Buy now, pay later company Affirm (NASDAQ: AFRM) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 29.6% year on year to $1.12 billion. Its non-GAAP profit of $0.72 per share was 13.9% below analysts’ consensus estimates.

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StockStory’s Take

Affirm’s fourth quarter results were shaped by continued diversification across its merchant base and growth in transaction volumes, with management emphasizing both new merchant additions and higher transactions per user as key contributors. CEO Max Levchin noted, “the business is growing quite well, and we’re quite happy with the diversification that we see in the GMV.” While revenue surpassed Wall Street’s expectations, the company’s non-GAAP profit came in below analyst consensus. Management downplayed concerns about merchant concentration, attributing any shifts to changes in the composition of its largest partners and ongoing expansion into new categories.

Looking forward, Affirm’s outlook centers on expanding its reach through the Affirm Card, deeper international partnerships, and broadening its merchant network, including new verticals like services and auto repair. Levchin stated that the Affirm Card is “not the only growth engine, but it’s a big growth engine for our metrics,” and highlighted plans to accelerate both card and international initiatives. Management pointed to continued investment in artificial intelligence, regulatory certainty through a potential bank charter, and maintaining strong relationships with funding partners as central to sustaining growth and navigating a dynamic regulatory environment.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to growth in the Affirm Card, increased merchant diversification, and ongoing investment in technology and partnerships.

• Affirm Card drives engagement: The Affirm Card continued to scale rapidly, with GMV (gross merchandise volume) nearly doubling and active cardholders up 121% year over year. Management highlighted that the card is no longer a niche product but a central part of the company’s offering, fueling both user acquisition and transaction growth.

• Merchant base diversification: The company saw meaningful increases in the number of active merchants, driven in part by wallet partnerships and new verticals. CFO Rob O’Hare explained that while large merchants remain important, growth is increasingly coming from a broader set of smaller merchants and new categories, reducing concentration risk.

• AI product adoption in early stages: Affirm’s new Boost AI tool, which automates A/B testing and promotional optimization for merchants, was discussed as an early, promising initiative. While adoption is still limited, management is optimistic about its long-term impact on merchant conversion and incremental sales.

• Funding and capital markets strength: Management underscored continued favorable funding conditions, citing recent asset-backed securitization (ABS) deals with historically low spreads and high demand from loan buyers. This supports Affirm’s ability to scale without significant increases in funding costs.

• Regulatory focus and bank charter application: The decision to apply for a bank charter was described as a long-term investment in regulatory certainty. Levchin explained that while the timeline for approval is uncertain, the move is intended to ensure stability and unlock new product offerings in the future.

Drivers of Future Performance

Affirm’s guidance is shaped by ongoing product expansion, a focus on merchant diversification, and disciplined margin management amid an evolving competitive and regulatory landscape.

• Affirm Card and international growth: Management expects the Affirm Card to remain a primary growth driver, with plans to further expand in international markets such as the UK. New merchant partnerships and wallet integrations are expected to contribute to both user acquisition and higher transaction frequency.

• AI and product innovation: The rollout of Boost AI and continued investment in adaptive credit and promotional tools are positioned as key to improving merchant conversion rates and driving incremental GMV. Management cautioned that while early results are promising, these initiatives are still ramping up and may take time to materially impact results.

• Regulatory and funding environment: The company’s application for a bank charter is intended to provide long-term regulatory certainty, though management stressed that any benefits from this move are years away. Affirm continues to monitor potential regulatory changes and maintains strong relationships with funding partners, viewing these factors as critical to future profitability and risk management.

Catalysts in Upcoming Quarters

In the upcoming quarters, the StockStory team will focus on (1) adoption and expansion of the Affirm Card and international partnerships, (2) merchant uptake and measurable impact of new AI-powered tools like Boost AI, and (3) Affirm’s progress on regulatory milestones, including updates on its bank charter application. We will also monitor funding market dynamics and the scaling of new verticals to assess Affirm’s ability to sustain growth and manage risk.

Affirm currently trades at $59.40, in line with $59.42 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).

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