Affirm beats Q4 estimates as GMV jumps 36% to $14.1 billion

Affirm Holdings' fiscal fourth-quarter revenue rose 33% to $1.17 billion, beating analyst estimates, as gross merchandise volume jumped 36% to $14.1 billion on surging card adoption and a 50% expansion in its merchant network. The buy-now-pay-later lender posted earnings of $4.62 per share, up from 20 cents a year earlier and far above the 33 cents consensus, though the bottom line included a $1.45 billion tax benefit from releasing a valuation allowance on domestic deferred tax assets.

CEO Max Levchin called the quarter Affirm's "most profitable ever," attributing the result to network effects and a disciplined approach to credit risk. "The larger we get, the more valuable the network becomes, the more merchants want to join the graph," Levchin said on the earnings call.

Active merchants rose 50% to 570,800, while active consumers grew 21% to 27.8 million and transactions per user climbed 20% to seven. Affirm Card cardholders more than doubled to 5.2 million, with card GMV surging 124% to $2.8 billion in the quarter. Adjusted operating income rose 49% to $353.4 million, lifting the adjusted operating margin to 30.3% from 27% a year earlier.

The expansion came with rising costs. Operating expenses climbed 24.5% to $1.02 billion, and the provision for credit losses rose 42.5% to $223.2 million. Amazon accounted for 22% of total GMV, unchanged from a year earlier, while the top five merchants and platform partners' combined share fell to 44% from 47%, reflecting greater diversification across the network.

Merchant and Consumer Growth Still Has Room

Levchin said the addressable merchant base offers "an enormous amount of greenfield." Affirm is available at about 80 of the top 250 e-commerce sites, while penetration across e-commerce merchants overall sits near 10%. Large merchants can take time to onboard because many run complicated or outdated payment systems, he said, adding that the sales team "has a lot of work to do for probably quite a number of quarters."

The company also represents only a small slice of many existing merchants' total transaction volume, leaving room to grow as consumer demand rises. Roughly 30% of Affirm Card transactions now occur offline, reflecting growing adoption for in-store purchases, and early results from the United Kingdom have been positive, with minimal competitive response so far.

For fiscal 2027, management guided to GMV above $64 billion, up from $50.2 billion in fiscal 2026, with adjusted operating margins exceeding 30.5%. First-quarter guidance calls for revenue of $1.19 billion to $1.22 billion and GMV of $13.7 billion to $14 billion.

Affirm's growth contrasts with the broader payments sector. Mastercard's second-quarter adjusted EPS rose 21.4% year over year, Visa's fiscal third-quarter earnings climbed 11%, and American Express posted an 11% gain, all beating estimates on resilient consumer spending. Affirm's model differs by financing purchases directly, exposing it to credit losses that the card networks avoid.

Shares jumped more than 10% after the results, extending a six-month rally of about 61%. The stock trades at roughly 25 times forward adjusted earnings and 6.1 times sales, above industry benchmarks. Wall Street rates the stock a Strong Buy, with an average price target of $93.61 implying 20.8% upside. BMO Capital Markets' Rufus Hone raised his target to $86, while Oppenheimer's Rayna Kumar reiterated a Buy with a $100 target.

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