Digital banking company Axos Financial (NYSE: AX) announced better-than-expected revenue in Q1 CY2026, with sales up 27% year on year to $392.2 million. Its non-GAAP profit of $1.90 per share was 10.8% below analysts’ consensus estimates.

Is now the time to buy AX? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Axos Financial’s first quarter saw management attribute strong top-line growth to loan origination momentum and the closing of the Verdant Commercial Capital acquisition. While revenue outpaced Wall Street expectations, the market responded negatively due to adjusted earnings per share missing consensus. CEO Gregory Garrabrants cited robust loan growth across commercial specialty real estate and auto lending, as well as incremental fee income from banking services. However, he acknowledged that deal-related costs and allowance adjustments linked to the Verdant transaction weighed on profitability. The company also noted rising noninterest expenses tied to new team hires and technology investments.

Looking ahead, Axos Financial’s guidance is shaped by expectations for continued loan growth in the low to mid-teens, incremental contributions from Verdant, and disciplined cost management. Management believes the integration of Verdant’s equipment leasing platform and ongoing adoption of artificial intelligence (AI) across operations will foster operating leverage and support earnings expansion. CFO Derrick Walsh cautioned that the company is closely monitoring funding costs and aims to offset any compression in loan yields by lowering cost of deposits. Garrabrants emphasized that, "We remain hyper-focused on increasing productivity and implementing operational improvements to help us become more profitable and scalable."

Key Insights from Management’s Remarks

Management highlighted that outperformance in lending and deposit growth, alongside the Verdant acquisition, drove revenue, but higher expenses and deal-related adjustments impacted margins.

• Verdant Acquisition Impact: The closing of the Verdant Commercial Capital acquisition added $1 billion in loans and leases, expanding Axos’ reach in vendor-based equipment finance and creating new cross-sell opportunities with strategic dealers and manufacturers.
• Loan Growth Momentum: Axos generated $1.6 billion in net loan growth, supported by strong originations in commercial specialty real estate, auto lending, and single-family warehouse, partially offset by declining prepayment rates in multifamily lending.
• Deposit Base Expansion: Year-over-year deposit growth of nearly 7% was driven by increases in demand, money market, and savings accounts. Management pointed to the growing contribution of treasury management and Axos Securities deposits, which help reduce funding costs.
• Artificial Intelligence Deployment: The company expanded AI use cases across risk, compliance, operations, and software development, with management expecting further efficiency and speed gains as AI adoption deepens.
• Noninterest Income Lift: Higher banking service fees, mortgage banking income, and prepayment penalty fees contributed to a 13% year-over-year increase in noninterest income, with expectations for further lift as Verdant’s equipment leases are integrated.

Drivers of Future Performance

Axos Financial’s outlook centers on sustained loan growth, operational efficiencies from AI, and integration of the Verdant platform, offset by ongoing funding and expense pressures.

• Verdant Integration Benefits: Management expects Verdant to generate $150–$200 million of incremental loans and leases per quarter, with accretive returns and opportunities to expand into new verticals and cross-sell deposits to equipment dealers and manufacturers.
• Cost Discipline and AI Leverage: The company aims to keep personnel and professional services expense growth below 30% of incremental revenue, with AI-driven automation targeted to enhance productivity and contain noninterest expenses, even as the platform broadens.
• Funding Cost Management: While new loan yields have softened slightly due to recent Federal Reserve actions, management plans to offset yield compression by growing lower-cost deposits and opportunistically refinancing higher-cost debt, particularly as legacy term securitizations mature.

Catalysts in Upcoming Quarters

In the coming quarters, our team will monitor (1) the pace of loan and lease origination growth, especially from Verdant’s integration; (2) Axos’ effectiveness in expanding its lower-cost deposit base to mitigate funding pressures; and (3) measurable improvements in operating efficiency from broader AI deployment. Progress in technology modernization and successful rollouts in the securities business will also be important indicators of execution.

Axos Financial currently trades at $94.97, down from $96.51 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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