What's Happening?
Affirm has reported a significant increase in its Q4 2025 earnings, marking a pivotal shift from historical losses to profitability in the buy-now-pay-later (BNPL) sector. The company achieved earnings of $0.20 per share, surpassing the estimated $0.11, and saw a 33% rise in revenue to $876.4 million. This growth was driven by a 43% increase in Gross Merchandise Volume (GMV) to $10.4 billion, supported by strategic partnerships with major platforms such as Apple Pay, Amazon, and Shopify. Affirm's success is attributed to its 0% APR loan strategy, which has fueled a 44% year-over-year increase in loan growth. The company has also optimized its operations through AI-driven tools, reducing costs and improving credit quality.
Why It's Important?
Affirm's strong performance highlights its ability to scale profitably in a competitive BNPL landscape, where rivals like Klarna and Afterpay are also vying for market share. The company's strategic shift towards interest-free products aligns with consumer preferences, particularly among Gen Z and Millennials, enhancing its conversion rates to interest-bearing products. Affirm's operational scalability, bolstered by AI-driven tools, has improved its unit economics and operating margins. The success of the Affirm Card, with a 136% year-over-year growth in active cardholders, reflects Affirm's broader strategy to transition from transactional BNPL to a diversified financial services platform.
What's Next?
Affirm's guidance for Q1 2026 projects revenue between $855 million and $885 million, with GMV expected to reach $10.1 billion to $10.4 billion. The company anticipates adjusted operating margins to exceed 26.1% in fiscal 2026, demonstrating confidence in sustaining its growth momentum. Affirm's strategic international expansion and partnerships are expected to continue opening new revenue streams, positioning the company to thrive in the maturing BNPL sector.
