Qfin Holdings faces securities fraud probe after Q2 revenue falls 31.6%

Qfin Holdings faces a securities fraud investigation after reporting Q2 revenue down 31.6 percent year over year, sending shares down 18.91 percent.

The Law Offices of Frank R. Cruz announced the probe on Aug. 26 on behalf of investors who lost money on Qfin (NASDAQ: QFIN), citing possible violations of federal securities laws. The investigation follows the company's Aug. 25 earnings release, which showed total net revenue fell to $525.65 million from $728.11 million a year earlier, while net income dropped 76.8 percent year over year. Qfin attributed the decline to "continued industry contraction, tighter regulatory oversight, and a sudden industry-wide liquidity shock in late June," according to the earnings statement.

The company reported adjusted EPS of $0.48, missing the Zacks Consensus Estimate of $0.96 by 50 percent. Non-GAAP net profit fell to RMB 455 million from RMB 1.85 billion a year earlier, and a one-time RMB 500 million tax expense pushed the effective tax rate to 60.3 percent. Loan facilitation volume reached approximately RMB 63.4 billion, down 2.5 percent sequentially, while average annualized loan pricing declined to 18.2 percent from 18.7 percent. The 90-day delinquency rate improved to 2.83 percent from 3.5 percent in Q1, though management warned that early August indicators showed credit risk rising about 20 percent month over month.

Qfin's stock fell $2.18 to close at $9.35 on Aug. 26, the day after results were announced. Shares have lost about 43 percent since the start of the year, compared with an 11.8 percent gain for the S&P 500. The company guided Q3 non-GAAP net income of RMB 400 million to RMB 500 million, a year-over-year decline of 67 percent to 73 percent, as management maintains a conservative risk posture.

CEO Haisheng Wu said China's consumer finance market remained under pressure through the first half of 2026, with outstanding short-term household consumer loans down more than RMB 660 billion from the start of the year, according to People's Bank of China data. "Regulatory measures targeting loan pricing, marketing, funding, collections and payments also became more stringent," Wu said on the earnings call.

The investigation adds legal risk on top of operational pressure. Qfin suspended share repurchases in late June during the industry liquidity squeeze, and the board approved a first-half dividend of $0.46 per ADS with a payout ratio of about 30 percent. The company generated RMB 1.09 billion in operating cash flow during Q2, down from RMB 2.1 billion in Q1, while cash and short-term investments totaled RMB 10.63 billion at quarter-end.

Investors will watch for further regulatory developments and the company's Q3 earnings report for signs of stabilization in loan volumes and credit metrics. The securities fraud probe could result in legal costs, potential settlements, and reputational damage for the company.

This article is for informational purposes only and does not constitute investment advice.