The study examined the influence of Digital Financial Services (DFS) on the profitability of microfinance institutions in Uganda, with specific reference to FINCA Uganda. The objectives of the study were to quantify the impact of mobile money transactions, digital loans, and agency banking on profitability; to evaluate management perceptions regarding the influence of DFS on operational determinants of profitability; and to identify the critical challenges and strategic success factors affecting the linkage between DFS adoption and profitability. A cross-sectional research design was employed, and both primary and secondary data were analyzed using multiple linear regression models. The results revealed that mobile money transactions (β = 0.412, p < 0.001), digital loans (β = 0.368, p = 0.001), and agency banking (β = 0.295, p = 0.002) significantly enhanced profitability, accounting for 64% of the variation in profitability outcomes. Findings further showed that management perceived DFS as improving customer retention (β = 0.425, p < 0.001), cost efficiency (β = 0.354, p = 0.003), and revenue growth (β = 0.297, p = 0.007). The study also established that poor connectivity negatively affected DFS–profitability linkages (β = -0.284, p = 0.003), whereas customer trust (β = 0.397, p < 0.001) and staff training (β = 0.316, p = 0.002) emerged as critical success factors. It was concluded that DFS adoption significantly contributed to the profitability of FINCA Uganda by broadening financial access, reducing operational costs, and enhancing customer loyalty. However, challenges such as infrastructural limitations and connectivity gaps constrained the full realization of profitability benefits. The study recommended that FINCA Uganda should expand DFS services, improve digital infrastructure in partnership with telecom operators, enhance customer trust through robust security measures, strengthen staff capacity through continuous training, and engage policymakers in creating a supportive regulatory framework.