Digital banking company Axos Financial (NYSE: AX) beat Wall Street’s revenue expectations in Q3 CY2025, but sales were flat year on year at $323.4 million. Its non-GAAP profit of $2.07 per share was 10.3% above 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 third quarter saw results that exceeded Wall Street’s expectations for both revenue and non-GAAP earnings per share, but the market responded negatively, with shares declining after the report. Management highlighted stable net interest margins, strong loan growth—particularly in fund finance and equipment leasing—and improvements in credit quality as primary drivers of the quarter. CEO Gregory Garrabrants noted, “We delivered solid results this quarter, generating over $700 million of net loan growth,” and emphasized disciplined expense management and the company’s ability to navigate a volatile rate and competitive environment. The team also cited progress in reducing nonaccrual loans and maintaining robust credit reserves.

Looking ahead, Axos Financial’s management is focused on sustaining high-single-digit to low-teens loan growth while maintaining operating efficiency despite potential headwinds from interest rates and tariffs. The company is investing in artificial intelligence and proprietary technology platforms to further improve cost structure and offer new services. Garrabrants emphasized, “We’re targeting next year that personnel expenses will go up no more than 30% of the combination of net interest and noninterest income,” and pointed to ongoing technology modernization as key to driving operating leverage. Management also acknowledged potential volatility in loan growth due to uncertainty in economic and regulatory conditions.

Key Insights from Management’s Remarks

Management attributed quarterly performance to net loan growth in select areas, progress in deposit mix, expense discipline, and enhanced technology initiatives.

• Loan growth in select segments: Axos achieved its strongest loan growth in fund finance, equipment leasing, and lender finance, driven by improved origination pipelines and reduced headwinds in single-family and multifamily mortgages. Management noted that prior challenges in these mortgage categories have largely subsided, supporting more balanced future loan growth.
• Deposit mix optimization: The company made progress in growing lower-cost deposits, particularly through its Axos ONE bundled account and commercial cash management products. Management cited success in cross-selling deposit products within lending businesses, which contributed to a reduction in reliance on higher-cost funding sources.
• Expense management and operating leverage: Operating expenses increased only modestly, with effective controls in place. CFO Derrick Walsh highlighted reductions in both professional service and general administrative expenses, crediting technology and process improvements for the efficiency gains.
• Credit quality improvements: Nonaccrual loans and nonperforming assets both declined meaningfully during the quarter. Management explained that many previously substandard loans were paid off or sold at par value, and the overall portfolio continues to show low charge-offs and stable performance.
• Technology and AI initiatives: Axos advanced several strategic projects, including the rollout of its proprietary professional workstation for clearing clients and broader adoption of artificial intelligence in software development and operations. Garrabrants stated these initiatives are expected to drive further efficiency and reduce reliance on third-party platforms.

Drivers of Future Performance

Management expects future performance to hinge on sustained loan growth, technology-led efficiencies, and prudent expense management amid economic uncertainty.

• Pipeline-driven loan growth: Management is targeting high-single-digit to low-teens annual loan growth, supported by healthy pipelines in auto, commercial, and multifamily lending. However, they flagged the potential for quarter-to-quarter volatility due to uncertain prepayment rates and external factors like tariffs and interest rates.
• Technology-driven efficiency gains: Ongoing investment in artificial intelligence, proprietary workstations, and modernization of digital banking platforms are expected to improve operating leverage. Management believes these initiatives will help cap personnel expense growth and enhance scalability.
• Economic and regulatory risks: While credit quality remains robust, management acknowledged that macroeconomic volatility, possible regulatory changes—such as California’s proposed tax law—and tariff uncertainty could affect both revenue and expense trends. The company is monitoring these factors closely as it plans for the remainder of the year.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will watch (1) Axos’s ability to maintain high-single-digit to low-teens loan growth as prepayment and origination dynamics shift, (2) progress in deposit mix optimization and cost control amid rising competition for funding, and (3) measurable results from investments in artificial intelligence and digital platform modernization. Execution on these priorities, along with management of credit quality and regulatory risks, will be critical signposts.

Axos Financial currently trades at $79.32, in line with $79.11 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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