Pagaya Q3 2026 Net Income Jumps 121% as Network Volume Grows

Pagaya Technologies Ltd. reported a 121% increase in third-quarter net income as network volume expanded 29%, while adjusted EBITDA rose 22%. The gains came despite a lower fee revenue less production costs ratio and larger fair-value adjustments on the company’s investments in loans and securities.

For the three months ended September 30, 2026, net income attributable to Pagaya was $49.7 million, up from $22.5 million a year earlier. Total revenue and other income increased 12% to $390 million, while revenue from fees rose 7% to $362 million.

Network volume reached $3.61 billion, compared with $2.80 billion in the third quarter of 2025. Pagaya said it evaluated $377 billion of applications during the quarter, excluding credit card product applications and issued loans, with about 1% converting into issued loans.

Adjusted EBITDA rises as core costs decline

Fee revenue less production costs, or FRLPC, increased 5% to $146.5 million. Production costs rose 8% to $216 million, limiting FRLPC growth relative to the expansion in network volume.

FRLPC represented 4.1% of network volume, down from 5.0% a year earlier and 4.2% in the second quarter. Pagaya is targeting an FRLPC ratio of 4% to 5%. The measure is non-GAAP and is intended to show fee revenue after production costs.

AI integration revenue was $334 million, up from $309 million a year earlier, while contract revenue increased to $50 million from $35 million. The capital-markets component was a loss of $22 million, compared with a $5 million loss in the prior-year quarter.

Core operating expenses declined 3% to $45.5 million and represented 31% of FRLPC, compared with 34% a year earlier. Core operating expenses exclude share-based compensation, depreciation and amortization, restructuring costs and certain non-recurring expenses.

Adjusted EBITDA increased to $130.3 million from $107.0 million. Adjusted net income rose to $102.5 million from $92.8 million. Both are non-GAAP measures and should be considered alongside the company’s GAAP results.

Funding network expands

Pagaya reported $11.7 billion of asset-backed securities issuance across its products for the 12 months through the third quarter. The number of investors participating in its financing vehicles increased to 183 from 154 a year earlier, spanning asset managers, banks and depositories, hedge funds, insurers and other investors.

The company’s investments in loans and securities ended the quarter at $1.10 billion, or $1.06 billion after non-controlling interests. Pagaya added $287 million of investments during the quarter and received $165 million in cash. Accrued interest contributed $16 million, while fair-value changes and other adjustments reduced the balance by $77 million.

Fair-value adjustments remain a key risk

The total credit-related income-statement impact was negative $43 million in the third quarter, compared with negative $20 million a year earlier. Including other comprehensive income and non-controlling interests, total fair-value changes and other adjustments were negative $69 million, versus negative $32 million in the prior-year period.

Pagaya measures its loan and securities investments at fair value using a discounted cash-flow model. At September 30, the weighted-average discount rate was 15.6%, up from 14.6% at June 30, while the weighted-average loss rate was unchanged at 16.2%. The weighted-average prepayment rate increased to 14.5% from 13.2%.

Management’s sensitivity analysis estimated that a 10% to 20% reduction in expected cash flows could imply credit-related impairments of about $100 million to $150 million. A more severe scenario involving a decline of 20% to more than 30% could produce impairments of roughly $150 million to more than $200 million. Pagaya said its GAAP net income guidance assumes the fair-value adjustments represented by the first scenario over the life of the portfolio.

The company cautioned that these scenarios and other forward-looking statements depend on assumptions and that actual results could differ materially. It also said some non-GAAP outlook measures cannot be reconciled to comparable GAAP measures without unreasonable effort because certain inputs are outside its control or cannot be reasonably predicted.