Affirm Stock Jumps As Analyst Highlights Record Spending Volumes, Strong Credit Trends

Affirm Holdings (AFRM) reported robust fourth-quarter results, with EPS doubling Street estimates to $0.20 and revenue exceeding forecasts at $876.41 million, driving a 12% stock surge. The fintech posted record GMV growth exceeding 40% year-over-year and issued strong fiscal 2026 revenue guidance of $3.86 billion, significantly above consensus, alongside improved profitability targets including its first GAAP operating profit. This strong performance, underpinned by a 66% increase in 0% APR loans attracting new customers and improving credit quality, signals sustained momentum and expanding profitability, leading JPMorgan to reiterate an Overweight rating.

Analysis

Affirm Holdings (AFRM) delivered a strong fourth quarter, significantly surpassing market expectations and signaling a robust growth trajectory. The company reported earnings per share of $0.20, doubling the consensus estimate, on revenue of $876.41 million, which beat forecasts. This performance was driven by record Gross Merchandise Volume (GMV) growth exceeding 40% year-over-year, alongside a 24% expansion of its merchant network and a 20% increase in transaction frequency. A key strategic element is the aggressive expansion of 0% APR loans, which surged 66% YoY to $3 billion and now serve as the entry point for half of all new customers. While this mix shift is dilutive to the take rate, which slipped to 8.5%, it has improved the overall credit quality, evidenced by a 18bps YoY decline in 30+ day delinquencies. The forward-looking guidance is particularly strong, with a fiscal 2026 revenue projection of $3.86 billion, substantially above the $3.18 billion consensus. Furthermore, Affirm projects significant profitability improvements, including an adjusted operating margin above 26.1% and a GAAP operating margin exceeding 6.0%, an 800bps year-over-year expansion. This guidance is notable as it already incorporates the potential removal of Affirm from Walmart's website, suggesting a resilient business model where a third of the volume from that partner originates from the Affirm app itself.

Key Decisions for Investors

• The significant beat on key metrics and a fiscal 2026 revenue forecast that is over 20% above consensus validates the company's growth strategy and path to sustained GAAP profitability, supporting a bullish outlook.
• Investors should monitor the strategic trade-off of using 0% APR loans, which successfully drives new customer acquisition and improves credit quality but also compresses the take rate, guided to approximately 8.4%.
• Note that the strong forward guidance already assumes the loss of Walmart's website integration; any renewal or continuation of this partnership would represent a material source of upside to the current growth and GMV forecasts.
• Given the company's documented history of exceeding its own GMV guidance by 9-11%, consider this potential for outperformance when evaluating the stock's valuation, especially as it trades near a 52-week high on the back of these results.