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Affirm Holdings Q4 2025 Earnings: Strong Profitability

August 28, 2025

Executive Summary

Affirm Holdings (NASDAQ:AFRM) reported its Q4 2025 earnings on August 28, 2025, showcasing robust BNPL growth. The company achieved ✔ $0.20 EPS, nearly double the analyst estimate of $0.11, driven by strong gross merchandise volume (GMV) and operational efficiencies. Revenue reached ✔ $876 million, surpassing expectations of $837 million, fueled by a 43% GMV increase.

However, operating expenses rose ✘ 25% YoY, driven by increased technology and marketing costs. Competitive pressures from rivals like Klarna and potential regulatory scrutiny in the BNPL sector remain concerns.

Stock analysis highlights Affirm’s BNPL growth momentum, tempered by competitive pressures.

Summary of Beats, Misses, and Forward Guidance

1. Q4 2025 Financial Performance

Affirm Holdings demonstrated strong financial performance in its Q4 2025 earnings, driven by robust consumer adoption:

• Total Revenue: ✔ $876 million, up 33% YoY from $659 million, beating estimates of $837 million due to strong GMV growth.
• Gross Merchandise Volume: ✔ $10.4 billion, up 43% YoY from $7.2 billion, driven by increased Affirm Card adoption and partnerships.
• EPS: ✔ $0.20, compared to a loss of $0.14 YoY, beating estimates of $0.11, supported by operational efficiencies and higher margins.
• Operating Margin: ✔ 23%, up from 21.6% estimated, reflecting disciplined cost management and higher transaction volumes.
• Operating Expenses: Up 25% YoY to $614 million, driven by investments in technology, AI, and marketing to support growth initiatives.
• Active Consumers: Increased 20% YoY to 22 million, boosting transaction frequency through loyalty and promotional strategies.

2. Growth Drivers for BNPL Growth

Affirm’s BNPL growth is driven by strategic initiatives enhancing consumer and merchant adoption:

• Affirm Card Adoption: 115% GMV growth YoY, with active cardholders doubling, driving higher transaction volumes across retail categories.
• Strategic Partnerships: Deals with Apple, Amazon, and Shopify expanded market reach, contributing significantly to GMV and revenue growth.
• 0% APR Loans: 44% YoY increase in zero-interest loans, attracting prime customers and boosting merchant conversion rates effectively.
• AI and Machine Learning: Enhanced customer experience and fraud detection, improving operational efficiency and reducing transaction risks for merchants.

Affirm Card adoption fuels Affirm’s BNPL growth success.

3. Valuation and Market Reaction

Affirm’s stock responded strongly to the earnings report:

• Market Reaction: Shares surged ✔ 15% in after-hours trading, closing at $83.94, driven by strong EPS and revenue beats.
• Valuation: Forward P/E of ~35x, attractive for growth investors, though tempered by high debt-to-equity ratio of 2.55.
• Market Cap: Approximately $25.9 billion, reflecting Affirm’s strong position in the BNPL market amid competitive dynamics.

4. Competitive Pressures

Affirm faces headwinds from competitive pressures in the BNPL sector:

• Rival Platforms: ✘ Klarna and Afterpay challenge Affirm with aggressive pricing and merchant partnerships, pressuring market share.
• Walmart Partnership Loss: ✘ Shift to Klarna reduces Affirm’s exposure to a key retail partner, impacting GMV growth potential.
• Regulatory Scrutiny: ✘ Potential BNPL regulations could increase compliance costs and limit operational flexibility in key markets.

5. Q1 2026 Forward Guidance

Affirm’s Q1 2026 outlook reflects confidence in sustained growth:

• Revenue: Forecasted at ✔ $855 million to $885 million, above estimates of $841 million, driven by strong GMV momentum.
• Gross Merchandise Volume: Expected at $10.1 billion to $10.4 billion, reflecting continued Affirm Card and partnership growth.
• Operating Margin: Projected at 23% to 25%, stable with Q4, supported by operational efficiencies and scale.
• EPS: Not explicitly guided, but implied positive EPS, aligning with profitability goals by Q4 2025.

Affirm’s guidance reflects BNPL growth momentum despite competitive risks.

6. Competitive Landscape for Stock Analysis

Affirm operates in a competitive BNPL environment:

• BNPL Competitors: ✘ Klarna and Afterpay offer lower-cost financing options, challenging Affirm’s pricing and market share.
• E-commerce Giants: ✘ Amazon’s own BNPL solutions compete directly, leveraging its vast merchant and consumer base.
• Advantage: Partnerships with Apple and Shopify provide Affirm a competitive edge in premium retail and e-commerce channels.

7. Risks and Challenges for Investors

Key risks impacting Affirm’s performance include:

• Competitive Pressures: ✘ Intensifying rivalry from Klarna and Afterpay could erode margins and GMV growth in key markets.
• Regulatory Risks: ✘ Potential BNPL regulations may increase compliance costs, impacting profitability and operational flexibility.
• Consumer Spending: ✘ Economic slowdowns could reduce discretionary spending, lowering demand for BNPL services.
• Debt Levels: ✘ Debt-to-equity ratio of 2.55 raises financial risk, especially if interest rates rise or growth slows.
• Operating Costs: ✘ 25% YoY expense increase may pressure margins if GMV growth does not outpace cost escalation.

Investors must balance Affirm’s BNPL growth with competitive and regulatory risks.

8. Industry Impact of Affirm’s Performance

Affirm influences the BNPL sector with its strategic initiatives:

• Merchant Adoption: 0% APR loans drive merchant conversions, encouraging competitors to adopt similar promotional strategies.
• Consumer Trends: Affirm Card growth sets a standard for integrated BNPL solutions, pushing rivals to enhance their offerings.

9. Guidance to Investors

Q4 2025 earnings present opportunities with caution:

• Growth Investors: ✔ Consider Affirm for its ~35x forward P/E and strong GMV growth, but monitor competitive pressures from Klarna.
• Risk-Averse Investors: ✔ Diversify with stable tech firms like Apple to mitigate Affirm’s ✘ regulatory risks.
• Opportunistic Investors: ✔ Capitalize on dips, as seen with the ✔ 15% after-hours surge, but prepare for volatility tied to consumer spending.
• Hedging Strategies: ✔ Use protective puts to manage ✘ 3.63 beta volatility, especially during earnings seasons.
• Regulatory Monitoring: ✘ Track BNPL regulatory developments, which could increase compliance costs and impact growth.
• Economic Sensitivity: ✘ Evaluate inflation’s impact on consumer spending, affecting Affirm’s transaction volumes.

Balance Affirm’s BNPL growth with competitive pressures.

10. Conclusion

Affirm’s Q4 2025 earnings, with ✔ $0.20 EPS and ✔ $876 million revenue, underscore robust BNPL growth, driven by Affirm Card adoption.

✘ Rising operating expenses and competitive pressures reflect challenges in maintaining profitability amid growth.

Affirm advances its BNPL growth, but success depends on overcoming competitive and regulatory hurdles.

11. Disclaimer

This stock analysis is for informational purposes only and does not constitute financial, investment, or legal advice. Investors should conduct due diligence and consult a financial advisor. Affirm’s stock faces risks from competitive pressures, regulatory scrutiny, consumer spending trends, high debt levels, and rising operating costs, which could impact performance. Past performance is not indicative of future results. Qunatical assumes no liability for losses from actions based on this analysis.

Affirm’s ✔ EPS and revenue beats and BNPL growth are offset by ✘ rising expenses and competitive pressures, requiring cautious navigation for investors.