Qfin Holdings reported a sharp drop in quarterly profit on Tuesday, reflecting broader pressures in China’s consumer lending sector despite continued investment in artificial intelligence-driven underwriting.
The NASDAQ-listed company posted non-GAAP net income of RMB 455 million for the second quarter, down 75.4% from a year earlier, as total revenue declined 31.6% to RMB 3.567 billion. Credit-driven services, which accounted for RMB 2.6 billion of revenue, fell 27.2% year-over-year, while platform services revenue dropped 41.3% to RMB 969.8 million. Shares fell 11% in after-hours trading to $10.26.
Loan facilitation volume totaled RMB 63.4 billion, a 25% decline from the prior-year period and roughly flat sequentially. The company’s outstanding loan balance decreased to RMB 107.6 billion from RMB 140.1 billion a year ago, with delinquency metrics showing a 5.6% D1 rate and a 90% 30-day collection rate. External funding costs rose approximately 25 basis points in July and August, compounding pressure on margins.
Qfin’s user base continued to expand, with 65.6 million cumulative users holding approved credit lines as of June 30, up 9% year-over-year. Borrowers totaled 39.9 million, an 8.5% increase. The company attributed 89.4% of loan volume to repeat borrowers, with an average drawdown of RMB 12,600 and an average tenor of 11.6 months. Geographically, 81% of users came from tier 3 and tier 4 cities, while 64% were under 40 years old.
Regulatory changes contributed to a one-time tax expense of approximately RMB 500 million in the quarter, weighing on profitability. The company also faces a decline in short-term household consumer loans in China, which exceeded RMB 660 billion through June.
Despite the downturn, Qfin highlighted its AI infrastructure, which processed over 300 million users through its Argus credit assessment engine. The system leverages more than 2,700 machine learning and deep learning models, analyzing over 720,000 data dimensions. The company completed over 350 model iterations in the quarter and automated more than 99% of loan applications.
Looking ahead, Qfin guided for non-GAAP net income of RMB 400 million to RMB 500 million in the third quarter, implying a 67% to 73% year-over-year decline. CFO Alex Xu emphasized preserving operational stability amid industry headwinds, stating the company’s priority is to safeguard long-term viability.
Qfin has also prioritized shareholder returns, repurchasing $1.2 billion in ADS since 2023 and reducing its share count by 28.5%. A $677 million repurchase program remains active, with $234 million completed to date. The company paid a dividend of $0.46 per ADS in the first half of 2026, maintaining a 30% payout ratio.
