earnings call that the company expects to beat its revised revenue guidance if the two expected rate hikes do not occur.

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Inflation metrics continued to increase in recent weeks even as the Federal Reserve held its interest rates steady last month. On Wednesday afternoon, Fed Chair Kevin Warsh announced that the Federal Open Market Committee voted to keep its benchmark interest rate unchanged.

SoFi CEO Anthony Noto told American Banker that SoFi has grown through a wide range of rate environments.

"I think that is one of the biggest strengths of our model," he said. "We raised our revenue outlook even as expectations shifted from rate cuts to rate increases, which speaks to the strength and diversification of the business. Higher rates can slow certain areas, but they can also create opportunities in other parts of our business. Our deposit base also gives us an attractive and stable source of funding."

Originations for student loans, the sector where SoFi got its start over a decade ago, increased 170% year over year to $2.7 billion for the highest quarterly result in SoFi's history.

Pandemic-era student loan payment relief measures, such as the SAVE plan, lapsed on July 1 of this year. The current administration's overhaul of the student loan market, with roughly $1.8 trillion in outstanding debt according to Federal Reserve data, was expected to have ripple effects for private-sector consumer lenders in the near future.

A SoFi spokesperson told American Banker that the company's student loan origination increase was primarily driven by "the interest rate environment and the continued normalization of the student loan market following the end of payment relief."

Since the recent loan repayment overhaul primarily focused on federal student loan programs, however, the company didn't attribute it as a direct factor in its quarterly results.

"The changes do not directly affect our existing student-loan portfolio, but they could create a greater need for private financing as some federal options become more limited," Noto told American Banker.

The company is also anticipating growth from its digital asset product launches, which include a combined fiat and crypto banking service called Big Business Banking for enterprise clients and a retail rollout of its SoFiUSD stablecoin to all 15.8 million of its members.

"It's still early, but we're encouraged by the demand we've seen," Noto said. "The retail rollout is an important first step, but the utility we're building around it is what will ultimately drive adoption."

He expects enterprise customers to adopt stablecoins more quickly than consumers due to businesses feeling the pain points of cross-border payments and settlement, both potential use cases for stablecoins, but anticipates that retail adoption will follow as the benefits of digital assets become embedded in everyday financial products.

"The opportunity is not simply giving members another digital asset to hold," he said. "It's using blockchain technology to make everyday financial services faster, less expensive and available around the clock, all within a regulated banking environment."