SoFi Holds Earnings Guidance to Fund Growth Amid Rate Uncertainty
SoFi is holding its earnings guidance steady despite raising its full-year revenue outlook, arguing that near-term investment and a less favorable interest-rate path should not be sacrificed for a stronger quarterly earnings figure. Chief executive Anthony Noto says higher rates would limit the upside included in guidance rather than disrupt the company’s model, while AI is already increasing engineering capacity, automating service and fraud work, and supporting its broader financial-services offering.
SoFi is holding earnings guidance to fund growth and absorb rate risk
SoFi raised its full-year revenue outlook after reporting $1.2 billion in second-quarter revenue, while leaving earnings guidance unchanged. Shares fell roughly 8% intraday, with Bloomberg’s on-screen headline attributing the move to expenses that were higher than expected. ? anthony-noto said the unchanged earnings outlook reflects a capital-allocation choice: keep investing to sustain revenue growth and retain room for a less favorable interest-rate path.
Noto said SoFi now anticipates two rate increases, rather than the two rate decreases it expected at the beginning of the year. That revised assumption creates uncertainty, he said, even as the company expects stronger revenue in the back half of the year. SoFi is therefore not building potential rate-driven upside into near-term earnings guidance.
It's just we're not going to take earnings up in the near term to try to drive market favorability that will be short-term beneficial but not long-term prudent.
Noto described the quarter as SoFi’s 19th consecutive period above its “rule of 40” measure; this one, he said, reached a “rule of 70.” He cited 40% revenue growth to $1.2 billion, more than $1 billion in cash revenue, a 30% EBITDA margin, and what he called a strong net-income margin.
The operating case, in Noto’s account, rests on credit performance, adoption of newer products, and the expanding use of multiple SoFi products by the same member. Its one-stop-shop model is driving products per member, he said. For the third quarter, SoFi expects continued member and product growth alongside profitability.
The company’s guidance already assumes a 30% incremental net-income margin, which Noto described as its long-term profile. The point of holding guidance is not that SoFi has abandoned that destination, but that it does not want to curtail investment or assume a more accommodating rate environment to make the near-term earnings outlook look stronger.
Higher rates would narrow upside, not break the model
Ed Ludlow asked how a shift from expected rate cuts to potential hikes changes SoFi’s view of the consumer and the economy. Noto framed higher rates as consistent with a strong economy and an effort to maintain stable inflation. If rates rise by one to two percentage points, he said, SoFi should still perform well on revenue and ultimately on the bottom line.
What changes is the amount of upside management is willing to include in guidance. Noto said a stable economy with unemployment below 5% and inflation around 2% to 3% would be a good backdrop for SoFi. Declining rates would be better still, he said, but higher rates do not materially alter the company’s model.
Customer behavior is central to that confidence. Noto said SoFi’s debit spending is annualizing at about $38 billion; credit trends remain strong; the investing business is receiving inflows; and customers are taking out more products.
The most notable customer behavior, Noto said, is demand to reduce the cost of debt. SoFi recorded record originations in unsecured personal loans, student-loan refinancing, home-equity lines of credit, and home-equity loans. He characterized home-equity borrowing as secured lending with a lower interest rate. SoFi had also recently launched small and medium-sized business lending and was seeing demand for those loans, he said.
From SoFi’s view, Noto said, inflation is not causing its customers to hold back. The company is not seeing an increase in unemployment among customers or a deviation in credit performance.
AI is meant to expand capacity while preserving margins
? anthony-noto described AI as an operating tool with immediate effects in engineering, service, and fraud operations. The clearest impact so far, he said, is code production. SoFi organizes engineering work into squads that historically consisted of seven people; with AI capabilities, a four-person squad can produce the same amount of code. AI also helps with testing.
| Engineering model | People in a squad | Output |
|---|---|---|
| Historical squad | 7 | Baseline code production |
| AI-enabled squad | 4 | Same code production, according to Noto |
On the cost side, SoFi is using AI to automate fraud investigations, dispute resolutions, and aspects of customer service. These applications make AI both a capacity tool and a cost tool: it can support product development and service operations without requiring the prior staffing model.
Noto drew a boundary around underwriting. SoFi is not using AI principally to predict whether borrowers can repay, he said, because the company underwrites against actual cash flow—income and expenses. AI can help identify and verify outliers, including potential fraudulent activity. He identified first-party fraud, where a person has no intention of repaying an obligation, as one use case.
SoFi has also launched SoFi Coach, an AI-driven chatbot intended to answer questions about a customer’s financial life, including whether to refinance a mortgage, where to invest, how to lower costs and expenses, or whether to invest more. Noto said the tool can draw on data from checking and savings accounts, loans, mortgages, investments, credit cards, and insurance.
That breadth of relationship data is the differentiator, Noto argued. SoFi’s case is not only that AI can reduce the cost of code production and service work, but that its one-stop-shop model provides the data needed to make financial AI tools more useful to customers.