Affirm CEO says furloughed federal employees are starting to lose interest in shopping

Affirm reported robust fiscal first-quarter results, significantly surpassing analyst estimates with EPS of $0.23 and revenue of $933 million, driven by a 42% year-over-year surge in gross merchandise volume to $10.8 billion. The buy now, pay later firm also raised its full-year GMV outlook to $47.5 billion and secured a critical partnership renewal with Amazon through 2031. CEO Max Levchin indicated that while there's a subtle decline in shopping interest among federally employed borrowers due to the government shutdown, overall consumer spending remains strong, with no major credit quality disturbances and active consumers growing to 24.1 million.

Analysis

Affirm Holdings (AFRM) reported a robust fiscal first quarter, significantly surpassing Wall Street expectations with earnings per share of $0.23 against an estimated $0.11, and revenue reaching $933 million, exceeding the $883 million forecast. This strong performance was underpinned by a 34% year-over-year revenue climb and a 42% surge in gross merchandise volume (GMV) to $10.8 billion, surpassing the $10.38 billion estimate. Consequently, the company raised its full-year GMV outlook to $47.5 billion from the prior $46 billion, signaling continued confidence in its growth trajectory.

Strategic partnerships remain a key driver, highlighted by the critical renewal of its Amazon partnership through 2031, alongside existing deals with Shopify and Apple. While Affirm continues to expand its merchant network, it recently lost its long-time Walmart partnership to competitor Klarna, underscoring the intense competition within the buy now, pay later (BNPL) sector. This competitive dynamic requires continuous innovation and strong merchant relationships to maintain market share.

CEO Max Levchin indicated minimal impact from the government shutdown, noting only a "subtle loss of interest in shopping" among federally employed borrowers and no major credit quality disturbances. Overall consumer demand appears resilient, with active consumers growing to 24.1 million from 19.5 million a year ago, and strong spending observed in categories like ticketing and travel. This suggests that despite broader economic concerns, Affirm's core consumer base remains engaged and credit quality stable.

Key Decisions for Investors

• Investors should consider Affirm's strong Q1 performance and raised full-year guidance as indicators of robust operational momentum, particularly with the Amazon partnership renewal providing long-term stability.
• Monitor competitive pressures in the BNPL space, especially after the Walmart loss, and assess the broader consumer spending environment for any shifts in discretionary spending or credit quality.
• Evaluate the company's ability to maintain credit quality and consumer engagement amidst potential macro-economic headwinds, despite current assurances from management.