Affirm Holdings, a leading player in the buy now, pay later (BNPL) sector, has recently captured the financial spotlight. After announcing its fiscal second-quarter results, the company witnessed a significant boost in its stock price, jumping over 15% in after-hours trading on Thursday. This surge was attributed to performance metrics that significantly exceeded analysts’ expectations. Affirm’s earnings per share were reported at 23 cents, shattering the predicted loss of 15 cents. Additionally, the company’s revenue reached $866 million, surpassing the anticipated $807 million. These figures not only underscore a robust quarterly performance but also signal positive sentiment about the company’s future growth.
Another pivotal metric in Affirm’s report was the gross merchandise volume (GMV), which reached an impressive $10.1 billion. This number eclipsed the average estimate of $9.64 billion, marking the first time Affirm has surpassed the $10 billion mark in this category. When analyzing GMV growth compared to the same quarter last year, the number reflects a staggering increase of 35%. This growth suggests that the company’s service is gaining traction among consumers and merchants alike, as more participants engage with Affirm’s offerings. When revenue expansion outpaces GMV, as it did this quarter with a 47% increase from $591 million a year ago, it typically points to favorable unit economics for Affirm.
Further dissecting the numbers reveals that revenue less transaction costs (RLTC) shot up by 73%, reaching $419 million. The resulting RLTC margin stood at 4.1%, comfortably above the company’s long-term target range of 3% to 4%. Such performance illustrates that Affirm’s operational efficiency is on an upward trajectory, suggesting the management team is adeptly navigating the complexities of their financial landscape. During an interview with CNBC, Chief Financial Officer Rob O’Hare highlighted a one-off gain of $60 million due to a strategic move related to the repurchase of convertible debt. However, he emphasized that the company’s positive trajectory is primarily driven by solid business fundamentals, rather than isolated financial maneuvers.
As Affirm navigates the current quarter, the company has projected revenues between $755 million and $785 million, with an average estimate pointing towards $772 million. This forward-looking guidance indicates cautious optimism about maintaining a consistent growth rate, despite potential market uncertainties. Affirm has reiterated its commitment to achieving profitability on a Generally Accepted Accounting Principles (GAAP) basis by the end of its fiscal fourth quarter in 2025, adding to the confidence that investors may find reassuring.
One of the most encouraging signs for Affirm’s growth trajectory is the significant uptick in its active consumer base, which soared 23% year over year to 21 million users. The Affirm Card, a vital component in the company’s strategy to boost customer engagement, is gaining traction, with 1.7 million active users—an impressive 136% increase from the previous year. These figures demonstrate that Affirm is not only attracting new customers but also enhancing product adoption among existing users, signaling healthy market demand for its services.
Partnerships with high-profile companies like Apple, Amazon, and Shopify further illustrate that Affirm is solidifying its market position. A notable development in July involved Apple announcing that U.S. Apple Pay users could apply for loans directly through Affirm’s platform on their iPhones and iPads. Additionally, the quarter experienced a surge in 0% interest loans, highlighting a trend where merchants and manufacturers subsidize borrowing costs to drive consumer purchases. According to Libor Michalek, Affirm’s president, this culture of growth-oriented promotions from merchants underscores the increasing trust in BNPL services as a viable payment option.
Affirm’s latest financial results serve as a testament to its resilience and adaptability in a highly competitive financial services landscape. By effectively leveraging partnerships and innovating its product offerings, the company is not only solidifying its existing consumer base but also positioning itself for future growth. As Affirm strives to maintain its momentum and work toward GAAP profitability, investors and analysts alike will be watching closely to see how it navigates the challenges and opportunities ahead.