Qifu Technology (NASDAQ: QFIN) reported a significant decline in second-quarter 2026 financial results, with non-GAAP net profit falling sharply year-over-year. The fintech company posted non-GAAP net profit of $455 million for the quarter. This represents a 75.1% decrease compared to the $1.85 billion recorded in the same period last year. The substantial drop in profitability coincides with a notable contraction in top-line revenue and an industry-wide liquidity crisis.

Revenue Contraction

Total net revenue for the quarter stood at $3.57 billion. This figure marks a 31.6% decline from the $5.22 billion reported during the corresponding period in the previous fiscal year. The reduction in sales volume correlates with decreased risk-bearing loans and lower loan pricing.

What the Numbers Show

The divergence between the revenue decline and the earnings drop highlights significant pressure on profitability. While sales contracted by nearly 32%, adjusted earnings per share fell by over 75%. This indicates that cost structures or operational efficiencies did not scale down proportionately with the reduced revenue base, leading to a disproportionate impact on bottom-line metrics. Additionally, a one-off tax-related expense of approximately RMB 500 million contributed to the effective tax rate rising to 60.3%, significantly higher than normal levels.

Operational Headwinds

Management highlighted that an unexpected industry event in late June triggered a crisis of confidence in the loan facilitation sector, causing liquidity to tighten sharply across the market. Consequently, total loan facilitation and origination volume on the platform reached approximately RMB 63.4 billion, down 2.5% sequentially. Customer acquisition expenses decreased by approximately 13% sequentially as the company moderated spending pace.

Looking forward, QFIN expects non-GAAP net income for Q3 2026 to decline by 67% to 73% year-over-year, reflecting cautious business planning amid regulatory and market challenges.

Qifu Technology reported a decline in loan facilitation volume and profitability for the first quarter of 2026, prioritizing risk optimization and operational efficiency over scale growth. The company's total loan facilitation and origination volume decreased by approximately 7.5% sequentially to RMB65 billion, while non-GAAP net income fell by 11.6% to approximately RMB950 million. Management attributed the performance to proactive measures taken to strengthen the business's health and resilience amid a challenging consumer credit market in China.

Financial Performance

Total net revenue for Q1 stood at 3.91 billion, down from 4.09 billion in the previous quarter and 4.69 billion a year ago. The decline was driven by lower loan volumes and reduced average pricing. Revenue from the Credit-driven Service Capital Heavy segment was $2.96 billion, compared to $3.43 billion in Q4. Meanwhile, revenue from the Platform Service Capital Light segment rose sequentially to $951.9 million from $660 million in the prior quarter.

Non-GAAP net income per fully diluted American Depositary Share (ADS) decreased by 6.4% sequentially to RMB 7.70. The company generated approximately $2.1 billion in cash from operations during the quarter.

Risk and Operational Metrics

Qifu Technology achieved significant improvements in risk indicators during the quarter. The C2M2 ratio, which measures the outstanding delinquency rate after 30 days of collection, decreased by roughly 17% sequentially to 0.8%. The 30-day collection rate improved to 85.8%, up 1.8 percentage points from the previous quarter.

Operational efficiency also improved, with overall customer acquisition costs falling by approximately 17% sequentially. The company focused its marketing spend on high-quality users, increasing investment in this segment by 40% compared to the prior quarter.

Strategic Initiatives and Outlook

The company continued to expand its technology solutions business, with loan volumes empowered by tech solutions reaching RMB 9.96 billion, representing seven-fold year-over-year growth. Qifu Technology also launched operations in a new emerging market as part of its overseas expansion strategy.

Looking ahead to the second quarter of 2026, the company expects non-GAAP net income to be between RMB900 million and RMB980 million, reflecting a year-on-year decline of 47% to 51%. Management cited ongoing regulatory and market uncertainties as reasons for the cautious guidance.