In a rapidly evolving financial landscape, Affirm Holdings, Inc. has marked a notable resurgence with its recent fiscal second-quarter financial results. The company’s shares surged by over 15% in extended trading following the announcement of its earnings, and this excitement is well-founded given the impressive metrics that outperformed analysts’ expectations across various dimensions. With earnings per share (EPS) hitting 23 cents against an anticipated loss of 15 cents, as well as revenue soaring to $866 million compared to the expected $807 million, the figures are indicative of a company that is not just weathering economic headwinds but is poised for sustained growth.
Analyzing these results reveals that Affirm achieved a gross merchandise volume (GMV) of $10.1 billion for the quarter, which not only exceeded predictions of $9.64 billion but also marked a critical milestone, as it was the first time the company surpassed the $10 billion threshold. This represents an impressive year-over-year increase of 35%. The fact that revenue growth outpaced GMV growth—47% year-on-year compared to 35% for GMV—suggests that Affirm is cultivating robust unit economics, an essential facet for any expanding financial institution.
A deeper look at Affirm’s financial mechanics reveals that the company has successfully boosted its revenue less transaction costs (RLTC), which jumped an astounding 73% to reach $419 million, resulting in an RLTC margin of 4.1%. This is a promising figure, as it sits above the company’s long-term target of 3% to 4%, signaling effective cost management and operational efficiency. Affirm’s Chief Financial Officer, Rob O’Hare, noted that the commendable earnings were partially attributable to a $60 million gain from a strategic repurchase of convertible debt earlier in the fiscal year. However, he firmly asserted that the company’s core business operations remain the primary catalyst for this rise.
The current fiscal climate is punitive for many in the financial sector, yet Affirm seems intent on walking the line between cautious optimism and strategic risk-taking. During the latest earnings call, O’Hare reiterated the company’s guidance—projecting revenue for the next quarter to be within the range of $755 million to $785 million, with a midpoint estimate of $770 million. This forecast stays closely aligned with analyst projections, suggesting that Affirm is aiming for steady, predictable growth while maintaining its operational integrity.
Another critical component of Affirm’s success is its expanding customer base, which has grown 23% year-over-year to reach 21 million active consumers. The company’s ambitious push with its Affirm Card has yielded impressive results, noting a 136% increase in active users to 1.7 million. The doubling of card volume signifies a strengthening customer commitment, which bodes well for future revenue streams.
Affirm has established significant partnerships with industry giants such as Apple, Amazon, and Shopify, enhancing its visibility and market access. A notable initiative announced in June was the integrated loan application feature for U.S. Apple Pay users on iPhones and iPads, underscoring Affirm’s commitment to harnessing technology to streamline the consumer loan experience.
Moreover, the growth in 0% interest loans—an appealing offer for consumers—highlights an evolving strategy where merchants often subsidize borrowing costs as a means to stimulate sales. Libor Michalek, Affirm’s president, noted the tendency for merchants to adopt aggressive growth strategies during peak sales periods, implicating a possible influx of promotional activity in the forthcoming quarters.
Affirm remains committed to achieving sustained profitability, aiming for a Generally Accepted Accounting Principles (GAAP) profit by the end of its fiscal fourth quarter in 2025. The guiding metrics and operational strategies being implemented indicate a cautiously optimistic roadmap.
Affirm’s fiscal second-quarter achievements showcase not only resilience in face of external economic pressures but also the effective execution of foundational strategies designed to drive unit economics and customer growth. It will be crucial for the company to maintain this momentum, adapting its strategies as market dynamics shift, to sustain long-term success in the competitive buy-now, pay-later landscape.