Introduction & Market Context
Affirm Holdings Inc (NASDAQ:AFRM) released its fiscal third quarter 2025 earnings presentation on May 8, 2025, showcasing strong growth across key metrics while continuing to expand its consumer base and merchant partnerships. Despite the positive results, Affirm’s stock fell 7.7% in after-hours trading to $50.08, suggesting investors may have had higher expectations or concerns about future guidance.
The buy-now-pay-later (BNPL) provider reported substantial year-over-year growth in its core business while highlighting the accelerating adoption of its Affirm Card offering. The company also provided guidance for the fourth quarter and full fiscal year 2025.
Quarterly Performance Highlights
Affirm delivered robust growth across all major financial and operational metrics in the third quarter of fiscal year 2025. The company reported Gross Merchandise Volume (GMV) of $8.6 billion, representing a 36% increase compared to the same period last year.
As shown in the following chart of quarterly financial highlights, revenue grew at the same pace as GMV, reaching $783 million, up 36% year-over-year:
Active consumers increased to 21.9 million, a 23% year-over-year growth, while transactions per active consumer rose to 5.6, up 19% compared to the same quarter last year. This indicates both expanding market reach and deepening engagement with existing customers.
The company’s consumer engagement metrics show strong retention, with the following chart highlighting that 94% of transactions in Q3 FY25 came from repeat customers:
Affirm Card Drives Direct-to-Consumer Growth
A standout performer in Affirm’s portfolio was its direct-to-consumer business, particularly the Affirm Card. The card segment generated $807 million in GMV during the quarter, representing an impressive 115% year-over-year growth. Active Affirm Card consumers reached 1.9 million, more than doubling with 107% growth compared to the prior year.
The following chart illustrates the rapid acceleration of the Affirm Card business alongside the company’s marketplace:
The card’s attach rate has reached 9%, indicating growing adoption among Affirm’s customer base. This direct-to-consumer channel represents a significant growth opportunity as it allows Affirm to establish relationships with consumers independently of merchant partnerships.
Diversified Transaction (JO:NTUJ) and Merchant Mix
Affirm’s business continues to show healthy diversification across transaction types and merchant categories. The company reported that 77% of transactions occur at point of sale, while 23% are initiated through Affirm’s platform. In terms of product composition, 72% of transactions are interest-bearing, while 28% are split between short-term and monthly 0% APR options.
The following chart breaks down Affirm’s transaction mix by channel and product type:
The company’s merchant category mix shows broad diversification, with general merchandise representing the largest segment at 33% of GMV. Other significant categories include travel/ticketing (15%), fashion/beauty (14%), and electronics (8%). Most categories showed healthy year-over-year growth, with "Other" categories leading at 81% growth.
The following chart illustrates Affirm’s GMV distribution across merchant categories:
Active merchants grew by 23% year-over-year, with those generating more than $1,000 in trailing twelve-month GMV increasing by 27%.
Financial Performance and Credit Quality
Affirm reported Revenue Less Transaction Costs of $353 million, up 53% year-over-year. When excluding provisions for credit losses, this figure reached $499.8 million, representing 41% growth compared to the same period last year.
The following chart shows the trend in Revenue Less Transaction Costs:
Transaction costs as a percentage of GMV stood at 5.0%, with transaction costs excluding provisions at 3.3% of GMV. The company’s delinquency rates appear stable and competitive with other consumer lenders, with 30+ day delinquencies for monthly installment loans (excluding Peloton (NASDAQ:PTON)) tracking in line with industry benchmarks.
The company maintains a solid funding position, with 59% of its funding capacity utilized. A partnership signed in December 2024 added $4 billion in unutilized capacity.
Forward-Looking Statements
For the fourth quarter of fiscal year 2025, Affirm projects GMV between $9.40 billion and $9.70 billion, with revenue expected to range from $815 million to $845 million. The company anticipates an operating margin of 1% to 3% on a GAAP basis and an adjusted operating margin between 23% and 25%.
For the full fiscal year 2025, Affirm forecasts GMV of $35.70 billion to $36.00 billion and revenue between $3.16 billion and $3.19 billion. The company expects a GAAP operating margin between -4.3% and -3.8%, with an adjusted operating margin between 23% and 23.6%.
The following table details Affirm’s outlook for Q4 and full-year 2025:
Key assumptions in the outlook include moderation in GMV growth, similar enterprise warrant expense to Q3 FY25, and an equity capital required ratio remaining at 5% or less. The company acknowledged limited financial impact from new initiatives in Q4 FY25.
Market Reaction and Conclusion
Despite the strong quarterly results, Affirm’s stock declined 7.7% in after-hours trading following the earnings release. This reaction suggests investors may have had higher expectations or concerns about the company’s outlook and growth trajectory.
The after-hours decline came after the stock had closed up 5.4% during regular trading hours, indicating significant volatility around the earnings announcement. Year-to-date, Affirm’s stock has experienced substantial movement, with a 52-week range of $22.25 to $82.53.
While Affirm continues to show impressive growth in its core metrics and the Affirm Card business in particular, investors may be focusing on the company’s path to profitability, as indicated by the negative GAAP operating margin forecast for the full fiscal year. The company’s guidance suggests continued investment in growth at the expense of near-term profitability, a strategy that may be receiving mixed reactions from the market.
As Affirm prepares for international expansion, particularly into the UK market as mentioned in recent earnings calls, the company’s ability to maintain growth while improving profitability metrics will likely remain a key focus for investors.
Full presentation:
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