Affirm’s AI-Driven Growth and Profitability: A New Era for Buy-Now-Pay-Later

Affirm’s fiscal Q4 2025 results marked a watershed moment for the buy-now-pay-later (BNPL) sector, delivering a 43% year-over-year surge in gross merchandise volume (GMV) to $10.4 billion and its first-ever quarterly operating profit of $58 million (GAAP) and $237 million (adjusted) [1]. This performance underscores a strategic shift toward AI-driven innovation, which is redefining Affirm’s ability to scale GMV while expanding margins.

AI as a Catalyst for GMV Acceleration

At the core of Affirm’s success is Adapt AI, a real-time financing optimization tool that dynamically tailors offers to consumer behavior and merchant needs. By analyzing transaction data, creditworthiness, and purchasing patterns, Adapt AI has generated a 5% GMV uplift for participating merchants [2]. This not only boosts merchant adoption but also enhances Affirm’s value proposition by increasing transaction frequency and basket sizes. For example, the Affirm Card—a direct-to-consumer product—saw a 132% GMV increase in Q4 2025, driven by AI-powered personalization that improved customer retention and spending [3].

The AI-driven approach also extends to underwriting. Affirm’s algorithms now proactively identify customers eligible for higher credit limits, enabling increased lending without compromising risk management. This has contributed to a 95% repeat transaction rate in Q4 2025, a critical metric for sustaining growth in a competitive BNPL market [4].

Sustainable Margin Expansion Through AI Optimization

Affirm’s AI strategies are not only accelerating GMV but also fortifying margins. By optimizing financing offers in real time, the company reduces the cost of capital allocation and minimizes defaults. For instance, AI-driven underwriting has enabled Affirm to maintain disciplined credit standards while expanding its active consumer base to 23.0 million, a 24% year-over-year increase [5]. This scalability is critical in a macroeconomic environment where rising interest rates and consumer caution could pressure BNPL providers.

Moreover, the Affirm Card’s success—$1.2 billion in GMV and a 10% attach rate—demonstrates how AI can monetize direct relationships with consumers. The product’s average annual GMV per cardholder of $4,700 highlights the potential for recurring revenue streams, which are less volatile than merchant-driven BNPL models [6].

The Road Ahead: AI and Global Expansion

Management’s guidance for 2026 GMV to exceed $46 billion hinges on further AI integration and international expansion. The company is already testing AI-driven embedded finance solutions in markets like the UK and Australia, where regulatory frameworks are more favorable. Additionally, Affirm’s focus on “AI-enabled products” suggests a pipeline of innovations, such as predictive spending analytics and automated credit limit adjustments, which could differentiate it from rivals like Klarna and Afterpay.

Conclusion

Affirm’s AI-driven model is reshaping the BNPL landscape by combining growth with profitability. By leveraging machine learning to optimize offers, underwrite risk, and personalize customer experiences, the company is building a durable competitive moat. For investors, the Q4 2025 results and 2026 guidance signal a transition from high-growth experimentation to scalable, margin-positive execution—a rare combination in fintech.

Source:
[1] Affirm Q4 2025 slides: 43% GMV growth and operating profit milestone [https://www.investing.com/news/company-news/affirm-q4-2025-slides-43-gmv-growth-and-operating-profit-milestone-93CH-4215440]
[2] Affirm Reports Record Q4 Growth [https://www.aol.com/finance/affirm-reports-record-q4-growth-223234621.html]
[3] Affirm Experiences Record Growth in Q4 2025, Eyes Expansion in International Markets and AI-Driven Products [https://www.ainvest.com/news/affirm-experiences-record-growth-q4-2025-eyes-expansion-international-expansion-ai-driven-products-2508/]
[4] Affirm (AFRM) Q4 2025 Earnings Call Transcript [https://www.fool.com/earnings/call-transcripts/2025/08/28/affirm-afrm-q4-2025-earnings-call-transcript/]
[5] Affirm GMV Jumps 43% in Fiscal Q4 [https://www.theglobeandmail.com/investing/markets/stocks/AFRM/pressreleases/34464116/affirm-gmv-jumps-43-in-fiscal-q4/]
[6] Affirm’s Quiet Revolution: How Embedded Finance and ... [https://www.ainvest.com/news/affirm-quiet-revolution-embedded-finance-strategic-alliances-fueling-long-term-growth-2508/]