Date: 2026-02-22 Quarter: Q4 FY25 (ended Dec 31, 2025) Task: Earnings Review Atlas baseline: FAIL (growth gate + margin gate). Conviction 2. Speculative value only.
Not for me. Not even close.
Look, I want to be fair to Pagaya. They had a real milestone year — four consecutive quarters of GAAP profitability, $81 million in net income, EBITDA up 76%. Those are genuinely impressive numbers for a company that was losing hundreds of millions just a year ago. And at 0.8x TTM revenue, this is undeniably cheap.
But cheap is not the same as cheap-and-growing. And that is the whole game for me.
Revenue growth went: 31% → 34% → 31% → 32% in FY24, then 18% → 30% → 36% → 20% in FY25, and management just guided FY26 at approximately 15%. That is a deceleration curve. Revenue actually declined sequentially in Q4 — down 4.3% from Q3. They missed their own network volume guidance ($2.7B vs $2.75-2.95B guide). And when I look at what they said on the call — "We are becoming a better Pagaya, not just a bigger one" — that is a CEO telling you the growth story is over. They are now optimizing rather than expanding.
I have no interest in optimizing businesses. I want growing businesses.
Action: No position. Pass.
| Q123 | Q223 | Q323 | Q423 | Q124 | Q224 | Q324 | Q424 | Q125 | Q225 | Q325 | Q425 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue ($m) | 186.6 | 195.6 | 211.8 | 218.0 | 245.0 | 250.0 | 257.0 | 279.4 | 290.0 | 326.0 | 350.0 | 335.0 |
| YoY % | — | — | — | — | 31.3% | 27.8% | 21.3% | 28.2% | 18.4% | 30.4% | 36.2% | 20.1% |
| QoQ % | — | 4.8% | 8.3% | 2.9% | 12.4% | 2.0% | 2.8% | 8.7% | 3.8% | 12.4% | 7.4% | -4.3% |
| Net Income ($m) | — | — | — | — | — | — | — | -237.9 | 8.0 | 17.0 | 23.0 | 34.0 |
| Adj EBITDA ($m) | — | — | — | — | — | — | — | — | 80 | 86 | 107 | 98 |
| Network Vol ($B) | — | — | — | — | — | — | — | — | — | — | ~2.8 | 2.7 |
Q4 2025 specific:
Full Year 2025:
I am genuinely impressed by a few things here. First, the GAAP profitability inflection is real. $8M → $17M → $23M → $34M over the four quarters of 2025. That is a clean, consistent ramp. Net income nearly quadrupled quarter-over-quarter from Q1 to Q4. The EBITDA story is even better — from roughly breakeven in 2023 to $371M in FY25, a 76% YoY jump.
Second, the ABS funding machine is working. They raised $8.5 billion in securitizations across three AAA-rated shelves in 2025. Their most recent deal was oversubscribed by 30% above initial sizing. That tells me the institutional market trusts their underwriting. When the money people — not retail investors, not analysts, but the institutional buyers who actually live in credit risk — are oversubscribing your deals, that is a meaningful signal.
Third, the business model is genuinely sticky. They are embedded in partner workflows. When a bank or auto lender uses Pagaya's AI to approve loans they otherwise would have declined, that is a workflow integration. You don't rip those out easily. Three new partners onboarded in 2025, with long-term fee and volume commitments.
But here is the thing. All of that is about the business being good. It does not make it a great growth investment, which is what I need. The revenue growth peaked at 36% in Q3 2025 and dropped to 20% in Q4. Management's own guidance for 2026 is 15% at the midpoint. That is what decelerating growth looks like.
Management says they deliberately pulled back from higher-risk credit tiers in late Q4, cutting $100-150M in annualized volume. CEO Gal Krubiner called it responding to "persistent consumer uncertainty and trends" rather than observed credit deterioration.
I have heard this kind of language before. When management says they are choosing to grow slower because they are being disciplined and protecting quality — sometimes that is true, and sometimes it is a polite way of saying demand for their higher-risk product dried up.
I cannot know for certain which this is. But I notice that their guidance for 2026 includes a $100-150M credit impairment buffer. That is a meaningful admission. You do not budget for impairments unless you think impairments are coming. So either: (a) Management saw credit deterioration coming and proactively pulled back — in which case I give them credit for discipline but the growth story is still impaired, or (b) They pulled back because demand from riskier borrowers was softening and they are framing a market problem as a management choice.
Either way, the outcome for the revenue line is the same: deceleration.
Let me be direct about this.
Pagaya is a fintech lending platform in the consumer credit business. That is a cyclical business. Consumer credit expands in good times and contracts in bad times. Unlike software subscriptions that renew regardless of the economic environment, lending volumes are directly tied to credit cycles, interest rates, and consumer confidence. When credit conditions tighten, originations fall, delinquencies rise, and ABS funding gets more expensive or less available.
I have spent years investing in software companies with recurring revenue precisely because the revenue is durable — it does not disappear when the economy sneezes. Pagaya does not have that. Their $10.5B in network volume is real, but it is not recurring revenue in the way I mean. It is transaction flow that can slow significantly in a downturn.
The AI angle is real and interesting — they genuinely use machine learning to approve more loans at appropriate risk levels than traditional models would. But the underlying risk is still credit risk. Fancy underwriting does not eliminate the credit cycle. It just means you might navigate it better than your competitors.
And the complexity of the ABS/securitization structure means I genuinely cannot get comfortable with where the credit risk sits. $8.5 billion in securitizations — what retained interests does Pagaya hold? What happens to the warehouse lines if funding markets seize? I follow the money, and I cannot follow this money clearly enough.
| Metric | Value |
|---|---|
| Market Cap | ~$1.0-1.5B |
| P/S (TTM) | ~0.8-1.2x |
| P/E (FY25 GAAP) | ~12-18x |
| Fwd P/E (2026E mid) | ~8-12x |
| EV/Adj EBITDA (TTM) | ~2.7-4x |
These are strikingly cheap multiples. Upstart (UPST), the closest public comparable, trades at ~6x revenue and ~30x forward P/E. PGY is at a fraction of that.
The stock is down ~47% since the earnings print. The market heard "15% growth guidance" and repriced immediately and aggressively. Is the market wrong? Maybe. At 8x forward earnings for a profitable AI lending platform, you could absolutely make a value investor's case for this.
But I am not a value investor. I do not buy companies because they are cheap. I buy companies because they are growing fast AND I believe they will continue to grow fast. PGY fails that test right now. If growth reaccelerates — if the new partners ramp significantly in H2 2026, if credit conditions improve, if they start printing 25-30% revenue growth again — then this becomes a different conversation. But I am not going to buy something guiding 15% revenue growth hoping it gets better.
CEO Gal Krubiner's language is the tell here. "Becoming a better Pagaya, not just a bigger one." That is not what I want to hear from a company I am investing in. I want to hear about acceleration, about demand that exceeds what they can serve, about blowing past guidance. Instead I am hearing about credit discipline, impairment buffers, and "persistent consumer uncertainty."
The one thing I genuinely respect is the ABS funding story. When you can raise $8.5 billion in securitizations with the latest deal 30% oversubscribed, that tells me the institutional money trusts you. That is a real moat. But a strong funding operation in service of decelerating growth is not the setup I need.
Prior Beliefs: No prior position. No prior analysis. Aware this is a beaten-down AI fintech stock.
Updated Beliefs:
Thesis: No position — never held. This is an initial evaluation. Status: Pass — does not meet Saul growth criteria (revenue decelerating to 15%, cyclical business model, opaque ABS structure).
Best, Saul