Affirm’s Strategic Resilience: A Path to Profitability and Dominance in the BNPL Sector

Affirm’s recent earnings reveal a company in full command of its destiny. With 36% year-over-year GMV growth to $8.6 billion in Q3 2025 and a 53% improvement in unit economics, Affirm is not just expanding—it’s redefining the buy-now-pay-later (BNPL) sector. Amid market skepticism, its focus on value over short-term monetization, coupled with partnerships that drive scalability, positions it to achieve GAAP profitability by Q4 2025 while building a defensible moat against competitors. This is a buy for investors willing to look past near-term volatility.

Unit Economics: The Foundation of Affirm’s Playbook

Affirm’s 53% YoY improvement in unit economics—measured by Revenue Less Transaction Costs (RLTC)—is the clearest signal of its operational maturity. By retaining more loans on its balance sheet and shifting toward long-term installment plans (85% of volume), Affirm has optimized returns while avoiding the “junk fee” traps of peers like Klarna. Its 0% APR offerings, which drive 90% repeat usage and attract prime-tier borrowers, are a masterstroke: they reduce cart abandonment by 28%, boost average order values by 70%, and ensure high repayment rates.

This focus on quality over quantity is paying off. In Q3, RLTC hit $340 million, far above its $280–$300 million guidance. With AI-driven underwriting refining risk assessment and operational leverage scaling efficiencies, Affirm’s path to $1.2 billion RLTC by year-end—and profitability—is mathematically clear.

Partnerships: Scaling Without Sacrificing Margins

Affirm’s partnerships are its secret weapon. The Costco deal—offering its flexible payment plans to 60 million U.S. members—adds a trusted retail anchor to its ecosystem. Similarly, the UATP travel partnership unlocks a $11 trillion market, where Affirm’s 0% APR plans already drive 40% YoY travel GMV growth. These alliances aren’t just about volume; they’re about access to high-margin, repeatable transactions in sectors where cart abandonment is costly.

The Affirm Card, with 2 million active cardholders and 115% GMV growth, further solidifies its direct-to-consumer moat. Unlike competitors reliant on short-term loans and hidden fees, Affirm’s card holders are loyal advocates, generating 70% of its GMV. This flywheel of engagement—80% of users return within 90 days—ensures sustainable growth.

Why the Market Misses the Opportunity

Affirm’s post-earnings dip—9.5% in one day—reflects investor anxiety over macroeconomic risks and competition. Yet Affirm’s credit models are stress-tested for downturns, and its repayment rates remain robust. Meanwhile, its $2.8 billion revenue run rate and $1.2 billion RLTC target are achievable without compromising margins.

The BNPL sector’s $1.43 trillion 2029 forecast is a tailwind. Affirm’s focus on premium verticals (travel, fashion) and its fee-free model—which builds trust rather than extracting hidden fees—will keep it ahead as regulators crack down on opaque pricing.

The Case for Immediate Investment

At a 4.32x price-to-book ratio, Affirm is undervalued relative to its growth trajectory and profitability path. The stock’s correction post-earnings creates a buy opportunity at a time when its unit economics and partnerships are accelerating.

Investors should prioritize Affirm for its:
- Defensible unit economics vs. fee-heavy peers.
- Strategic access to high-margin markets via Costco and UATP.
- Consumer stickiness through 0% APR and the Affirm Card.

Conclusion: A Leader in Transition

Affirm’s execution is undeniable. By prioritizing long-term value over short-term gains, it’s building a BNPL leader with a moat of loyalty, margins, and scalability. With GAAP profitability in sight and a market skeptical of its trajectory, now is the time to position for what comes next. Buy Affirm—the path to profit is clear, and the payoff is worth the wait.

The BNPL sector is consolidating. Affirm isn’t just surviving—it’s becoming the standard.