SoFi Technologies (SOFI 1.84%) reported another blockbuster quarter chock-full of excellent performance and beats on revenue and earnings per share (EPS). But as usual, the market found something to be disappointed with: This time, it's guidance.
Still,if guidance is the only issue here, the market may have overreacted. Let's go through the results, and the guidance management issued, and see why this is actually an excellent opportunity for savvy investors to buy shares on the dip.
A phenomenal quarter
SoFi exceeded analyst expectations for both the fourth quarter and full year on both the top and bottom line. More importantly, the digital lender has turned a net profit for five consecutive quarters. Here are some of the most notable metrics for the fourth quarter and the full year:
| Metric | Fourth Quarter | Full Year |
|---|---|---|
| Adjusted revenue growth | 24% | 26% |
| Net income | $332 million | $499 million |
| Net income growth | 594% | N/A |
| Member add-ons | 785,000 | 2.6 million |
| Product add-ons | 1.1 million | 3.6 million |
Data source: SoFi quarterly reports. Growth is year over year.
It ended the year with more than 10 million members, 14.7 million products, and $2.6 billion in adjusted net revenue. Wall Street analysts were expecting $674.6 million in revenue and $0.04 in EPS for Q4. SoFi beat on both, reporting $739 million in revenue and $0.05 in EPS.
What's driving the success?
There were many highlights in the quarter, and management attributed its success to its digital-first mindset and flywheel effect.
First, SoFi differentiates itself from the larger, established banks by being all online and investing in technology to deliver the quick and seamless experience users want today, in contrast with the older banks that are encumbered by legacy operations and physical locations. SoFi's model is more agile and disposed to innovation, and it also lends itself to healthy profitability, which is exactly what's been happening.
Second, SoFi offers additional products and services and is able to do things differently, thanks to its robust technology platform. Some examples include offering access to alternative investments through SoFi Invest, such as money market funds that offer exposure to private companies like SpaceX and other funds through a partnership with BlackRock. It has a membership program for direct deposit customers called SoFi Plus, which offers a number of perks, like 1% matching on recurring interest deposits and cash back through SoFi travel.
Management says that it knows its cross-selling strategy is working because not only are people signing up for more than one product; they're doing it faster. In 2024, 30% of new products were opened by existing members, and 40% of new users opened a second product within 30 days.
NASDAQ: SOFI
Key Data Points
Third, lower interest rates are having a positive impact on the lending segment, which was the market's big worry last year. After initially warning shareholders that lending revenue might decrease for the year, it reported a 22% increase in lending segment adjusted revenue.
The financial services segment is having an increasingly positive impact on the organization, and sales increased 84% over last year in Q4. Non-lending segments, which also include the tech platform, a business-to-business financial services platform, accounted for 49% of the total. As lending rebounds, the mix could stay around half and half.
And finally, SoFi has a solid capability to diversify its revenue base. Overall, SoFi's technology platform hasn't been an outstanding performer in terms of revenue generation, however, it serves a few purposes. It helps expand the total business and facilitates additional revenue streams. Such a business model helps the company avoid having all its eggs in one or even two baskets -- and that was important in 2024.
The technology platform also helps provide exposure to SoFi's partnering clients, which could potentially develop into larger and more important deals down the road. The takeaway is that it helps the company build up a large and diverse set of services that solidifies its place as a major player in U.S. finance.
SoFi disappoints on guidance
What seemed to turn the market sour was management's 2025 guidance, specifically for Q1 EPS. Management is guiding for $0.03, while Wall Street's expectation was $0.04.
The rest of its guidance is in line with or tops Wall Street's estimates. It's guiding for a 23% to 26% full-year increase in revenue over last year, or about $3.2 billion, and EPS of $0.25 to $0.27. Wall Street is expecting revenue of $3.16 billion and EPS of $0.25. Readers should note that SoFi tends to guide conservatively and typically beats guidance.
The long-term investment thesis holds
You'll notice that even though the market sent SoFi stock down after earnings, like it usually does, the decline wasn't as extreme as in the past; the results were just too good, and the underwhelming guidance, if you can call it that, was a weak reason to be disappointed.
That's even more obvious if you're looking at the long term. If you pause for a moment and imagine SoFi in three or five years, or even longer, what are you thinking? It's easy to get pulled into the urgency of the current moment, but that's not what leads to successful investing.
So getting back to the original question, no, I don't think investors should be worried about SoFi's guidance, and you can consider this an opportunity to buy on the dip.
