Why Affirm’s Strong Q4 Earnings Signal a Turning Point for BNPL Stocks

The buy-now-pay-later (BNPL) sector has long been criticized for prioritizing rapid user acquisition over profitability, with skeptics questioning its sustainability in a maturing market. Affirm’s Q4 2025 earnings, however, challenge this narrative. The company not only returned to profitability—posting a $0.20 GAAP diluted earnings per share (EPS) after a $0.14 loss in Q4 2024—but also demonstrated scalable growth, with gross merchandise volume (GMV) surging 43% to $10.4 billion and active consumers rising 24% to 23 million [1]. These results suggest a pivotal shift: BNPL is evolving from a high-growth experiment to a sector capable of disciplined, margin-expanding expansion.

The Mechanics of Affirm’s Turnaround

Affirm’s success stems from a combination of strategic product innovation and operational discipline. The Affirm Card, launched in 2023, has become a linchpin of its growth strategy. By Q4 2025, card GMV had grown 132% year-over-year to $1.2 billion, with active cardholders nearing 2.3 million [2]. This product not only diversifies Affirm’s revenue streams but also deepens customer engagement, as cardholders tend to transact more frequently and in higher volumes.

Equally critical has been Affirm’s deployment of artificial intelligence (AI). The company’s AdaptAI platform, which dynamically tailors offers to consumer behavior, boosted GMV by 5% for participating merchants [3]. Meanwhile, AI-driven underwriting and risk management helped maintain a 95% repeat transaction rate and credit performance metrics aligned with historical averages, even as the user base expanded [4]. These tools have enabled Affirm to scale without compromising credit quality—a rare feat in consumer finance.

A Sector-Wide Implication

Affirm’s profitability is not an isolated achievement but a harbinger for the broader BNPL sector. For years, BNPL firms were valued primarily on user growth, with little emphasis on margins. Affirm’s Q4 results, however, show that profitability is achievable through a combination of product diversification, technological innovation, and disciplined credit policies. This has significant implications for the sector’s valuation models.

Consider the numbers: Affirm’s adjusted operating margin rose to 27.0% in Q4 2025, up 4.3 percentage points from the prior year [1]. This margin expansion, driven by AI-driven efficiency and higher-margin products like the Affirm Card, suggests that BNPL companies can now compete with traditional financial institutions on profitability. Moreover, Affirm’s ability to offset the loss of a major partner (Walmart) by securing contracts with Amazon, Shopify, and Apple underscores the sector’s resilience and the growing acceptance of BNPL as a mainstream payment method [5].

Risks and Realities

Despite these positives, challenges remain. Regulatory scrutiny of BNPL’s debt risks—particularly its lack of visibility in credit scores—could intensify [6]. Additionally, competition from traditional credit products, such as 0% interest cards, is growing [7]. Yet Affirm’s focus on financial wellness tools and its ability to maintain a 10% attach rate (the percentage of transactions using BNPL) suggest it is addressing these concerns proactively.

The broader BNPL market is also maturing. While global BNPL GMV is projected to grow at a 27% compound annual rate through 2033 [8], Affirm’s Q4 performance indicates that the sector’s next phase will be defined by margin expansion rather than pure volume growth. This aligns with broader fintech trends, where AI and data analytics are reshaping competitive dynamics.

Conclusion

Affirm’s Q4 2025 earnings represent more than a quarterly win—they signal a structural shift in the BNPL sector. By proving that profitability and growth can coexist, Affirm has redefined expectations for the industry. For investors, this raises a compelling question: Can other BNPL firms replicate this model, or will Affirm’s disciplined approach give it a lasting edge? The answer may determine the sector’s long-term trajectory.

Source:
[1] Affirm GMV Jumps 43% in Fiscal Q4 [https://www.nasdaq.com/articles/affirm-gmv-jumps-43-fiscal-q4]
[2] Affirm's AI-Driven Growth and Profitability: A New Era for Buy-Now-Pay-Later [https://www.ainvest.com/news/affirm-ai-driven-growth-profitability-era-buy-pay-2508/]
[3] Affirm Q4 2025 slides: 43% GMV growth and operating profit milestone [https://www.investing.com/news/company-news/affirm-q4-2025-slides-43-gmv-growth-and-operating-93CH-4215440]
[4] Affirm Reports Record Q4 Growth [https://www.mitrade.com/insights/news/live-news/article-8-1077814-20250829]
[5] Affirm Holdings (AFRM) Reports Q4 Earnings [https://finance.yahoo.com/news/affirm-holdings-afrm-reports-q4-220002452.html]
[6] Who Bears the Risk of 'Buy Now, Pay Later'? - BNPL [https://www.morganstanley.com/insights/articles/buy-now-pay-later-trends-2025]
[7] Buy Now Pay Later Statistics (2025): Market Share & Trends [https://capitaloneshopping.com/research/buy-now-pay-later-statistics/]
[8] Buy Now Pay Later (BNPL) Market Size, Shares, Business Growth [https://www.openpr.com/news/4161007/buy-now-pay-later-bnpl-market-size-shares-business-growth]