Shares of Australian buy-now-pay-later firm Zip plunged nearly 40% after the company flagged a broadly flat second-half earnings outlook, overshadowing strong first-half profit growth. Sydney-listed shares declined as much as 39% to A$1.725, their lowest since early May. The company reported cash earnings before tax, depreciation and amortisation (EBITDA) for the six months to Dec. 31 jumped 85.6% to A$124.3 million, driven by higher transaction volumes and operating leverage across its core U.S. and Australia-New Zealand markets.

Total transaction volume rose 34.1% to A$8.4 billion, while revenue increased 29.2% to A$664 million. However, investors focused on the company's expectation that second-half cash EBITDA would be "broadly in line" with the first half, implying limited sequential growth despite typically stronger seasonal spending. Zip upgraded its fiscal-year 2026 operating-margin outlook to above 18%, from a prior 16%-19% range, and lifted guidance for cash EBITDA as a share of transaction volume to above 1.4%.

The dramatic share price decline reflects investor disappointment with the company's inability to deliver sequential growth in the second half, despite strong first-half performance. The flat outlook suggests potential challenges in maintaining momentum in the competitive buy-now-pay-later sector, even as the company improves its margin profile.