Affirm (AFRM) Earnings Call: Growth Strong, Outlook Cools

Affirm Holdings, Inc. ((AFRM)) has held its Q2 earnings call. Read on for the main highlights of the call.

Affirm’s Earnings Call Balances Robust Growth With Cautious Outlook

Affirm Holdings, Inc. delivered an earnings call that leaned clearly positive, underscoring strong growth in gross merchandise volume (GMV), rapid adoption of the Affirm Card, improving funding costs, and early success with AI-powered tools. Management emphasized stable consumer credit performance and a more diversified merchant base, while also acknowledging a planned slowdown in GMV growth, the impact of a large merchant transition, and ongoing regulatory and bank-charter uncertainty. Overall, the tone suggested a company still in strong expansion mode but increasingly focused on disciplined execution and risk management.

Q2 GMV Growth Underscores Strong Demand

Q2 GMV grew about 36% year over year, signaling that demand for Affirm’s buy now, pay later (BNPL) and related products remains robust despite a choppy macro backdrop. The company framed this growth as evidence that its model continues to gain traction with both consumers and merchants, outpacing broader e-commerce trends. Even with management signaling slower growth ahead, the reported quarter showed that Affirm’s core engine is still firing on all cylinders.

Affirm Card Becomes a High-Velocity Growth Engine

The Affirm Card emerged as a standout highlight, with GMV up just under 160% year over year and active cardholders climbing 121%. The mix of 0% APR deals on the card surged nearly 190%, underscoring its appeal as a flexible, transparent credit option. Management portrayed the card as both a powerful engagement tool and a major acquisition channel, positioning it as central to Affirm’s strategy of embedding itself into everyday spending rather than remaining a purely transaction-based checkout option.

Merchant Base Expands and Diversifies

Affirm’s merchant ecosystem broadened significantly, with active merchant count up 42% year over year, helped in part by wallet partnerships. Notably, the “Other” GMV category—comprising a long tail of smaller merchants—reached about 15% of total GMV and is growing at triple-digit rates. This diversification reduces dependence on a handful of large partners and suggests that Affirm’s value proposition is increasingly resonating across a wider range of verticals and merchant sizes.

Funding Costs Fall as Capital Markets Stay Supportive

Management highlighted strong capital markets execution, particularly in asset-backed securities (ABS) funding. The latest ABS deal priced with spreads below 100 basis points and a weighted average yield under 4.6%, showing healthy investor demand. These lower funding costs translate directly into better transaction economics, helping offset pressure on revenue take-rates. Affirm also cited constructive demand from forward-flow and private credit partners, reinforcing its access to diversified funding sources.

AI-Driven Product Innovation Begins to Pay Off

Affirm showcased a pipeline of AI-led tools for merchants, including Boost AI and Adapt AI, which aim to automate A/B testing and optimize offers in real time. Early data points show these tools are lifting conversion and attracting incremental marketing dollars from merchants, effectively creating an “ad-like” channel within the Affirm ecosystem. A recent promotional event branded as the “big nothing” delivered strong conversion and cardholder growth, underscoring the potential for data-driven, AI-enabled campaigns to deepen engagement and drive incremental GMV.

Consumer Credit Performance Remains Stable

Despite concerns around consumer health in the broader economy, Affirm reported that its users remain able and willing to repay, with credit performance metrics described as stable. Management noted that NACo (net charge-off) curves are holding steady, and provisions increased only modestly by a few basis points. This stability is key for investors, as Affirm’s growth is being layered on top of steady credit outcomes rather than a loosening of underwriting standards.

International Expansion Gathers Momentum

On the international front, Affirm’s expansion efforts are progressing, with particular momentum in the UK. Management highlighted traction with partners such as Wayfair and other recently announced integrations, while Shopify-related flows continue to scale. The company pointed to a strong pipeline of opportunities, suggesting that international markets could become a more meaningful contributor to growth over time, though they remain in earlier stages compared with the U.S. business.

GMV Growth Guidance Points to Near-Term Deceleration

While the current quarter was strong, Affirm guided to slower GMV growth for the rest of the fiscal year—around 30% in Q3 and 25% in Q4, down from 36% in Q2. Management framed this deceleration as part of a deliberate and realistic outlook, shaped by mix shifts, merchant dynamics, and a focus on profitable growth. For investors, the message is that Affirm still expects healthy double-digit expansion, but at a more moderate pace as the business scales and the company prioritizes margin expansion and disciplined risk management.

Large Merchant Transition Distorts Concentration Metrics

A notable caveat in the quarter was the impact of a large merchant partner transitioning off Affirm’s integration, which significantly distorted the disclosed “top-five” merchant concentration metric. Management stressed that this is more of a statistical anomaly than a reflection of broad-based merchant weakness, given the ongoing growth and diversification across smaller merchants and new-wallet partnerships. Still, the transition adds some near-term volatility and is a reminder of the risks attached to large enterprise relationships.

Bank Charter: Strategic but Long-Dated Upside

Affirm reiterated that it has applied for an industrial bank charter to secure more regulatory certainty and potentially improve its long-term funding structure. However, executives were candid that approval is uncertain and the timeline stretches over several years, meaning the charter is not expected to materially change the company’s near-term economics. For now, the charter remains a strategic longer-term lever rather than a catalyst for imminent financial improvement.

Take-Rate Pressure and Product Mix Shifts

The company acknowledged some year-over-year softening in revenue take-rates, driven in part by a higher mix of 0% APR offerings—particularly on the fast-growing Affirm Card. While these products can be strategically valuable for growth and engagement, they weigh on reported take-rates. Even so, Affirm expects loan/take rates to be slightly above 4% in Q3 and Q4, suggesting that mix headwinds are being balanced by lower funding costs and other efficiencies.

Regulatory Landscape Remains Complex

Management emphasized that the regulatory environment for BNPL and consumer finance remains complex and dynamic, with ongoing engagement across federal and state regulators in 51 jurisdictions. While no new rate caps specific to BNPL were disclosed on the call, Affirm made clear that regulatory scrutiny and oversight are an enduring part of the operating reality. The company appears focused on staying proactive in compliance and using the bank charter process as one path to greater long-term clarity.

Guidance Highlights Growth Discipline and Margin Focus

Looking ahead, Affirm guided investors to a decelerating but still solid GMV growth cadence—roughly 30% for Q3 and 25% for Q4—while expecting loan/take rates to run slightly above 4% in both quarters. Management anticipates revenue take-rate pressure similar to Q2, but expects this to be offset by transaction-cost tailwinds from lower funding costs, thanks to constructive ABS markets where the most recent deal priced with sub-100 bps spreads and a weighted-average yield under about 4.6%. The company reiterated a commitment to execute within this guidance and to drive continued adjusted operating-margin expansion into fiscal 2026, signaling a clear focus on balancing growth with improving profitability.

In sum, Affirm’s earnings call painted the picture of a company that is still growing rapidly, supported by a booming Affirm Card business, expanding merchant relationships, and improving funding economics. While management flagged a planned deceleration in GMV growth, mix-related pressure on take-rates, and a complex regulatory backdrop, the overall narrative was one of resilient demand, stable credit performance, and increasing diversification. For investors, Affirm remains a high-growth fintech story that is now leaning more visibly into disciplined execution and long-term margin expansion.