Affirm Defies Credit Fears With Big Beat—But Can It Hold the Line at $65?

Affirm (AFRM) delivered a clean beat-and-raise that threads the needle between growth and discipline—exactly what BNPL skeptics said would be hard to sustain this late in the cycle. Fiscal Q1 revenue rose 34% to $933 million (vs. ~$882–$884 million consensus) and EPS printed $0.23 (vs. $0.11 est.), with EBIT of $64 million (vs. $25 million est.). GMV jumped 42% to $10.8 billion, powered by its 0% APR products, continued adoption of the Affirm Card, and distribution via payment-service-provider (PSP) partners. Management nudged guidance higher, including operating margin now “more than 7.5%” for the year (prior “more than 6%”) and reaffirmed the long-stated goal of keeping revenue-less-transaction-costs (RLTC) around a 3–4% band, with 4% the upper bound. The quarter also came with a strategically important extension of the U.S. Amazon partnership through January 2031, plus another ABS deal and added forward-flow capacity—useful ballast if markets get choppy.

Credit is the fulcrum of the BNPL debate, and Affirm’s read remains steady rather than euphoric. Management said consumers are “borrowing, paying us back, shopping fairly healthily,” and they “do not see any loss of repayment.” The data line up: 30+ day delinquencies (excluding Peloton and Pay-in-X) fell 4 bps year over year and rose 45 bps quarter over quarter—seasonal normalization that tracks historical patterns. Recent monthly-installment cohorts continue to point to ~3.5% ultimate net charge-offs, consistent with prior vintages. Mix matters here: the share of 0% APR loans increased to 28% from 25% a year ago, and 0% APR products carry a lower credit-risk profile. In plain English, product mix and underwriting (including cash-flow underwriting for younger cohorts) are offsetting late-cycle nerves you’re seeing in other consumer buckets—especially auto—where delinquencies have climbed.

Funding flexibility was another bright spot. Capacity increased to $26.6 billion, which the company believes supports more than $60 billion in annual GMV on a roughly 5-month weighted-average duration. In September, Affirm printed its largest ABS to date ($1.1 billion) at the lowest weighted-average yield since FY’22 and, notably, with a three-year revolving period—reducing near-term refinancing risk. Forward-flow capacity grew by roughly $500 million as relationships with large insurers deepened and a new asset manager onboarded; warehouse capacity expanded by $300 million, and advance rates improved with a bank partner thanks to predictable credit performance. If credit is the fulcrum, funding is the hinge—both looked sturdier this quarter.

Unit economics and operating leverage also improved. RLTC landed around 4.2% in the quarter (management’s reiterated upper bound is 4%), and adjusted operating income reached $264 million, a 28% margin versus 19% a year ago. The margin lift was driven by a $170 million increase in RLTC dollars and operating expense discipline (sales and marketing fell year over year largely due to warrant amortization rolling off). Technology and data costs rose in line with a 52% increase in transaction count—investment that supports Card growth, wallet integrations, and international work streams like the U.K. with Shopify.

On the growth side, momentum remains broad-based—not just a one-merchant story. GMV from 0% APR products grew 64% and 0% APR monthly installment GMV rose 74% as more than 40,000 merchants funded offers; roughly 95% of 0% APR monthly installment GMV at integrated merchants is merchant-funded. Direct-to-consumer GMV grew 53% to $3.2 billion, with Affirm Card GMV up 135% to $1.4 billion; in-store Card usage surged 170%. Active cardholders more than doubled to 2.8 million; active consumers reached 24.1 million (+24% y/y), the seventh straight quarter of accelerating growth. Concentration risk nudged lower as GMV from the top five partners declined to 44% from 47% a year ago, even as those partners still grew strongly (+33%).

Guidance threads caution with confidence. Q2 revenue is guided to $1.03–$1.06 billion (roughly in line at the midpoint) with EBIT around $78 million, and GMV of $13.0–$13.3 billion. For the full year, revenue of ~$4.0 billion and EBIT of ~$299 million imply continued operating leverage as RLTC dollars scale. Management reiterated that the 4% RLTC cap is about optimizing long-term growth and profitability, not squeezing take rates in the short run. Translation: they’ll spend RLTC “headroom” to win durable distribution and better cohorts.

So why the stock wobble around the print? Two things. First, BNPL remains a lightning rod in a market suddenly twitchy about consumer credit—especially with headline fatigue from auto delinquencies and a softening labor narrative. Second, AFRM’s tape has carved a descending triangle in recent weeks as investors positioned for a credit scare that didn’t show up in the data. Shares dipped on the open despite the beat/raise, then reclaimed losses. Technically, the 200-day moving average near $65 is the line in the sand. A decisive test is likely; a hold could reset the pattern and invite momentum back toward the mid-70s, while a break would risk a slide toward prior volume shelves. For traders, the setup is unusually clean: defined risk at/just below the 200-day; for longs, confirmation requires both the hold and follow-through.

Risks bear watching. RLTC can be lumpy quarter to quarter due to capital-markets activity and product mix; seasonality will keep near-term delinquency compares noisy. Macro remains a swing factor: a more pronounced slowdown or a sharper rise in unemployment would test BNPL’s resilience despite better underwriting and merchant-funded 0% APR. Regulatory scrutiny is the wild card every BNPL model carries.

Bottom line: AFRM’s quarter argues the model is scaling with improving quality—growth diversified across products and channels, credit metrics stable, and funding breadth expanding. In a market fretting about late-cycle consumer cracks, that combination is rare. The narrative now shifts to the chart: all eyes on the 200-day at $65 to see if fundamentals can overpower fear of the pattern.