Affirm’s Q4 Earnings Outperformance and Strategic Momentum in the BNPL Space

Affirm’s Q4 2025 earnings report marked a pivotal moment for the buy-now-pay-later (BNPL) sector, showcasing a dramatic shift from historical losses to profitability. The company delivered $0.20 per share in earnings, far exceeding the estimated $0.11, while revenue surged 33% to $876.4 million, surpassing expectations [1]. Gross Merchandise Volume (GMV) soared 43% to $10.4 billion, driven by strategic product diversification and partnerships with major platforms like Apple Pay, Amazon, and Shopify [5]. This performance underscores Affirm’s ability to scale profitably in a competitive landscape where rivals like Klarna and Afterpay are also vying for market share.

A key driver of Affirm’s success is its 0% APR loan strategy, which now accounts for 85% of its longer-term offerings. These interest-free products have fueled a 44% year-over-year increase in loan growth, with 50% of first-time users in Q2 2025 originating from these offerings [1]. The shift aligns with consumer preferences for no-interest financing, particularly among Gen Z and Millennials, and has enabled Affirm to maintain high conversion rates to interest-bearing products [4]. This dual approach—balancing low-margin BNPL transactions with higher-margin credit products—has strengthened unit economics. For instance, Affirm’s RLTC margin (revenue less transaction costs) reached 4.1% in Q2 2025, exceeding its long-term target of 3%–4% [1].

Operational scalability is further bolstered by AI-driven tools and vertical integration. Affirm’s AdaptAI platform has optimized underwriting and collections, reducing costs by up to 50% and improving credit quality [4]. Delinquency rates have stabilized near pre-pandemic levels, with recent cohorts tracking toward 3.5% net charge-offs [2]. Additionally, the company’s decision to phase out the Walmart partnership (5% GMV) in favor of expanding to 360,000 merchants has diversified revenue streams and improved operating margins [1]. By Q4 2025, Affirm’s operating margin had expanded to 27.0%, up 4.3 percentage points from the prior year [1].

Affirm’s Affirm Card has emerged as a cornerstone of long-term profitability. Active cardholders grew 136% YoY to 1.7 million, generating $845 million in GMV during Q2 2025 [3]. This product line offers recurring revenue and higher customer lifetime value (LTV), with cardholders exhibiting a 95% repeat transaction rate [3]. The card’s success reflects Affirm’s broader strategy to transition from transactional BNPL to a diversified financial services platform, a move that aligns with the global BNPL market’s projected growth to $560.1 billion in 2025 [5].

Despite intensifying competition, Affirm’s disciplined approach to risk management and regulatory alignment positions it to outperform. Its customer acquisition cost (CAC) of $43.58 in 2025 is significantly lower than the fintech industry average of $1,450, driven by AI-powered efficiency and strong retention rates [1]. Meanwhile, strategic international expansion into markets like the UK and partnerships with platforms like Shopify and Apple Pay are opening new revenue streams [3].

Looking ahead, Affirm’s guidance for Q1 2026—revenue of $855–$885 million and GMV of $10.1–$10.4 billion—signals confidence in sustaining momentum [1]. With adjusted operating margins forecasted to exceed 26.1% in fiscal 2026 [5], the company is demonstrating the scalability and profitability required to thrive in a maturing BNPL sector.

Source:
[1] Affirm's Earnings Surge and Strategic Shifts Signal a Tipping Point for BNPL 2.0 [https://www.ainvest.com/news/affirm-earnings-surge-strategic-shifts-signal-tipping-point-bnpl-2-0-2508]
[2] Affirm: the profitable growth breakthrough Wall Street missed [https://linas.substack.com/p/fintechpulse904]
[3] Affirm Q2 2025 financial results and international expansion [https://investors.affirm.com/news-releases/news-release-details/affirm-reports-second-fiscal-quarter-2025-results]
[4] Fintech Valuation Multiples: 2025 Insights & Trends [https://www.finrofca.com/news/fintech-revenue-multiples-2025]
[5] Buy Now Pay Later Global Business Report 2025: BNPL Payments to Grow by 13.7% to Surpass $560 Billion This Year [https://www.fintechfutures.com/press-releases/buy-now-pay-later-global-business-report-2025-bnpl-payments-to-grow-by-13-7-to-surpass-560-billion-this-year-driven-by-klarna-afterpay-paypal-and-affirm-forecast-to-2030]
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