Zip Co (ASX: ZIP) has delivered a record FY26 result, with strong growth in the United States driving higher transaction volumes, profitability and operating margins as the buy now, pay later company builds on its turnaround. The result caps a multi-year rebuild in which Zip exited non-core markets, including the UK and Canada, and refocused on the US and Australia after a period of heavy losses during the earlier BNPL boom.

Group cash EBITDA rose 57.9% to $268.9 million, while statutory net profit increased to $116.4 million from $79.9 million a year earlier. Total transaction volume climbed 27.2% to $16.7 billion, and total income advanced 24.6% to $1.35 billion.

The result also demonstrated growing operating leverage, with the group operating margin expanding 420 basis points to a record 20%.

The US remained the main growth engine and the industry's most competitive market, where Zip competes with larger rivals including Affirm, Klarna, PayPal and Block's Afterpay. US transaction volumes increased 42.5% in US dollar terms, while the US operating margin reached 25%. Net bad debts in the US were 1.73% of transaction volume, remaining within Zip's targeted range.

The combination of rapid volume growth and controlled credit losses sits at the centre of the investment case for the stock. Zip will need to continue growing its US book without allowing bad debts to rise sharply enough to erase the gains from scale.

The Australian and New Zealand business also improved, with cash EBITDA nearly doubling to $69.5 million. The home market now operates under a changed regulatory backdrop: since June 2025, BNPL products in Australia have been regulated under the National Credit Code, bringing the sector under responsible lending obligations that previously did not apply to it.

Management is targeting further growth in FY27, guiding to $340 million in cash EBITDA, which would represent a 26% increase on FY26.

The outlook increasingly depends on whether Zip can maintain the pace of US growth while preserving its credit performance and expanding margins. The risks remain clear: faster lending growth can increase exposure to credit losses, while greater competition in the US could pressure revenue yields and increase customer acquisition costs.

The FY26 result nonetheless strengthens the case that Zip's business has moved beyond recovering from its earlier challenges. The company is now focused on sustaining that momentum as it targets another sizeable increase in earnings, with credit performance in both the US and the newly regulated Australian market key to that effort.