On August 25, Qfin Holdings (NASDAQ:QFIN) reported second-quarter results that tell two very different stories at once. Total loan volume fell 25.1% year over year to RMB63,377 million, and non-GAAP net income dropped to RMB454.9 million from RMB946 million just one quarter earlier. Non-GAAP earnings per diluted ADS sank to RMB3.72 from RMB7.70. But buried in the same release, revenue from the company’s technology solutions business jumped more than sixfold, and management laid out plans to turn Qfin into what it calls an AI-native lender. Investors have to weigh both halves of that picture.
An AI Business Taking Shape
The clearest growth story sits inside Qfin’s tech solutions arm. Loan volume tied to that unit hit RMB10.5 billion for the quarter, up 515% from a year earlier, while the outstanding balance climbed to roughly RMB16.1 billion, up 313%. Through its FocusPRO platform, Qfin now helps banks serve borrowers priced between 3% and 12%, a segment its own consumer lending rarely touches. During the quarter, the company signed two new AI agent projects with banking partners, one built to support loan officers from lead identification through conversion, the other aimed at SME credit review and approval. CEO Wu Haisheng framed the effort as an organizational shift, saying it is “about turning individual and team experience into shared reusable organizational capabilities.”
Risk metrics also moved in the right direction during the quarter itself. The 30-day collection rate rose to 88.1%, up 2.3 percentage points sequentially, while the C-M2 delinquency ratio fell 17% sequentially to 0.66%, nearing year-ago levels. The 90-day delinquency rate dropped to 2.83% from 3.5%. On the funding side, ABS issuance jumped 90% sequentially to RMB5.5 billion while issuance costs fell roughly 20 basis points, and overall funding costs eased about 10 basis points as the company leaned on a track record of stable asset performance. Qfin also paid a semiannual dividend of $0.46 per ADS, a payout ratio near 30%, and had repurchased $7 million of stock before pausing the buyback program.
The Liquidity Crisis Hits Home
Every one of those quarterly improvements sits next to a much rougher backdrop. Sales and marketing spending fell 13% sequentially as Qfin pulled back on growth, and new credit line users fell to 830,000, down from 1.19 million a quarter earlier. New loan provisions hit RMB1.72 billion, a booking ratio of 5.36%, the highest on record. A one-off RMB500 million tax expense tied to a change in tax treatment pushed the effective tax rate to 60.3%, though management expects it to settle near 20% going forward.
The bigger issue is what happened after the quarter closed. Management pointed to an unexpected liquidity crisis at industry peers in late June, combined with a nationwide regulatory crackdown on debt collection, as the source of a widening risk problem across the entire lending industry. Funding costs from outside partners climbed roughly 25 basis points across July and August as lenders grew more risk-averse, and the company described a severe shortage of collection capacity industrywide. Delinquency trends that improved through Q2 reversed sharply in August, and management said it could take two to three quarters to bring the C-M2 ratio back to a reasonable level. That backdrop is why Qfin guided to non-GAAP net income of just RMB400 million to RMB500 million for the third quarter, a decline of 67% to 73% from a year earlier.
Where Wall Street Stands Now
Hedge fund ownership of Qfin slipped from 19 funds to 17 in the most recent quarter, a mild pullback rather than a rush for the exits. Short interest sits at 3.21% of float, a modest level that suggests little organized betting against the stock despite the rough quarter. That combination points to a market still undecided rather than one that has picked a side.
A Bet On Two Different Futures
Qfin’s second quarter captures a lender caught between a genuine AI-driven pivot and a credit cycle that turned uglier the moment the quarter ended. The bull case rests on technology solutions volume that is scaling fast and bank partnerships that could diversify the business well beyond direct consumer lending. The bear case rests on August’s delinquency reversal and a collection capacity shortage that management says could take two to three quarters to resolve. Qfin’s weak third-quarter guidance already reflects some of that pain, though whether it captures all of it depends on how quickly the industry-wide liquidity squeeze eases. For now, the company’s own numbers make the case for both sides at once.
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