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Quarterly results topped expectations

Affirm reported earnings for its fiscal fourth quarter ended June 30 that came in above market forecasts. Revenue rose 33% year on year to $1.17 billion, and the stock saw only a modest reaction in trading on August 28 despite the strong results.

The buy now, pay later company’s GMV rose 36% to $14.1 billion, beating expectations of $13.39 billion. Adjusted operating income came in at $353 million, with the margin reaching 30%, while the GAAP operating margin widened by 6 percentage points to 12.6%. For the full fiscal year, GMV climbed to $50.2 billion, while revenue was reported at $4.26 billion.

What did user growth and credit quality show?

Growth was also reflected in user metrics. The number of active consumers rose 21% from a year earlier to 27.8 million, while transactions per active user increased 20% to 7.0. Active users of the Affirm Card more than doubled to 5.2 million.

  • The 30-day delinquency rate fell to 2.5% from the 2.7%-2.8% range seen in the previous three quarters.
  • New president Michael Linford said the company has now delivered GMV growth of more than 30% for 11 straight quarters.
  • Under its partnership with Shopify, Shop Pay Installments was rolled out in Australia after last year’s expansion in the United Kingdom.

Management’s cautious tone pointed to the consumer backdrop

Despite the strong financial picture, CEO Max Levchin pointed to financial pressure on U.S. consumers. Levchin said shoppers are managing spending more carefully because of different inflation pressures, which is helping drive demand for tools like Affirm.

In comments to CNBC, Levchin said, "The U.S. consumer is seeing higher gasoline prices."

As of August 28, the average U.S. gasoline price stood at $4.09 per gallon. That was below the levels above $4.50 seen in May, but prices have not fallen below $3 since March 2. Levchin also stressed that persistent price pressure does not point to a healthy long-term backdrop.

Market impact: strong growth, but valuation debate continues

Signals in the broader macro picture are also shaping the consumer outlook. Annual inflation came in at 3.7% in July, while the personal consumption expenditures index watched by the Federal Reserve rose 0.2% month on month. Gains in personal income and spending are keeping rate and demand expectations in focus ahead of the Fed’s September meeting.

Analysts were split. James Friedman of Susquehanna raised his price target from $105 to $110, calling the company’s fiscal 2027 guidance strong. James Faucette of Morgan Stanley also stayed positive on the company, but argued that the valuation is broadly in line with peers given its growth. Hedge fund ownership fell from 61 to 57 in the latest quarter, while short interest stood at 4.96% and the forward price-to-earnings ratio was 40.16.

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