Affirm marked the beginning of its fiscal 2026 with notable achievements, highlighted by a strategic extension of its agreement with Amazon (NASDAQ:AMZN) until January 2031. This significant move comes amidst broader successes such as a spike in gross merchandise volume to $10.8 billion, which reflects a 42% increase. Alongside this, Affirm’s revenue also experienced a noteworthy rise, reaching $933 million, an expansion that underscores the growing demand for their payment solutions. These developments position Affirm on a promising trajectory, reinforcing its market stance.
Affirm’s strategy has consistently been reliant on scalable network effects and the utility of data in enhancing service delivery. Previously, the company saw incremental growth through expanding its merchant network and refining its technological infrastructure. Now, the current results affirm that these efforts were indeed pivotal, as indicated by the improvement in data-driven decision-making and credit modeling, which have become more robust with increased transaction volumes. Max Levchin, CEO, has reiterated the vital role of transparent credit options in driving their recent success.
What Drives Affirm’s Recent Success?
A significant component of Affirm’s growth is attributed to the surge in direct-to-consumer gross merchandise volume, which saw an impressive 53% rise. The Affirm Card, in particular, played a critical role, with its usage spiking by 135% to $1.4 billion. This expansion was achieved organically, as Affirm focused on its existing customer base. Levchin reiterated that the extension of the product was deliberate, aiming to broaden its reach.
The growth “has been deliberate and entirely organic,” Levchin stated.
Testing of cash flow underwriting continues to show promise, notably increasing accessibility for younger individuals including millennials and Gen Z, who prefer flexibility over traditional credit options. Levchin underscored that these groups look for alternatives when financing routine purchases. The ongoing testing aims to make Affirm’s services more appealing to these demographic groups.
How is Affirm Tackling Credit and Risk?
Affirm is seeing consistent repayment patterns, even amidst economic fluctuations. According to Levchin, consumers are engaging responsibly, maintaining repayment schedules without significant delinquency or default rates. This consistency has kept Affirm’s loan portfolios strong, and the company’s diverse offerings, like their Pay in 4 loans, sustain less than 1% in loss rates.
Levchin emphasized, “Our consumer is borrowing, paying us back, shopping fairly healthily.”
The company’s merchant and consumer engagement have both grown, supported by the strength of their partnerships and diverse financial products. This is reflected in the increase of active consumers to 24.1 million and an uptick in transaction frequency per consumer, now averaging 6.1 transactions each year. Such engagement is crucial as it contributes substantially to Affirm’s revenue stream.
Affirm’s financial growth is mirrored in its market performance, with after-hours trading showing an increase in share value by more than 11%. This optimistic outlook is reinforced through their financial projections, which anticipate continued growth in GMV and funding capacity heading into the latter part of the decade.
These outcomes do not just highlight Affirm’s short-term gains but also imply sustainable growth potential. The company’s ability to sustain low loss rates and cater to emerging consumer trends will likely remain instrumental in maintaining its competitive edge. As Affirm forges ahead, their strategic alignments and data-centric approach will be critical in navigating future challenges within the ever-evolving financial landscape.
