Feb 19 (Reuters) - Australian buy-now, pay-later firm Zip Co logged first-half operating earnings below analyst expectations on Thursday, sending its shares tumbling over 34% in their worst ​session in more than a decade.

The digital ‌payments firm reported cash operating earnings of A$124.3 million ($87.61 million) for the six-month period ended ⁠December 31, up 85.6% from a year earlier but below ⁠the Visible Alpha consensus estimate of A$128.4 million.

The company ‌also said it ‌expects its second-half group cash earnings to broadly match the first six months.

Zip Co ​shares closed 34.4% lower at A$1.85 ‌in their worst session since mid-November 2014. The stock dropped as much as 39.2% earlier in the session ​to hit its lowest since ​early May ‌2025.

The firm, which thrived during the Covid-19 pandemic due to ultra-cheap money, was the biggest loser on the benchmark index, which ⁠ended 0.9% higher.

"Although Zip delivered solid first-half cash earnings, guidance ⁠for flat growth in the second half caught investors off guard, signalling a dramatic deceleration in momentum," said Marc Jocum, senior product and investment strategist at Global X ETFs.

"In this (earnings and rate hike) ⁠environment, ‌even minor disappointments in growth, guidance, or operational ‌efficiency can trigger outsized reactions, explaining why Zip became the most punished ⁠stock on an otherwise strong ASX 200 today."

Weaker momentum in adding U.S. customers and higher credit losses weighed on Zip Co's results, UBS analysts said. Net bad debts in the half year increased to 1.73% of the total transaction volume, up from 1.56% a year earlier.

Zip Co said it ​would monitor conditions and consider a dual listing on a U.S. stock exchange only when it aligned with shareholders' best interests.

($1 = 1.4188 ​Australian dollars)