Zip Co Ltd, the Australian buy-now-pay-later (BNPL) provider, has moved to shore up investor confidence with a significant share repurchase program following a brutal market sell-off. The company announced plans for an on-market buyback of up to A$50 million, set to commence around March 6 and potentially run for twelve months.
Market Reaction and Share Price Plunge
The buyback announcement follows two consecutive days of heavy losses for Zip shares. The stock closed at A$1.78 on Friday, February 20, 2026, down 3.8% for the session. This decline extended a 34.4% collapse on Thursday, triggered by the company's half-year earnings report. Cumulatively, the share price has tumbled approximately 37% from its A$2.82 close the previous Wednesday.
Earnings: A Mixed Picture
Zip's financial update presented a complex narrative for investors. The company reported a robust 85.6% year-over-year increase in cash EBITDA, reaching A$124.3 million for the half-year ended December 31. Total transaction volume (TTV) grew to A$8.38 billion. Management also upgraded its full-year operating margin outlook to above 18.0% and projected cash EBITDA as a share of TTV exceeding 1.4%.
However, the positive metrics were overshadowed by guidance that second-half cash EBITDA would be "roughly level" with the first half, indicating a plateau in profit growth. Furthermore, net bad debts climbed to 1.73% of TTV, up from 1.56% a year prior, signaling deteriorating credit quality. This combination of a flat growth outlook and rising credit losses spooked the market, leading to the sharp sell-off.
Buyback Details and Strategic Rationale
In response to the market volatility, Zip's board authorized the repurchase of up to 92,161,082 of its 1,270,683,586 outstanding shares. The program will be executed by brokers Barrenjoey Markets and Third Party Platform, with purchases capped at no more than 5% above the five-day volume-weighted average price (VWAP). The company reserves the right to alter, suspend, or terminate the buyback as necessary.
Chief Executive Cynthia Scott framed the buyback as a demonstration of "confidence in the strength of our balance sheet." Such a move is often interpreted as management signaling that the stock is undervalued. However, analysts caution that a buyback does not directly address fundamental business challenges like credit risk or customer growth.
Analyst and Investor Sentiment
The market's negative reaction highlights investor sensitivity in the current environment. "Guidance for flat growth in the second half caught investors off guard," noted Marc Jocum, a senior product and investment strategist at Global X ETFs. He emphasized that minor disappointments can trigger outsized moves when markets are intensely focused on earnings and interest rate trajectories.
Analysts from UBS pointed to specific operational headwinds, including sluggish customer growth in the key U.S. market and the notable jump in credit losses. These factors have raised concerns about whether the company's upgraded margin targets are sustainable if credit costs continue to rise.
Sector Context and Future Risks
Zip operates in the competitive global BNPL sector alongside peers like Block's Afterpay and U.S.-based Affirm. This segment is particularly sensitive to shifts in funding costs and household financial health, especially as consumers face higher borrowing costs. Investors maintain a close watch on credit performance metrics across the industry.
The primary risk for Zip is that the "flat second half" scenario could worsen if net bad debts continue to climb or if U.S. growth stalls further. The buyback program, while a supportive gesture, is not guaranteed and could be suspended if financial conditions change. The company's next major update is scheduled for April 17, when it will release its FY26 third-quarter results. The market will scrutinize this report for new data on U.S. transaction growth and credit loss trends.
Traders are now monitoring whether Zip's share price stabilizes after its precipitous fall and for any early indications of buyback activity. The company's attempt to balance a show of financial strength with a cautious earnings outlook encapsulates the challenging landscape for fintech firms navigating economic uncertainty and shifting investor expectations.
