X Financial Earnings Call: Growth Meets Rising Risk

X Financial ((XYF)) has held its Q4 earnings call. Read on for the main highlights of the call.

X Financial’s latest earnings call painted a tale of two halves, with strong full-year growth offset by a sharp Q4 slowdown. Management highlighted robust 2025 revenue and origination gains, stable non-GAAP profitability and a solid cash position, but also flagged rising delinquencies, weaker margins and mounting regulatory risks that have pushed the company into a more defensive stance.

Full-Year Revenue Rebound

X Financial delivered a strong top-line performance for fiscal 2025, with total net revenue rising 30.1% year over year to RMB 7.64 billion. This growth came despite a softer fourth quarter, underscoring how earlier-period momentum carried the full-year results.

Loan Origination Scale Built Early in the Year

For 2025 the platform facilitated and originated RMB 130.6 billion in loans, up 24.5% from RMB 104.9 billion a year earlier. The increase reflects substantial scale achieved earlier in the year before management deliberately slowed activity amid a tougher backdrop.

Balance Sheet Strength and Ample Liquidity

As of December 31, 2025, total assets stood at RMB 14.67 billion against liabilities of RMB 6.83 billion, leaving shareholders’ equity at RMB 7.84 billion. Cash and cash equivalents plus restricted cash totaled roughly RMB 2.13 billion, giving the company meaningful flexibility to navigate volatility.

Share Repurchase Signals Management Conviction

Under its USD 100 million buyback plan, X Financial repurchased about 3.79 million ADS for USD 53.85 million, with roughly USD 46.15 million capacity remaining. The program underscores management’s confidence in long-term value and its willingness to return capital to shareholders despite near-term turbulence.

Non-GAAP Profitability Holds Up

Full-year non-GAAP adjusted net income in 2025 edged up to RMB 1.56 billion from RMB 1.54 billion in 2024, indicating resilient underlying earnings. Adjusted net income per ADS (basic) climbed to RMB 38.34 from RMB 31.98, an almost 20% increase that highlights improved per-ADS economics.

Improved Per-ADS Earnings on a GAAP Basis

GAAP net income per ADS (basic) also advanced, rising to RMB 36 from RMB 31.98 in the prior year, a gain of roughly 12.6%. That improvement came even as the company turned cautious in the second half, suggesting buybacks and operational leverage supported per-share results.

Cost Discipline and Channel Optimization

Management stressed disciplined spending as it tightened underwriting and shifted more activity onto its internal platform. Marketing expenses in Q4 were held to RMB 212.2 million, while greater automation allowed efficiency gains without adding headcount, aiming to protect margins and asset quality.

Sharp Q4 Drop in Originations and Borrowers

The trade-off was a pronounced slowdown in business volumes during Q4 2025, when loan facilitation fell to RMB 22.77 billion, down 29.5% year over year and 32.3% sequentially. Active borrowers dropped to about 1.69 million and quarterly loans to 2.47 million, reflecting deliberate moderation and weaker demand.

Revenue and Profit Squeezed in the Quarter

Q4 total net revenue slid to RMB 1.47 billion, a decline of 14.1% from a year earlier and 25.1% from Q3, as volume and pricing pressure weighed on the top line. Income from operations plunged to RMB 20.2 million, collapsing the operating margin to just 1.4% from 18.5% in Q3 and 30.7% a year ago.

Delinquencies and Credit Costs Surge

Credit trends deteriorated meaningfully, with 31–60 day delinquencies rising to 2.9% from 1.85% in Q3 and 1.17% a year prior. Longer-term 91–180 day delinquencies climbed to 6.31%, driving credit-related provisions to RMB 669.3 million and weighing heavily on profitability.

Quarterly Net Income Takes a Hit

Net income for Q4 fell to RMB 57.2 million compared with RMB 421.2 million in Q3 and RMB 385.6 million a year earlier. The net profit margin shrank to 3.9% and return on equity dropped to 2.9%, underscoring how quickly higher credit costs and lower volumes eroded earnings.

Full-Year Margins Slip Despite Growth

Across 2025 the company’s operating margin narrowed to 21.3% from 31.9% in 2024 and GAAP net income eased to RMB 1.46 billion from RMB 1.54 billion. The combination of higher provisions and a cautious second half limited bottom-line progress even as revenue expanded.

Regulatory Overhang Raises Material Risks

Management highlighted growing regulatory uncertainty, including Notice 9 and related measures that in practice cap total borrowing costs around 24% annually. New white-listing rules and payment-institution ratings could pressure pricing, constrain funding and materially affect profitability, with management warning that future losses are possible.

Funding Visibility and Execution Risks

Implementation details remain murky as bank white-list requirements and uneven local enforcement complicate funding relationships. This limited visibility on future funding availability and cost adds downside risk to near-term volumes and margins, reinforcing the company’s conservative posture.

Forward-Looking Guidance Turns Defensive

Looking ahead, X Financial is prioritizing asset quality, liquidity and operational discipline over growth as regulations evolve. Management signaled that originations, marketing and discretionary spending will remain tightly controlled, and it openly acknowledged limited visibility and the possibility of materially adverse effects on results, including potential operating losses.

X Financial’s earnings call showcased a company with solid full-year growth and a fortified balance sheet but facing a challenging inflection point. Investors will be watching whether its defensive stance, cost controls and strong liquidity can offset regulatory headwinds, rising delinquencies and weaker Q4 profitability in the quarters to come.