Pagaya: Capitalizing On Private Credit's Great Rotation While Operating Leverage Shines

Despite a tighter model in Q4, Pagaya's ability to grow its GAAP income and free cash flow sequentially highlights its operating leverage scale. Pagaya's operating leverage scale could ensure that incremental FRLPC dollar gains flow directly to its bottom line, potentially offsetting anticipated margin compression in FY 2026. PGY appears to be benefiting from private credit's ongoing push into asset-backed financing, with strong demand for its ABS transactions YTD representing 41% of its total ABS funding in 2025.