What Was Behind Pagaya's Positive GAAP Earnings in 2025?

With improving fundamentals, Pagaya Technologies PGY turned GAAP profitable in 2025. After reporting substantial losses in prior years, the fintech firm hit an inflection point last year, posting all four quarters of positive GAAP net income.

For the full year, net income was a record $81.4 million against net loss of $401.4 million incurred in 2024. The primary driver of impressive earnings growth was robust revenue expansion, along with improving unit economics. The company reported solid total revenue and other income growth (rising 26.1% year over year), driven largely by higher fee income across its lending network. This helped push revenue from fees less production costs higher, which means that the business generated more high-quality revenues while keeping volume growth focused on profitability rather than aggressive expansion. 

Another major driver of earnings growth in 2025 was operating leverage and cost efficiency. The company’s revenue growth outpaced expense growth, allowing margins to improve and turning prior losses into positive net income. Adjusted EBITDA rose sharply (up 76.3% year over year), showing that the platform scaled efficiently as utilization increased. Operational efficiencies, including tighter cost discipline and better performance in the personal loan and auto lending segments, played a key role in pushing the company into positive GAAP earnings earlier than originally expected. 

Finally, improved funding diversification and disciplined risk management supported profitability. Pagaya expanded its investor base and executed multiple funding transactions last year, which helped maintain capital availability while stabilizing loan economics. At the same time, management emphasized selective underwriting and a shift toward profitable growth, allowing the company to avoid chasing risky volume.

Despite an impressive 2025 performance, investors reacted negatively to the company’s fourth-quarter 2025 earnings results, sending the PGY stock lower in the past month. This is because management issued a softer-than-expected guidance for early 2026 (projects network volume of $2.5-$2.7 billion, and total revenues and other income of $315-$335 million in first-quarter 2026). Along with this, while management’s decision to tighten underwriting standards and reduce exposure to higher-risk credit segments will strengthen credit quality and long-term stability, it will likely limit loan volumes and near-term growth.

2025 Performance of Pagaya’s Peers

In 2025, Upstart Holdings, Inc. UPST reported net income of $53.6 million against a net loss of $128.6 million in 2024. Total revenues increased 64% year over year to $1.04 billion, with net revenue from fees increasing 49.5%.

During the year, Upstart originated 1,497,149 loans, increasing 115% year over year, reflecting a 19.4% conversion rate. Total originations were $11 billion, up 86% year over year.

For 2026, Upstart expects total revenues of $1.4 billion and revenue from fees of $1.3 billion.

Another close competitor of PGY is LendingTree TREE. LendingTree is expected to report fourth-quarter 2025 results on March 2, after market close.

In the third quarter, LendingTree’s total revenues grew 18% year over year to $307.8 million.

PGY’s Price Performance, Valuation & Estimate Analysis

Pagaya’s shares have lost 63.4% in the past six months compared with the industry’s 25% decline.

The PGY stock is currently trading at a 12-month forward price-to-sales (P/S) of 0.66X, which is below the industry average of 2.81X.

Over the past 30 days, the Zacks Consensus Estimate for PGY’s 2026 and 2027 earnings has been revised lower to $2.87 and $3.61, respectively. The consensus estimate indicates 13.3% decline for 2026 and 25.8% growth for 2027.

Currently, Pagaya carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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