Affirm Q3 revenue rises 33% to $1.04bn, EPS beats by $0.13

Affirm Holdings reported fiscal third-quarter revenue of $1.039 billion on May 7, beating analyst estimates by more than 4 per cent, as gross merchandise volume rose 35 per cent year-over-year to $11.6 billion. Diluted earnings per share of $0.30 topped the $0.17 consensus, a 76 per cent beat. The stock rose 1.29 per cent in after-hours trading before consolidating on Friday.

The quarter was the tenth in a row with 30 per cent-plus GMV growth. Founder and chief executive Max Levchin described it as “outstanding” and told investors the growth was achieved “without sacrificing credit discipline.” The buy-now-pay-later lender swung to a GAAP operating profit of $88.4 million from an $8 million loss a year earlier. Adjusted operating income reached $280.8 million, a 27.0 per cent margin.

Revenue less transaction costs, the metric Affirm uses to gauge unit economics, climbed 41 per cent to $498 million, equal to 4.31 per cent of GMV, according to the company’s shareholder letter filed with the Securities and Exchange Commission. Net income was $102.9 million.

What drove the quarter

Affirm’s active consumer base expanded 22 per cent to 26.8 million. The average customer transacted 6.7 times during the quarter, up 20 per cent from a year ago. Active merchants on the platform grew 44 per cent to 515,000 as the company pushed deeper into e-commerce checkouts and point-of-sale integrations.

The Affirm Card remained the fastest-growing channel. Card-linked gross merchandise volume surged 146 per cent to $2.1 billion. Active cardholders reached 4.4 million, and the attach rate, the share of Affirm users who also hold the card, hit roughly 17 per cent. Direct-to-consumer GMV, which includes the card and the Affirm app, rose 48 per cent to $3.7 billion. The DTC channel reduces the company’s dependence on merchant integrations by building a direct relationship with borrowers.

Zero per cent APR products, including Pay in X, Affirm’s pay-in-four offering, grew GMV by 41 per cent, while the broader Pay in X product line was up 52 per cent. The mix shift toward interest-bearing instalment loans helped margins, since those products carry higher unit economics than the zero-APR book. Levchin noted that “top-line momentum is now paired with stronger profitability further down the income statement.”

Credit quality holds steady

Levchin told analysts “we are not seeing deterioration in the Affirm consumer.” The numbers backed him. The 30-plus-day delinquency rate on monthly instalment loans, excluding legacy Peloton receivables and Pay in X, was 2.8 per cent, a single basis point higher than the prior quarter. The 60-plus-day bucket held flat at 1.6 per cent, and the 90-plus-day rate improved to 0.7 per cent from 0.8 per cent.

The allowance for credit losses stood at 6.0 per cent of loans held for investment, unchanged from the prior quarter. Average funding costs declined 126 basis points year-over-year to 5.8 per cent and fell 34 basis points sequentially, helped by successful asset-backed securities issuance and favourable repricing in the securitisation market, Crowdfund Insider reported.

Total funding capacity reached $28.2 billion, which management estimated can support more than $65 billion in annual GMV. The platform portfolio stood at $18.4 billion with roughly 65 per cent utilisation, backed by a Sixth Street joint venture alongside pension funds and large insurance complexes. Total liquidity at quarter-end was about $2.5 billion. The net cash position of roughly $1.4 billion was up $373 million year-over-year.

The guidance

Affirm raised its full-year outlook. For the fiscal fourth quarter ending June 30, management guided to GMV of $13.15 billion to $13.45 billion, revenue of $1.080 billion to $1.110 billion, and revenue less transaction costs of $535 million to $550 million. The GAAP operating margin is expected to land between 9.5 per cent and 11.5 per cent.

For the full fiscal year 2026, GMV is now seen at $49.265 billion to $49.565 billion, with revenue of $4.175 billion to $4.205 billion. The adjusted operating margin forecast was raised to 28.2 per cent to 28.8 per cent. Management said it anticipates stable product mix and interest rates while advancing international initiatives. No specific timeline or market breakdown was provided.

Wall Street analysts project fiscal 2027 revenue could exceed $5 billion, driven by card growth, merchant partnerships, and incremental margin expansion above 70 per cent on RLTC gains, according to Crowdfund Insider. That estimate implies roughly 20 per cent top-line growth from the midpoint of the fiscal 2026 guidance range, a deceleration from the current 33 per cent pace but consistent with a maturing fintech platform lapping tougher comparisons.

How to read the print

Affirm’s quarter comes as the BNPL sector shifts from growth-at-any-cost toward a private-credit maturity story. The company’s hybrid model, combining transparent instalment loans with merchant fees, interest income, and loan sales, sets it apart from pure short-term pay-in-four competitors. Unlike those products, Affirm reports to credit bureaus, which helps users build credit histories while the company maintains conservative underwriting.

The quarter from Block, which owns Afterpay, showed a similar dynamic. Block’s Square ecosystem and Cash App card give it a different distribution advantage, but both companies are moving toward the same outcome: scaled lending as the core profit-and-loss driver rather than a sidecar product. Mercado Libre, reporting the same week, posted a 16 per cent drop in net income as it invested in Brazil and Mercado Pago credit card expansion. The Latin American fintech play is still in its capital-deployment phase.

Morgan Stanley named Affirm its top pick in April, arguing that private-credit funding fears were overdone and that the company’s securitisation track record had eased concerns over funding strains, according to 24/7 Wall Street. The Q3 print backs that view. The 126-basis-point drop in average funding costs in a single year, with a further 34 basis points of sequential improvement, shows Affirm’s cost of capital moving in the right direction independently of the rate cycle.

The BNPL market is projected to grow at a compound annual rate above 20 per cent through the early 2030s, fuelled by e-commerce integration, point-of-sale adoption, and consumer demand for flexible payment terms. Growth is moderating from pandemic-era peaks as regulatory scrutiny increases and traditional banks roll out competing instalment features. The Consumer Financial Protection Bureau has expressed interest in BNPL lending standards, though no formal rulemaking has been proposed.

What’s next

Affirm’s ability to sustain 30 per cent-plus GMV growth into an eleventh quarter depends on two variables: whether the US consumer holds up as tariff uncertainty and sticky inflation weigh on sentiment, and whether the private-credit funding channels that back its loan book stay open at current pricing.

The card attach rate at 17 per cent leaves room to run. Every percentage point of attach rate adds roughly 400,000 cardholders at the current active-consumer base, and card-linked GMV per user runs well above the platform average. The direct-to-consumer GMV of $3.7 billion, up 48 per cent, also reduces reliance on merchant integrations that carry fee compression risk over time.

International expansion is the wildcard. Affirm flagged it in guidance commentary but has not broken it out as a separate segment. The company already has partnerships with Shopify, Amazon, and Walmart that give it cross-border reach. A dedicated international product launch would open a new addressable market.

The earnings call transcript shows management fielded a question about a potential US recession. Levchin replied that Affirm’s underwriting models are “battle-tested” through multiple credit cycles, though the company has not operated at its current scale during a prolonged downturn. The allowance rate of 6.0 per cent is consistent with a stable-to-improving credit trajectory. A sharp rise in that number in the August print, when Affirm reports fiscal fourth-quarter and full-year results, would signal the cycle is turning. For now, the numbers show a consumer that is holding up and a funding machine that is working.