Affirm GMV Jumps 43% in Fiscal Q4

Affirm (AFRM 3.08%) reported its earnings for the quarter ending June 30, 2025, on August 28, 2025. The company delivered strong results in Q4 fiscal 2025, highlighted by a return to profitability. Earnings per diluted share reached $0.20, reversing a loss of $0.14 per share in the same quarter last year. Revenue climbed to $876 million, up from $659 million a year earlier, exceeding the high end of analyst estimates for revenue. Gross merchandise volume reached $10.4 billion, well above previous company guidance. The quarter stood out for growth in key operating metrics and expanding profitability margins.

What Affirm Does, and What Drives Its Success

Affirm is a financial technology company that lets consumers pay for purchases over time using installment loans, often at a 0% annual percentage rate (APR). Its platform combines payment technology, partnerships with merchants, and risk assessment algorithms to power its buy-now-pay-later service. For shoppers, Affirm offers an alternative to credit cards. For merchants, it provides a way to boost sales and customer satisfaction by enabling point-of-sale financing.

Recently, Affirm has focused on expanding its merchant and consumer network, growing its product lineup, and investing in technology. The company relies on advanced risk management and new checkout options, such as the Affirm Card, which is both a physical and virtual payment card, and adaptive digital checkout tools. Key success factors include growing transaction volume, managing credit risk, maintaining strong merchant partnerships, and operating efficiently through automation powered by artificial intelligence.

Quarterly Developments: What Drove the Performance

This period saw growth across Affirm's main business metrics. Gross merchandise volume rose to $10.4 billion in Q4 fiscal 2025, up 43% year over year, driven by increased use from both existing and new consumers. The number of active consumers reached 23.0 million as of June 30, 2025, an increase of 24%. Transactions per active consumer climbed to 5.8 from 4.9 in the prior year, showing higher engagement with Affirm's services.

Total revenue reached $876 million, up 33% year over year. This outpaced company guidance and reflected both higher transaction activity and expanded adoption of new products, including the Affirm Card. The card, which lets users split payments or pay in full, reached 2.3 million active cardholders, nearly doubling from the prior year. Gross merchandise volume through the card segment more than doubled, rising 132%. Direct-to-consumer channels also grew, with gross merchandise volume up 61% year over year.

Profitability improved significantly. Operating income for the quarter switched to a gain of $58 million, compared to a $73 million loss in the same period last year. The adjusted operating margin reached 27.0%, an improvement of 4.3 percentage points compared to the prior year. Revenue less transaction costs, a company-defined non-GAAP metric that removes funding and processing expenses, rose 37.4% to $425.1 million, though its margin narrowed slightly as the mix of lower-yield, 0% APR loans increased.

Technology and cost control played a role in these gains. Management noted that from fiscal 2023 to fiscal 2025, headcount stayed nearly flat while the platform handled almost double the merchandise volume. Artificial intelligence in underwriting and product features supported productivity; for example, machine learning models reduced credit decision times and helped control delinquencies, while new “AdaptAI” tools increased transaction volume by 5% among adopting merchants. There were no major new product launches during the quarter, but network expansion and technology improvements remained a focus.

Inside the Business: How Affirm Works and Where It Focuses

Affirm's operations are built on a payment platform that uses cloud computing and artificial intelligence. It processes thousands of purchases every minute, allowing merchants to offer flexible payment options at checkout. The company's buy-now-pay-later installment loans are designed to appeal to budget-conscious consumers and merchants looking to drive higher sales and conversion rates.

Much of Affirm's recent growth in fiscal 2025 comes from its focus on risk management and network effects. Its credit models analyze hundreds of data points per transaction to assess risk and set terms in real time. By offering more 0% APR loans—where the merchant covers the finance charge—Affirm improves conversion rates and attracts higher-quality, lower-risk consumers, as seen in the quarter. The ability to price risk precisely helps Affirm keep default rates in check, even as it grows quickly.

Detailed Quarterly Performance: Financials, Products, and Trends

Affirm's results this period were strong across both financial and operational measures. It achieved a $0.20 profit per diluted share in Q4 fiscal 2025, up from a loss in the same period last year. Growth in revenue and gross merchandise volume outpaced expectations, thanks in part to an increase in the number of merchants (now 377,000, up 24%) and higher transaction frequency by existing consumers. The company also saw the number of transactions handled through its payment platform rise more than 50% year over year.

Revenue mix shifted further toward lower-yielding, merchant-funded 0% APR loans, which now account for 29% of gross merchandise volume, up from 25%. These loans help attract higher-spending, low-risk consumers, but their shorter duration and lower finance costs pressure margins, as seen for 0% APR monthly installment loans in the prior quarter. Despite this, Affirm’s revenue less transaction costs (non-GAAP) remained at the high end of its long-term range at 4.1% of volume. Technology expenses increased due to ongoing investment, but sales and marketing costs decreased primarily due to a decline in enterprise warrant expense.

From a product perspective, the Affirm Card segment expanded rapidly. Not only did card gross merchandise volume and active users nearly double, but in-store spending also jumped by 187%. The Affirm Card works as both a pay-now and pay-later tool, helping Affirm capture a larger share of its users’ total spend. Direct-to-consumer gross merchandise volume through the app and card also rose sharply, reaching $3.1 billion, up 61% year over year.

Credit quality improved as 30+ day delinquencies fell by 18 basis points year over year, and allowance for credit losses remained stable at 5.6%. Net charge-off rates stayed consistent with the company’s historical average at about 3.5%. Funding costs eased, with the average cost of funds dropping approximately 90 basis points year over year. Merchant concentration remains a concern, with almost half of Affirm’s gross merchandise volume generated by its top five merchant partners, representing about 46% of volume, and the company expects at least one major merchant to leave the platform by early 2026.

Looking Forward: Guidance and Expectations

Management provided financial guidance for the first quarter and full fiscal year 2026. For the next quarter, Affirm expects gross merchandise volume of $10.1 billion to $10.4 billion. Revenue for the quarter is forecast at $855 million to $885 million, or roughly 8.4% of gross merchandise volume. The company also expects an adjusted operating margin (non-GAAP) of 23% to 25% for the quarter, with a full-year margin above 26.1%.

The company’s outlook for fiscal 2026 notes that the mix of 0% APR loans will continue to grow, putting downward pressure on revenue per transaction and margins. Management also disclosed that at least one major enterprise merchant will transition off the platform by the second quarter of fiscal 2026.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.