AFRM Q3 2025: GMV Up 40% in March, Guides 34% YoY Growth
- Strong GMV Growth: Affirm reported broad‐based growth in GMV, highlighted by a 40% year-on-year increase in March and a forecast of approximately 34% year-on-year growth, underscoring robust demand and market penetration.
- Effective 0% APR Offering: The company’s 0% APR financing differentiates it, delivering on its promise without hidden costs, which attracts a disproportionately higher percentage of qualified card users and bolsters overall credit quality.
- Robust Funding Structure: Affirm is executing nonconsolidated ABS deals and maintains strong relationships with funding partners, ensuring a healthy and flexible capital mix to support growth initiatives.
- GMV sustainability concerns: While Q3 showed strong, broad‐based GMV growth – including a 40% year-over-year growth in March – the discussion on sustaining pockets of growth, especially relating to Apple Pay trends, raises questions about whether this momentum is sustainable in future quarters.
- Uncertainty in key partnerships: The evolving narrative around the Walmart relationship, with references to recent headlines, creates uncertainty about the long-term stability and benefits of such partnerships, despite current positive comments.
- Masking of underlying expenditure issues: The notable drop in the sales and marketing line to $74 million was largely attributed to the end of warrant expense amortization. This non-GAAP adjustment might obscure persistent underlying cost pressures that could impact future profitability.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | 35.9% increase (from $576.2M to $783.1M) | Total Revenue increased by 35.9%, driven by higher transaction activity, increased active consumer engagement, and an overall boost in GMV compared to the previous period. This follows the pattern seen in earlier quarters where revenue growth was closely linked to enhancements in user and merchant participation. |
Merchant Network Revenue | Approximately 34% increase (from $159.3M to $213.97M) | Merchant Network Revenue rose by 34%, reflecting growth in GMV, an expanded merchant base, and increased transactions per active consumer. This improvement is consistent with prior periods where boosting merchant participation and diversification drove revenue gains. |
Card Network Revenue | 64% jump (from $35.7M to $58.57M) | Card Network Revenue jumped by 64%, likely a result of higher card transaction volumes and greater interchange fee collections. While specific drivers for Q3 2025 were not detailed, the significant increase continues trends identified in earlier quarters where increased consumer usage led to elevated revenue from card networks. |
Interest Income | 27.6% increase (from $315.7M to $402.70M) | Interest Income grew by 27.6%, which can be attributed to higher unpaid principal balances, an increase in interest-bearing loan origination, and improved loan portfolio mix. This is in line with previous quarters where growth in loans held for investment and favorable pricing initiatives boosted interest revenue. |
Gain on Sales of Loans | 88.6% increase (from $40.2M to $75.84M) | Gain on Sales of Loans increased by 88.6%, driven by higher loan sale volumes and improved sale pricing under favorable funding market conditions. This mirrors earlier period improvements where enhanced transaction economics and significant loan sale deals contributed markedly to revenue gains. |
Servicing Income | 26.7% increase (from $25.3M to $32.05M) | Servicing Income rose by 26.7% as a result of a growing unpaid principal balance of off-balance sheet loans, which increased net servicing fee revenue. This growth trajectory follows previous trends where increased loan balances offset any modest adjustments, ensuring steady income from servicing fees. |
Operating Performance Turnaround | Operating loss narrowed to $8.393M from a loss of $160.789M | Operating performance improved dramatically due to a combination of substantial revenue growth and improvements in operating efficiency. Factors include increased adjusted operating income, disciplined expense management (notably lower stock-based compensation and warrant expenses), and strong revenue less transaction costs, which collectively reversed prior operating losses. |
Net Income Improvement | Turned to net income of $2.804M from a net loss of $133.936M | Net Income improved significantly, transitioning from a substantial net loss in the previous year to a modest net income. This turnaround reflects the synergy of revenue growth, tighter expense control, and improved operating margins, aspects that were highlighted in operating performance improvements from earlier periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Non-GAAP Operating Expenses | Q3 2025 | remain relatively flat compared to Q2 levels | no guidance provided | no current guidance |
OpEx Envelope | Q3 2025 | maintaining a similar OpEx envelope as in Q2 | no guidance provided | no current guidance |
Non-GAAP Operating Expenses | Q4 2025 | remain relatively flat compared to Q2 levels | no guidance provided | no current guidance |
OpEx Envelope | Q4 2025 | maintaining a similar OpEx envelope as in Q2 | no guidance provided | no current guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Non-GAAP Operating Expenses | Q3 2025 | Affirm expects operating expenses to remain relatively flat in Q3 2025 compared to Q2 2025 | 791,527Vs. 831,102(Q2 2025) — a ~5% decrease | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
GMV Growth | Demonstrated in Q1 2025 with strong economics and in Q2 2025 with ambitious scaling toward a $50 billion GMV goal | Q3 2025 showed incredibly broad‐based growth with 40% YoY in March and a high‑end outlook of 34% YoY (a slight moderation from the quarter’s 36% growth) | Consistent robust growth with a minor moderation in outlook in Q3. |
Active Consumer Growth | Q1 and Q2 2025 highlighted accelerating active consumer numbers (up 23% YoY in Q2 and deliberate efforts in Q1) | No details in Q3 2025 earnings call provided | Previously positive sentiment; current period lacks discussion, suggesting lower emphasis or evolving focus. |
Affirm Card and 0% APR Financing | Consistently discussed in Q4 2024 (as a platform for diverse promotions), Q1 2025 (focusing on regulatory and promotional strengths), and Q2 2025 (enhancing customer engagement and long‐term relationships) | Q3 2025 emphasized its strategic role for 0% APR financing, credit quality, and dynamic optimization with a focus on rewarding existing consumers | Steady and positive emphasis across periods; current sentiment reinforces its strategic importance while deepening operational detail. |
Funding Structure, Capital Markets, and Cost Sustainability | Q4 2024 featured securitization benefits and fixed‑rate funding advantages; Q1 and Q2 2025 highlighted robust forward flow, ABS growth, and favorable market conditions | Q3 2025 discussed a recently priced nonconsolidated ABS deal, strong funding partnerships, and anticipated continuation of sustainable cost management | Consistent focus on diversified funding channels and careful cost management, with continued constructive capital market execution. |
Margin Expansion, Pricing Initiatives, and Promotional Reinvestment Risks | Q4 2024 reported impressive operating leverage (18.4% AOI margins) and plans for further margin improvements; Q1 and Q2 2025 described targeted pricing initiatives and deliberate promotional reinvestment | Not specifically mentioned in Q3 2025 earnings call [no citation] | Previously addressed with positive outlook; current period sees an absence of discussion, potentially shifting focus away from detailed margin initiatives. |
Sales and Marketing Expense Management | Q2 2025 noted increased investments to support new programs (around $30 million) while Q1 and Q4 2024 did not spotlight this topic | Q3 2025 reported a step‑down to $74 million due primarily to the end of a warrant amortization expense, indicating lower run‑rate spending | Recent focus shifted toward cost reduction, reflecting improved efficiency relative to previous higher expense levels. |
Credit Risk Management and Economic Downturn Impacts | Q4 2024 and Q1 2025 touched on strong credit performance and controlled underwriting; Q2 2025 stressed strict standards and adjustments to credit posture to meet capital partner requirements | Q3 2025 detailed healthy repayment rates, a slight increase in loan loss allowances due to prepayments, and proactive recession preparedness through internal data monitoring | Consistent and proactive strategy; current period shows continued strong credit practices with a cautious eye on potential downturn impacts. |
Partnership Dynamics | Q1 2025 was notable for a strong Walmart relationship (Walmart contributing 30% of revenue) and strategic funding partnerships with new players like GreenTech and Blue Horizon; Q2 2025 mentioned a diverse partner ecosystem including Walmart, Apple, Amazon, etc. | Q3 2025 highlighted an active and live Walmart relationship and robust execution with strategic funding partnerships via ABS and forward flow deals | Maintained emphasis on strategic partnerships with evolving details; current period focuses on operational value delivery rather than revenue breakdowns. |
Apple Pay Integration and Digital Wallet Expansion | Q1 2025 mentioned emerging overseas activity on Apple Pay and Q2 2025 provided positive remarks on wallet integrations bolstering conversion and credit metrics | Q3 2025 earnings call did not provide any commentary on Apple Pay or digital wallet initiatives | Previously noted as a growth area, but absent in the current period, suggesting a deprioritization or integration into broader digital strategies. |
Geographic Expansion Challenges (UK Market Entry) | Q1 and Q2 2025 discussed active merchant engagement, differentiated product offerings (longer‑term loans), and early testing in the UK market | Q3 2025 emphasized a key partnership with Adyen to accelerate UK integration and shared proactive market education efforts in London | Consistent commitment to UK expansion with evolving tactical partnerships, showing a progression from testing to accelerated integration. |
Leadership Transition and Execution Risks | Q4 2024 detailed a significant leadership transition (with Michael Linford expanding his role and Robert O'Hare slated to become CFO) | Not mentioned in Q1–Q3 2025 earnings calls | Once a major focus in Q4 2024, leadership transition now appears to be resolved and is not a current discussion point, indicating stabilization in management structure. |
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Funding Impact
Q: Updated views on bank charter and funding impact?
A: Management stated that even with a bank charter, they wouldn’t change their funding strategy; their diverse funding channels deliver low costs and regulatory certainty, and any charter would only be pursued if needed for a specific product feature. -
GMV Outlook
Q: Is GMV growth accelerating or moderating?
A: They expect overall GMV growth of around 34% YoY—March and April were notably strong, but the growth is anticipated to moderate from the intra‐quarter peaks. -
Credit Quality
Q: Why are loan loss reserves rising?
A: A slight uptick in reserves is due to increased prepayments, which management views as a positive credit signal reflecting robust repayment behavior and proactive credit management. -
Loan Funding
Q: Will off-balance sheet funding increase next quarter?
A: The recent pricing of a nonconsolidated ABS deal is expected to modestly boost off-balance sheet funding, though overall the funding mix remains stable thanks to strong partnerships across channels. -
Recession Prep
Q: What assumptions drive recession scenario planning?
A: Their models draw on historical trends from COVID and 2023, using conservative, empirically based adjustments when early signs of repayment stress appear. -
Competitive Landscape
Q: How competitive is the market?
A: The business operates in a highly competitive space but maintains consistent pricing and strong merchant partnerships, ensuring sustainable margins despite market pressures. -
Promotional Lending
Q: How are 0% loans balanced versus interest loans?
A: Although 0% APR products generate lower interest revenue, they drive high conversion and quality customer acquisition, serving as a powerful brand enhancer. -
Self-Funded Zeros
Q: What about self-funded 0% loan specifics?
A: Self-funded zeros, representing about 10% of volume, are aimed at existing cardholders, effectively acting as rewards while being managed within a controlled risk framework. -
Promotional Demand
Q: What drives merchants to run 0% promotions?
A: Merchants use 0% offers as a growth lever to boost direct-to-consumer sales—even though these promotions trade off some margin, the overall unit economics improve their top-line performance. -
International Expansion
Q: What is the UK expansion status?
A: They are accelerating international plans through partnerships like Adyen to enable faster go-live in the UK, with positive early steps already underway in Canada. -
App Impact
Q: Do app changes improve conversion?
A: Recent incremental updates have notably improved conversion rates while ensuring the app remains focused on its key role in facilitating timely loan repayments. -
App Future
Q: What is the app's long-term objective?
A: The app will continue to prioritize repayments but also evolve into a searchable financial tool that showcases merchant offers and dynamically optimizes loan terms. -
AI Integration
Q: How is AI enhancing operations?
A: AI and machine learning are extensively used to boost productivity in areas like contract review and dispute resolution, resulting in faster processing and enhanced customer service. -
Student Loans
Q: Concerns from student loan enforcement actions?
A: While management is monitoring the situation, potential impacts from student loan garnishments are already factored into their underwriting models, so no significant concerns exist. -
Costco Partnership
Q: What is the timeline for the Costco deal?
A: The new online partnership with Costco is viewed very positively; however, specific timing details remain fluid as the deployment and optimization process is still underway. -
Shopify Renewal
Q: Were there concessions in the Shopify renewal?
A: There were no economic concessions on the Shopify renewal; the only change was a minor adjustment due to an extended warrant amortization period. -
Walmart Update
Q: How is the Walmart relationship evolving?
A: Affirm continues to perform strongly with Walmart, actively optimizing their partnership to ensure the best outcomes for both consumers and the company. -
Sales & Marketing
Q: Why did S&M expenses drop this quarter?
A: The drop is primarily due to the end of noncash warrant amortization expenses, leading to a lower sales and marketing line going forward. -
Credit Reporting
Q: Why report data to credit bureaus?
A: They report repayment data to help consumers build a solid credit history, ensuring that on-time payments are accurately reflected in credit scores. -
Loan Tenure Guidance
Q: What guidance is provided on Affirm card terms?
A: Although precise RLTC figures weren’t provided, management noted that 0% loans typically feature 12-month terms, reflecting a mix designed to balance profitability and growth.