Affirm Crushes Earnings Expectations, Turns Bears into Believers

Affirm (AFRM) reported robust fiscal Q4 2025 results, driving its shares up nearly 11% after surpassing revenue and EPS estimates, most notably achieving its first quarter of positive non-adjusted operating income of $58 million. Revenue grew 33% to $876 million, and EPS reached $0.20, significantly exceeding consensus, while GMV growth accelerated to 44%. Despite Q1 FY26 revenue guidance implying a growth deceleration and projected slower FY26 GMV growth (partially due to the Walmart partnership cessation), Wall Street analysts reacted positively, significantly raising price targets and signaling a potential re-rating of the stock, though its forward EV/S multiple of 8.6x remains elevated.

Analysis

Affirm Holdings (AFRM) delivered a robust fiscal Q4 2025 performance, significantly surpassing market expectations and signaling a critical inflection point towards sustainable profitability. The company reported revenue of $876 million, representing nearly 33% growth and beating consensus estimates, while its non-adjusted EPS of $0.20 was almost double the forecast. Most notably, Affirm achieved its first-ever quarter of positive non-adjusted operating income at $58 million, addressing a long-standing investor concern about its path to profitability beyond just top-line expansion. Furthermore, Gross Merchandise Volume (GMV) growth accelerated to a six-quarter high of 44%, indicating strengthening platform engagement and market share capture. While forward guidance for fiscal Q1 revenue growth (24.5%) and full-year 2026 GMV growth (25%) implies a deceleration, this is partially attributed to the planned cessation of its Walmart partnership. Importantly, analysts have interpreted this guidance favorably, with Mizuho calling it “amazing,” suggesting the negative impact is less severe than previously feared. This positive sentiment is reflected in a wave of analyst price target upgrades post-earnings, with the average of revised targets now at nearly $97, in stark contrast to the pre-earnings consensus. This shift suggests a potential re-rating is underway, though the stock's elevated forward EV/S ratio of 8.6x necessitates continued execution on profitable growth to be justified.

Key Decisions for Investors

• Given the strong earnings beat, achievement of operating profitability, and sharp upward revisions in analyst price targets, investors could consider the results a catalyst for a potential stock re-rating, justifying a bullish outlook despite the current high valuation.
• It is crucial to monitor Affirm's ability to sustain profitable growth in the upcoming quarters to validate its elevated forward EV/S multiple of 8.6x, which is significantly above its three-year average.
• Investors should pay close attention to the company's performance excluding the impact of the Walmart partnership, which ceases in fiscal Q2 2026, as sustained underlying GMV growth will be key to meeting long-term guidance and offsetting the known headwind.