Pagaya Technologies (PGY 8.67%), a fintech firm focused on AI-driven credit and asset origination, reported its second quarter earnings on August 7, 2025. The standout headline: Revenue (GAAP) reached $326 million in the second quarter, beating analyst estimates of $316.95 million. Earnings per share (Non-GAAP, diluted) soared to $0.64. Net income (GAAP) also landed comfortably above company forecasts. The period saw strong growth across most key metrics. Overall, it was a robust quarter for the company, powered by record transaction volumes, expanded partnerships, and an improved bottom line.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS – Diluted (Non-GAAP) | $0.64 | $0.18 | $0.10 | 540.0% |
| Revenue | $326 million | $316.95 million | N/A | N/A |
| Revenue vs. Guidance Midpoint | Above midpoint ($300 million) | |||
| Adjusted EBITDA | $86 million | $50 million | 72.0% | |
| Fee Revenue Less Production Costs (FRLPC) | $126 million | $97 million | 30% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q2 2025 earnings report.
Business Overview and Strategic Focus
Pagaya operates at the intersection of artificial intelligence and consumer finance. Its core business is providing AI-powered credit underwriting and origination for financial partners, including banks and consumer lenders. By processing vast amounts of loan applications, it helps these partners make better, faster, and more accurate credit decisions.
Its recent focus has centered on scaling its proprietary technology, expanding its array of banking and investor partnerships, and launching new products in the auto and point-of-sale finance sectors. Long-term success relies on its ability to innovate in technology, deepen strategic relationships, and efficiently manage its capital as it grows its network.
Quarter in Review: Growth, Execution, and Key Metrics
The second quarter saw Pagaya setting new records in revenue, GAAP net income, and business volume. Revenue (GAAP) grew 30% year-over-year, driven by increased volume in partner-originated loans and successful expansion into new finance verticals such as auto loans and point-of-sale lending.
Net income attributable to shareholders was $17 million (GAAP), moving from a loss in the prior year period and landing above its GAAP net income guidance of up to $10 million. Adjusted EBITDA reached $86 million in the second quarter, a 72% jump from the previous year, highlighting improved operational scale. Diluted earnings per share on a Non-GAAP basis were $0.64, contrasting sharply with last year’s $0.10 non-GAAP adjusted net income per share.
Network volume—representing the total loans originated and processed through Pagaya’s AI platform—came in at $2.648 billion. This exceeded the company’s high-end forecast for GAAP net income and reflected a 14% year-over-year increase. Growth was especially strong in the auto and point-of-sale sectors, helped by strategic lending partnerships and what the company described as "prudent underwriting." Fee Revenue Less Production Costs (FRLPC), a non-GAAP metric that subtracts financing and production expenses from fee income to reflect direct profitability, further increased, reaching $126 million (up 30% year-over-year).
The company made a notable push in asset-backed securities (ABS)—financial products that pool loans and sell them as investments. Pagaya issued six ABS deals, including its first-ever AAA-rated $300 million Auto ABS and a $300 million Point-of-Sale ABS, the latter supporting over $1 billion in new funding capacity. It also added ten new funding partners for a total of 145, indicating expanding reach and trust among investors. A significant forward flow agreement with Castlelake was signed in July 2025, representing up to $2.5 billion in personal loan purchases over sixteen months—evidence of ongoing diversification and scaling.
Capital management remained a focus as well. Cash and equivalents stood at $183 million at quarter-end. However, total liabilities (GAAP) increased to $857 million as of June 30, 2025, up from $775 million at December 31, 2024, reflecting higher secured borrowings. The company raised $500 million in five-year notes to support growth, at an interest rate of 8.875%.
Looking Ahead: Guidance and Investor Considerations
Management raised its full-year revenue outlook. For the full year, it now expects total revenue and other income (GAAP) between $1.25 billion and $1.33 billion, higher than earlier forecasts. For the third quarter, it projects total revenue and other income of $330 million to $350 million, network volume of $2.75 billion to $2.95 billion, and adjusted EBITDA of $90 million to $100 million. GAAP net income is forecast at $10 million to $20 million, but this includes anticipated one-off expenses of $5 million to $10 million due to bond issuance and early retirement of debt, which are included in GAAP net income guidance.
As it expands into new asset classes and adds more partners, Pagaya will continue to operate within a complex regulatory landscape. While no specific regulatory obstacles were cited for the quarter, the nature of its business means ongoing attention to compliance and capital management will remain critical. Shareholders should watch for future effects from rising debt levels and one-time expenses, as well as the performance of recently launched ABS products and ongoing diversification efforts.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
