SoFi: Buy the Dip — Ride the Rate Tailwind, Manage the Dilution

Hook / Thesis

SoFi is worth buying on a tactical dip. The company's last three quarters show consistent sequential gains in revenue, net income and diluted EPS driven largely by rising interest income and accelerating noninterest revenue. Those trends make the current mid-$20s price attractive for a swing trade: you buy exposure to a fintech that is showing profitable unit economics right now while protecting yourself with a defined stop in case funding or rate dynamics reverse.

This is not a ticker for a full-sized, buy-and-forget allocation. The bull case rests on the company keeping net interest income high, continuing cross-sell momentum, and avoiding large dilution or rising credit losses. If those things hold, upside to the low-to-mid 30s is a reasonable near-term target; if they do not, limit risk tightly.

What SoFi does and why the market should care

SoFi operates as a digital financial platform: lending (originally student loan refinancing), personal loans, mortgages, deposit accounts, credit cards, investing, and a payments/account services business via Galileo. It positions itself as a one-stop mobile-first financial platform, monetizing both interest-bearing assets and noninterest services like card interchange and account fees.

Why investors should care today: the company is showing operating leverage. In the most recent quarter (fiscal Q3 ended 09/30/2025), SoFi reported $156.8 million in revenue and $139.4 million in net income (diluted EPS $0.11). Those numbers point to an improving profit profile versus prior quarters — a meaningful signal for a growth-fintech that historically cycled through losses.

Evidence from the numbers (what we can point to)

• Revenue progression: Q1 FY2025 revenue was $140.4M, Q2 was $151.9M and Q3 was $156.8M - steady sequential growth across the year.
• Profitability: Net income moved from $71.1M (Q1) to $97.3M (Q2) to $139.4M (Q3). Diluted EPS increased in the same sequence from ~$0.06 to $0.08 to $0.11 — clear evidence of improving per-share economics.
• Margin drivers: Interest income (operating net) has been a big contributor — $498.7M in Q1, $517.8M in Q2, and $585.1M in Q3 — implying the loan book and/or rate environment are creating a tailwind to net interest income.
• Noninterest income also expanded: from $273.0M (Q1) to $337.1M (Q2) to $376.5M (Q3), showing cross-sell and fee businesses are ramping alongside interest income.
• Balance sheet scale: As of Q3 (ended 09/30/2025) assets stood at $45.29B with liabilities of $36.51B and equity of $8.78B. That scale matters: SoFi is operating at bank-like asset levels while keeping capital in place.
• Investment and R&D: R&D clocked ~$167.1M in Q3 — management is still investing in product and tech which supports long-term differentiation, even if it pressures near-term noninterest expense.

Valuation framing (with caveats)

The dataset does not provide an explicit market capitalization line item. Using the most recent diluted-average-share count and market price gives a rough sense of valuation but requires a big caveat: share count changes and recent financings materially affect market-cap math.

Concrete inputs available:

• Diluted average shares in Q3 FY2025: ~1.291 billion.
• Last trade price in the market snapshot: $26.63.

Multiplying those two yields a back-of-envelope market cap on the order of tens of billions of dollars. If you take reported recent net income run-rate (sum of the last three quarters: Q1-Q3 FY2025 = $307.8M, annualized ~$410M) the implied P/E is elevated (roughly in the 70-90x range using those simple assumptions). That makes SoFi an expensive growth/profitability story on a headline P/E metric.

Two important contextual points:

• Much of SoFi's current profitability is interest-driven. If rates compress, the P&L could read differently quickly.
• Management has raised financing repeatedly (net cash flow from financing was a large positive in recent quarters), which can dilute EPS and change valuation dynamics. The dataset shows meaningful financing inflows in Q1-Q3 FY2025 (for example Q3 net cash flow from financing was $3.797B), so watch issuance and dilution risk closely.

Trade idea - actionable plan

Thesis: Buy SoFi on a tactical dip while managing dilution and funding risks. This is a swing trade (time horizon 1-3 months to ~12 months depending on catalysts) — size the position modestly and use a strict stop.

Catalysts that could drive the trade

• Quarterly earnings (next release) that extend sequential trends: higher net interest income and continued noninterest revenue growth would validate the thesis.
• Evidence of margin improvement as scale lifts operating income, and a slowing pace of share issuance (or buybacks) which reduces dilution concerns.
• Product launches or partnerships that materially accelerate noninterest income (cards, payments flow-through from Galileo, or new deposit product adoption).
• Macro: a sustained higher-for-longer rate environment would support net interest income — a primary near-term earnings driver.

Risks and counterarguments

At least four meaningful risks could invalidate the trade. Read them and size the position accordingly:

• Rate risk: SoFi's recent profitability is heavily supported by net interest income (~$585M in Q3). If interest rates fall and loan yields compress, NII could decline materially, hurting EPS and the stock.
• Funding and dilution risk: The company has relied on financing inflows to manage growth and liquidity (Q3 net cash flow from financing was $3.797B). Continued capital raises can dilute shareholders and weigh on per-share metrics.
• Credit risk / macro slowdown: A deterioration in borrower credit quality or an economic slowdown would increase provisions and reduce profitability; although provisions were $0 in the last several quarters in the dataset, that can change quickly with macro stress.
• Expense/investment cadence: Noninterest expense is high and rising (noninterest expense in Q3 reached ~$803.9M). SoFi is investing aggressively in R&D (~$167M in Q3). If that spending does not translate into faster revenue growth, margins could compress.
• Valuation risk: Simple back-of-envelope P/E using annualized net income suggests a high multiple. If investors re-rate fintechs or exit the space, the multiple could compress quickly, even if fundamentals remain stable.

Counterargument to the buy case: The bull case leans on the sustained interest-rate tailwind and successful deployment of capital into high-return products. If the rate environment normalizes downward or management continues to issue equity or dilutive securities to fund growth, the apparent profitability could be ephemeral on a per-share basis. That is a real possibility and why a strict stop and modest sizing are part of the trade idea.

What would change my mind

• I would stop being constructive if the company posts a quarter with a sharp decline in interest income or a material uptick in provisions for loan losses.
• Sustained guidance of meaningful share issuance or convertible financing that increases fully-diluted share count materially would make me step back — dilution is a direct offset to EPS-driven upside.
• If the next quarter shows noninterest income rolling over (card and account fees slowing) while operating expense stays elevated, the combination would make this trade unattractive.

Conclusion

SoFi presents a tradeable dip. The company is profitable on a trailing recent-quarter basis, growth is sequential, and interest income is a clear tailwind. Those are tangible positives that justify a tactically-sized long with a disciplined stop. But valuation appears elevated on basic multiples and the company has used financing heavily — both reasons to be conservative on size and to insist on a stop.

If you buy, enter in two tranches around $25.00-$27.50, place a hard stop at $23.00, and take profits incrementally at $32 and $38, adjusting if upcoming earnings confirm the improving trend or if dilution/public financing activity accelerates. This is a conviction trade with risk control, not a full-blown buy-and-hold allocation.

Disclosure: This is a trade idea, not personal financial advice. Do your own due diligence and size positions to your risk tolerance.

Key dataset reference dates used in this note: fiscal Q3 ended 09/30/2025 (filed 11/06/2025), and market snapshot as of 01/02/2026.