Affirm Reports Record Q4 Growth

Affirm (AFRM) reported robust Q4 FY25 results, marked by record performance in core metrics including GMV, funding capacity, and 0% APR adoption. Growth was significantly bolstered by strategic initiatives such as the Adapt AI, which delivered a 5% average GMV lift for merchants, and the Affirm Card, which surpassed $1.2 billion in volume with accelerating engagement and spend per cardholder. The company maintained strong credit quality, with 95% of transactions from repeat borrowers, and increased funding capacity by 55% year-over-year. Looking forward, Affirm anticipates a continued mix shift towards 0% loans, projects revenue less transaction costs (RLTC) at the high end of its 3-4% range, and plans further international expansion.

Analysis

Affirm's fourth-quarter fiscal 2025 results demonstrated significant operational momentum, characterized by record gross merchandise volume (GMV) and a 55% year-over-year increase in funding capacity. The deployment of the Adapt AI module is a key technological differentiator, delivering a quantifiable 5% average GMV lift at participating merchants and automating the optimization of financing offers. This AI-driven enhancement is complemented by the accelerating adoption of the Affirm Card, which has surpassed $1.2 billion in volume. Engagement metrics for the card are strengthening, with the average trailing 12-month spend per cardholder climbing to $4,700 from a previously disclosed $3,500, moving the company closer to its long-term target of 10 million active users with over $7,500 in annual spend. Financially, the company maintains a robust credit profile, with 95% of transactions originating from repeat borrowers and underwriting applied to every transaction. Looking ahead to fiscal 2026, management has proactively guided for the wind-down of a major enterprise merchant by the end of Q1, but simultaneously projects a revenue less transaction costs (RLTC) rate at the high end of its 3%-4% target range, signaling confidence in underlying profitability and a favorable product mix shift toward higher-margin 0% APR loans, which grew over 90% year-over-year.

Key Decisions for Investors

• Investors should monitor the incremental GMV lift from the Adapt AI product in future reports, as its success is a primary driver of organic growth and a key competitive advantage in merchant negotiations.
• The Affirm Card's progress toward the stated goals of 10 million users and $7,500 in annual spend per user should be tracked as a critical catalyst for increasing customer lifetime value and payment frequency.
• Consider the guided wind-down of a major merchant partner as a potential near-term headwind to GMV, but weigh this against the company's forecast for RLTC at the high end of its target range, which suggests strong underlying unit economics.
• Given the disciplined credit management, with 95% of volume from repeat users, investors should continue to watch credit quality metrics closely as a sign of resilience, especially as the company expands its product suite and navigates macroeconomic conditions.