Affirm Stock Pops on Surprise Q2 Revenue Beat

Affirm Holdings, Inc. (NASDAQ: AFRM), the provider of buy now, pay later (BNPL) loans, reported better-than-expected fiscal second-quarter results on Thursday, sending its stock price up more than 10% in extended trading. The company's revenue and earnings per share (EPS) both exceeded analysts' consensus estimates, while its gross merchandise volume (GMV) reached a new high.

Here's a breakdown of Affirm's Q2 performance and the key factors driving its stock price increase:

1. Revenue Beat: Affirm reported Q2 revenue of $866 million, surpassing the average estimate of $807 million. This represents a 47% year-over-year increase from the $591 million reported in the same quarter last year. The company's revenue growth has been accelerating, with the most recent year (2023 to 2024) showing the highest growth rate since 2020.
2. GMV Surpasses $10 Billion: Affirm's GMV for the quarter was $10.1 billion, topping the average estimate of $9.64 billion and surpassing $10 billion for the first time. This key industry metric helps gauge the total value of transactions processed through the platform and indicates strong consumer demand for Affirm's services.
3. Strong Unit Economics: Affirm's revenue grew at a faster rate than its GMV, suggesting strong unit economics. Revenue less transaction costs (RLTC) jumped 73% to $419 million, with an RLTC margin of 4.1% – ahead of the company's long-term range of 3% to 4%.
4. Growth in Active Consumers and Merchants: Affirm reported a 23% year-over-year increase in active consumers to 21 million, and a more than 136% increase in active users of the Affirm Card to 1.7 million. This growth in user base contributed to the revenue beat. Additionally, the company's new relationship with Apple, along with other partnerships with Amazon and Shopify, has boosted results.
5. Positive Guidance: Affirm expects revenue this quarter to be between $755 million and $785 million, with a midpoint of $770 million. This is in line with the average estimate of $772 million, indicating continued strong performance.