Sezzle Q3 2026: Record Revenue and Raised Guidance, but Valuation Risks Persist

What happened

Sezzle reported third quarter 2026 results with total transaction volume growing 34.9% year-over-year to $1.4 billion, while revenue grew 42.6% to a record $166.5 million. Active subscribers surged 68.1% to 955,000, and net income rose 79.3% to $47.8 million, with adjusted net income up 89.9% to $47.7 million, leading management to raise fiscal 2026 revenue growth guidance to approximately 42.5% and adjusted net income to $190 million. The company also introduced preliminary fiscal 2027 adjusted EPS guidance of $7.20, implying 30.9%–32.1% growth over 2026, signaling continued momentum. However, the master report had flagged concerns about rising credit losses, heavy reliance on late and subscription fees, and an aggressive buyback program, none of which were directly addressed in the release. The strong operational metrics support the bull case of sustained growth and profitability, but they do not alleviate the overhangs of regulatory risk and potential multiple compression if growth normalizes.

Implication

Investors should recognize that Sezzle continues to deliver impressive growth and profitability, with revenue growth outpacing TTV growth and net income nearly doubling year-over-year. However, the stock's valuation remains stretched relative to the risks, and the new guidance may have been partially anticipated by the market. The preliminary fiscal 2027 EPS guidance of $7.20 implies a forward price-to-earnings multiple that may still embed aggressive growth assumptions. The master report's concerns about fee dependence, credit losses, and buyback execution remain unresolved, and the lack of detail on these items in the earnings release is a cautionary sign. While the results support the bull scenario, the risk/reward at an elevated share price remains unattractive, and investors should trim or avoid new positions until these risks are better quantified.

Thesis delta

The new results strengthen the evidence for the bull case of high growth and profitability, but they do not change the master report's core caution. The raised guidance suggests management sees continued momentum, yet the risks around credit losses, regulatory action, and aggressive capital allocation are unchanged and might be amplified by the higher valuation. Overall, the thesis remains that Sezzle is a high-quality operator trading at a price that offers limited margin of safety, and the positive quarter does not warrant a more bullish stance.