SoFi Technologies (NASDAQ:SOFI) saw its shares stage a notable recovery on Friday, climbing 5.5% from an intraday low of $16.48 to reach $17.39 by midday. The stock was trading 0.4% higher at 12:50 p.m. EDT, showing resilience amid a broader technology sell-off that saw the Nasdaq Composite decline 1.3%.
Despite the bounce, SoFi shares remain 7.4% below their July 10 closing price of $18.78. The company is set to report second-quarter earnings before the market opens on July 29, with a conference call scheduled for 8 a.m. EDT.
Deposit Funding Advantage
Investor attention is increasingly focused on SoFi's deposit economics, which have become a key pillar of the company's profitability narrative. In the first quarter, average deposits accounted for over 90% of average liabilities, while the cost of deposits was 155 basis points lower than warehouse funding. This spread translates to annualized interest expense savings of $621.8 million, representing approximately 75% of SoFi's projected 2026 adjusted net income of $825 million.
These figures are intended as a scale comparison, not a direct profit projection, but they underscore the importance of deposit funding to SoFi's earnings story. The funding advantage currently underpins the earnings narrative, with shares trading at roughly 29 times management's projected 60-cent adjusted EPS for 2026. This valuation requires stronger and more transparent growth to be sustained.
Q2 Expectations
Management projects adjusted revenue to rise around 30% in the second quarter, with an adjusted EBITDA margin of 30% and an adjusted net-income margin between 12% and 13%. In the first quarter, SoFi delivered strong execution: adjusted revenue grew 41% to $1.09 billion, adjusted EBITDA jumped 62% to $339.9 million, and net income reached $166.7 million.
Membership growth remained robust, with 1.055 million new members added, bringing the total to 14.7 million. Total products increased 39% to 22.2 million. However, the composition of revenue raised some concerns: fee-based revenue grew only 23%, compared to 41% overall adjusted revenue growth, and Technology Platform revenue declined 27% to $75.1 million.
Market Context and Peer Comparison
SoFi's relative strength stood out against other fintech peers. Robinhood Markets (NASDAQ:HOOD) fell 2.4% to $103.46, Affirm Holdings (NASDAQ:AFRM) dropped 3.8% to $76.81, and Upstart Holdings (NASDAQ:UPST) declined 4.0% to $29.65. SoFi maintained the lowest trailing P/E multiple among the group at 38.7x, compared to Robinhood's 50.2x, Affirm's 68.6x, and Upstart's 72.2x.
This week's decline reflects shifting expectations. Following the first-quarter report, William Blair analyst Andrew Jeffrey noted that SoFi "uncharacteristically did not flow through first-quarter revenue and EBITDA upside," leading to a 12% drop in shares.
Risks and Outlook
Several risks persist: personal loan losses may increase, demand for loan sales could ease, and deposit expenses might climb. Further declines in the Technology Platform segment would add additional pressure. The July 29 report needs to demonstrate that margins supported by deposits are sufficient to balance softer fee growth. An upward revision to guidance would be a positive signal, while a reiterated outlook might once again raise questions about valuation.
CEO Anthony Noto highlighted engagement metrics, noting that "members grew 35% and products increased 39%, with 43% of new products coming from existing members." The key earnings benchmark remains the gap between fee-based revenue growth and overall revenue growth. Accelerating fee growth would reduce reliance on lending margins and balance-sheet expansion, potentially helping sustain the high valuation multiple.
