Affirm Stock Surges 12% on Surprise Profit, Revenue Beat

Affirm Holdings, Inc. (AFRM) shares surged 12% in after-hours trading on Thursday, following the company's fiscal 2025 second quarter earnings report. The buy now, pay later (BNPL) company reported a surprise profit and revenue beat, driven by strong holiday shopping season performance and increased market share.

In the three months ending December 31, Affirm's revenue increased 46.6% year over year to $866 million, topping analysts' expectations of $807 million. The company also swung to a net profit of 23 cents per share from a loss of 54 cents per share in the year-ago period, surpassing the consensus estimate of a 15-cent per share loss.

Affirm's gross merchandise volume (GMV) grew 34.7% year over year to $10.1 billion, beating analysts' expectations of $9.6 billion. The company's active merchants increased by 19% to 303,000, while total transactions soared 42% to 24.7 million.

Contributing to this strong performance was another record-setting holiday shopping season, with several standout categories such as third-party marketplaces (up 44%) and travel (up 42%). Affirm's unique partnerships, broad and growing adoption of its card, and increased popularity of its 0% APR product (up 70%) also drove increased market share.

For its fiscal third quarter, Affirm expects to achieve revenue in the range of $755 million to $785 million, with the midpoint of $770 million just short of the $772 million in revenue Wall Street is anticipating. The company also provided a more detailed forecast for its full-year guidance, calling for GMV in the range of $34.74 billion to $35.34 billion and revenue of $3.13 billion to $3.19 billion.

Affirm's CEO, Max Levchin, stated, "Affirm is in the strongest shape it's ever been. Challenges met, competitors bested: excellent growth in a rapidly expanding segment, on-target unit economics, robust operating leverage."



Wall Street is mostly bullish on Affirm's stock, with the average analyst target price representing implied upside of about 15% to its February 6 close. The consensus recommendation is a Buy. However, financial services firm Susquehanna has a Neutral rating (equivalent to a Hold) on the large-cap stock but raised its price target to $65 from $57 following the earnings release.

Susquehanna analyst James Friedman noted that Affirm's results came in well ahead due to a variety of factors, including unique partnerships, broad and growing adoption of their card, and increased popularity of their 0% APR product that rose 70%, all of which seemingly drove increased market share. Friedman adds that going forward, Affirm will see a variety of new growth thanks to broadening merchant acceptance, a high-velocity funnel of new consumer accounts coming on file, and an attractive credit market.

However, Friedman's Neutral rating is based on valuation, suggesting that the current stock price may be overvalued. The share price has rallied too far, too fast, in his opinion.



In conclusion, Affirm's surprise profit and revenue beat, driven by strong holiday shopping season performance and increased market share, has led to a 12% surge in the company's stock price. While Wall Street is mostly bullish on the financial stock, investors should be aware of the potential risks and catalysts that could impact the stock's performance in the near to medium term, such as competition in the BNPL market, economic downturns, regulatory risks, credit risk, and dependence on merchant partnerships.