Artificial Intelligence (AI) is transforming industry and unlocking all-new business models. Few companies in the lending sector show this change as strong as Pagaya Technologies (PGY). To drive the platform with AI, Pagaya has brought explosive growth – ITS stocks have almost doubled each year – reaching profitability ahead of many analysts’ expectations.
Compared to its industry peers, I am bullish on stocks due to its strong potential and attractive valuation. This appears to be a rare opportunity to invest in profitable, AI-driven fintech at an attractive price.
Think of Pagaya as a savvy intermediary in the world of lending. The company does not directly lend to consumers. Instead, it leverages sophisticated data modeling and artificial intelligence to enhance financial institutions’ ability to make informed lending decisions faster and more accurate than traditional methods.
This approach produced a strong network effect. Pagaya currently works with over 31 lending partners, each contributing data that will make AI smarter. The more partners they add, the better their algorithms will be, and it will be harder for their competitors to keep up.
What makes this business model particularly attractive is its fee-based revenue structure. Pagaya makes money from trading fees and does not take on credit risks themselves. They were also wise about diversification, expanding beyond personal loans to auto financing and point of sale loans, reducing their reliance on a single market segment.
Additionally, we use our network to securitize over 132 institutional investors and loan assets. The company secured $6 billion in 2024 through 17 asset-supported securitizations and became the leading issuer of US personal loan ABS. In the first quarter of 2025, it issued $1.4 billion via three transactions, including AAA-rated Personal Loan ABS and AA-rated Auto ABS.
Pagaya’s first quarter 2025 results marked a first positive net profit. Total revenue reached $290 million, representing solid growth of 18% year-on-year. More importantly, toll revenues have increased by 19%, suggesting that the core business is firing on all cylinders.
