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Affirm Holdings, Inc. (AFRM)·Q4 2025 Earnings Summary

Executive Summary

  • Affirm delivered a record quarter with revenue $876.4M (+33% YoY), GMV $10.4B (+43% YoY), and first GAAP operating income profitability (Operating Margin 6.6%), materially above guidance; Adjusted Operating Margin reached 27% .
  • Q4 beat Wall Street consensus on both revenue and EPS; revenue $876.4M vs $837.1M estimate*, SPGI Primary EPS 0.527 vs 0.43*, while company-reported GAAP diluted EPS was $0.20 .
  • Unit economics were strong: RLTC $425.1M (+37% YoY), RLTC % GMV 4.1%; revenue % GMV declined 64 bps on mix shift to 0% APR, offset by 90 bps YoY decline in average cost of funds to 6.8% .
  • Guidance implies continued profitable growth: Q1 FY26 GMV $10.10–10.40B, Revenue $855–885M, Operating Margin 1–3%, Adjusted Operating Margin 23–25%; FY26 Operating Margin >6.0% and Adjusted Operating Margin >26.1% .
  • Catalysts: accelerating 0% APR adoption, Affirm Card scale (GMV $1.2B, active cardholders 2.3M), easing funding costs, and clarity on an enterprise merchant transition by FQ2’26 provide both upside narrative and risk normalization .

What Went Well and What Went Wrong

What Went Well

  • Record top-line and positive GAAP operating income: revenue $876.4M, GMV $10.4B; Operating Income $58.1M (6.6% margin) vs (11.1%) a year ago; Adjusted Operating Income $237.0M (27.0% margin) .
  • Funding tailwinds: average annualized cost of funds fell to 6.8% (−90 bps YoY, −30 bps QoQ), supporting RLTC % GMV at 4.1% despite greater 0% mix .
  • D2C/Card momentum: Card GMV +132% to $1.2B; active cardholders +97% to 2.3M; in-store Card GMV +187%; attach rate 10% (“kicking ass and taking names”) .
  • Management execution and AI: “We intend to consistently deliver positive operating income while maintaining an aggressive growth rate” (Levchin); AdaptAI early deployments show ~5% GMV uplift for adopting merchants .

What Went Wrong

  • Take-rate compression: revenue as % GMV down 64 bps YoY to 8.5% on shorter-duration 0% APR mix and lower interest income share; network revenue % GMV declined with shorter terms .
  • Delinquencies modestly elevated vs historical low ranges (though improving QoQ), reflecting broader mix expansion; monthly installment 30+ DPD ex-Peloton declined QoQ and YoY, but broader supplemental tables show FY25 seasonality still above pre-2021 lows .
  • Concentration risk persists: ~46% of GMV from top five partners; an enterprise merchant plans to transition volumes by FQ2’26, with zero volume assumed post-integration removal per outlook/Q&A .

Financial Results

Core P&L and Unit Economics (USD)

MetricQ2 2025Q3 2025Q4 2025
Revenue ($MM)$866.4 $783.1 $876.4
GMV ($B)$10.1 $8.6 $10.4
Revenue % GMV8.5% 9.2% 8.5%
RLTC ($MM)$419.4 $352.6 $425.1
RLTC % GMV4.1% 4.1% 4.1%
Operating Income ($MM)$(4.3) $(8.4) $58.1
Operating Margin (%)(0.5)% (1.1)% 6.6%
Adjusted Operating Income ($MM)$237.8 $173.7 $237.0
Adjusted Operating Margin (%)27.4% 22.2% 27.0%
Net Income ($MM)$80.4 $2.8 $69.2
Diluted EPS (GAAP)$0.23 $0.01 $0.20
Avg Annualized Cost of Funds7.2% 7.1% 6.8%

Revenue Components ($MM)

ComponentQ2 2025Q3 2025Q4 2025
Merchant Network Revenue$244.9 $214.0 $239.5
Card Network Revenue$58.1 $58.6 $67.1
Total Network Revenue$303.0 $272.5 $306.6
Interest Income$409.4 $402.7 $419.1
Gain on Sales of Loans$125.3 $75.8 $116.9
Servicing Income$28.7 $32.1 $33.9
Total Revenue, net$866.4 $783.1 $876.4

KPIs and Platform Metrics

KPIQ2 2025Q3 2025Q4 2025
Total Transactions (count, MM)38.1 31.3 37.5
Active Consumers (MM)21.0 21.9 23.0
Transactions per Active Consumer5.3 5.6 5.8
Active Merchants (000s)337.2 358.4 376.8
Total Platform Portfolio ($B)$14.0 $13.7 $15.1
Equity Capital Required ($MM)$640.5 $636.8 $568.9
ECR % Total Platform Portfolio4.6% 4.6% 3.8%
Allowance for Credit Losses % LHI5.4% 5.7% 5.6%
Card GMV ($MM)$845 $807 $1,200
Active Cardholders (MM)~1.7 ~1.9 2.3
Card Attach Rate (%)N/AN/A10%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GMV ($B)Q4 FY25$9.00–9.30 $9.40–9.70 Raised
Revenue ($MM)Q4 FY25$810–840 $815–845 Raised (slightly)
Transaction Costs ($MM)Q4 FY25$435–450 $430–445 Lowered
RLTC ($MM)Q4 FY25$375–390 $385–400 Raised
Adjusted Op Margin (%)Q4 FY2523–25 23–25 Maintained
Operating Margin (%)Q4 FY25Achieve GAAP profitability 1–3 Formalized range
GMV ($B)Q1 FY26—$10.10–10.40 New
Revenue ($MM)Q1 FY26—$855–885 New
RLTC ($MM)Q1 FY26—$405–420 New
Operating Margin (%)Q1 FY26—1–3 New
Adjusted Op Margin (%)Q1 FY26—23–25 New
Operating Margin (%)FY26—>6.0 New
Adjusted Op Margin (%)FY26—>26.1 New
GMVFY26—>$46B; Revenue ~8.4% GMV; RLTC ~4% GMV New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current (Q4)Trend
AI/AdaptAILaunched; early wallet/app harmonization; RLTC exceeded 3–4% partly via capital markets; productivity initiatives with AI AdaptAI first results show ~5% GMV uplift; continued pragmatic AI adoption for productivity Improving/Scaling
Funding & Cost of CapitalMaster trust ABS; Sixth Street $4B forward flow ramp; cost of funds down to ~7.2% Average cost of funds 6.8% (−90 bps YoY); funding capacity up to $26.1B; multiple oversubscribed ABS deals Improving
Affirm CardQ2 GMV $845M; Q3 $807M; active cardholders ~1.7→~1.9M; in-store mix rising Q4 Card GMV $1.2B (+132%); 2.3M active cardholders; attach rate 10%; in-store GMV +187% Accelerating
0% APR MixQ2 0% monthly GMV +70%; Q3 +44% and ~28% of GMV; merchant-funded expansion 0% monthly +93%; Pay-in-X +50%; ~29% of GMV; shorter average terms; ~95% merchant-funded at integrated merchants Expanding
Enterprise Partner TransitionQ3: noted concentration and partner dynamics Outlook assumes a large enterprise partner transitions volumes by FQ2’26; zero volume after integration removal per Q&A Headwind (managed)
International (UK)UK live before year-end; beta with Shopify coming; Adyen integration aids speed “Friends and family” testing with Shopify in UK; early traction; mix skewing longer-term interest-bearing initially Building
PSP/OfflineJP Morgan Payments, Stripe Terminal; offline BNPL is greenfield Stripe Terminal integration aids offline; tender delivery and awareness are key constraints Early but strategic

Management Commentary

  • “We intend to consistently deliver positive operating income while maintaining an aggressive growth rate, investing in future products, and increasing operating leverage.” — Max Levchin .
  • “The first results from early AdaptAI deployments show an average 5% increase in GMV among adopting merchants.” — Shareholder Letter .
  • “Card… is kicking ass and taking names, and we’re very proud of it.” — Max Levchin on Card momentum .
  • “Underwriting is hard, and we’re good at it… We live better through mathematics.” — Max Levchin on 0% APR strategy .
  • “95% of our transactions came from repeat borrowers this quarter.” — Rob O’Hare on cohort quality and short duration .

Q&A Highlights

  • Funding market constructive; focus on long-term “blue chip” capital partners; discipline over lowest bid; capacity and spreads favorable .
  • 0% APR dynamics: attracts prime/super-prime and new users; many convert to interest-bearing products; shorter durations drive lower network revenue per GMV but higher conversion .
  • Enterprise partner transition: integration assumed to go away by end of Q1 FY26; zero volume thereafter in outlook .
  • UK expansion: Shopify beta underway; longer-term financing in demand; early mix skew interest-bearing; playbook to scale across Europe .
  • PSP/offline: Stripe Terminal enables faster in-store adoption; offline BNPL remains greenfield with discovery and tender delivery challenges .

Estimates Context

MetricQ2 2025Q3 2025Q4 2025
Revenue Consensus Mean ($MM)$807.6*$783.0*$837.1*
Revenue Actual ($MM)$866.4 $783.1 $876.4
Primary EPS Consensus Mean0.433*0.4045*0.43*
Primary EPS Actual0.7587*0.19498*0.5267*
  • Q4: Revenue beat and EPS beat vs SPGI consensus; note SPGI “Primary EPS” differs from company-reported GAAP diluted EPS ($0.20) .
  • Q3: Revenue in line/slight beat; EPS below consensus on SPGI Primary EPS*.
  • Q2: Revenue and EPS both beat*.
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Affirm crossed into GAAP operating profitability with accelerating GMV and strong adjusted margins; funding costs are easing, supporting durable RLTC at the top end of the 3–4% target .
  • Mix shift toward 0% APR (shorter duration) compresses take-rate but drives conversion, attracts higher-quality cohorts, and fuels Card growth—net positive for network effects .
  • Affirm Card is becoming a second growth engine (in-store acceleration, 2.3M actives, $1.2B GMV), with attach rate rising—watch for product enhancements to sustain momentum .
  • Funding program is a competitive advantage (master trust ABS, forward flow ramp including Sixth Street); cost of funds decline should continue to offset mix headwinds .
  • Near-term risk: enterprise merchant transition by FQ2’26; management already embedded conservative assumptions (zero volume post-integration removal), reducing surprise risk .
  • International optionality (UK with Shopify) and PSP/offline integrations offer medium-term GMV expansion; monetization depends on awareness and tender delivery execution .
  • Trading implications: strong beat/raise profile and profitability inflection support estimate revisions higher; monitor take-rate trends (mix-driven) and cost-of-funds trajectory for margin sustainability .