- Key insights: Consumers’ and merchants’ penchant for 0% loans continued to provide runway for the buy now/pay later lender in its first fiscal quarter ended Sept. 30, as gross merchandise hit a record and the firm upped its 2026 guidance.
- What’s at stake: Affirm hit its profitability targets last quarter ahead of expectations, further cementing buy now/pay later as a burgeoning credit product poised to challenge traditional credit.
- Forward look: Expanded agreements with Amazon and Shopify should help extend market share gains, according to analysts.
Buy now/pay later lender Affirm extended its streak of strong quarterly earnings in its first fiscal quarter of 2026, drawing praise from analysts that cover installment lending.
Affrm’s revenue hit $933 million in the quarter ended Sept. 30, a 34% increase compared to the same reporting period last year, and ahead of analysts’ estimates of $866.15 million. Net income landed at $80.69 million, or 23 cents per diluted share, over double of analysts’ expected income of $36.87 million, or 11 cents per diluted share. By comparison, in the first fiscal quarter last year, Affirm posted a $100 million loss.
Revenue less transaction cost as a percentage of gross merchandise value, a key margin measurement according to Affirm, was 4.2%. Affirm’s long-term target range for RLTC is between 3% and 4%.
Analysts hailed Affirm’s positive growth trajectory.
“The company is ‘firing on all cylinders,’ with strong 1Q outperformance and an upward bias to the estimates introduced only a little more than two months ago,” David Scharf, an analyst at Citizens Bank, wrote in a research note. “Affirm is a long-term secular winner at the expense primarily of the credit card industry. The company is well-positioned to capitalize on the continued adoption of BNPL solutions for everyday purchases and benefits from a more robust loan platform relative to competitors.”
William Blair analyst Andrew Jeffrey called Affirm “the undisputed BNPL leader … in an emerging consumer tender category with just over 1% of U.S. spend. Over time, we anticipate BNPL will capture a larger share of discretionary spend and Affirm will be the principal beneficiary.”
“We reiterate our thesis that younger consumers are tired of inflexible and predatory bank products,” Jeffrey said. “We see BNPL as a true alternative, offering the budgeting benefits of debit with a credit toggle.”
Gross merchandise volume, or GMV, tallied a record $10.8 billion, a 42% year-over-year increase and the second straight quarter that Affirm posted GMV growth exceeding 40%, according to JPMorgan Securities analyst Reginald Smith.
Consumers’ and merchants’
“You should expect us to continue to lean in here very heavily,” Affirm Chief Operating Officer Michael Linford said on Affirm’s call with analysts, referencing the company’s 0% APR offerings. “We think this is a really important part of rounding out the consumer value proposition in the network.”
Direct-to-consumer GMV increased 53% to $3.2 billion, while Affirm Card GMV – which is also considered direct-to-consumer – grew 135% to $1.4 billion. Active Affirm cardholders more than doubled year over year to 2.8 million, and active consumers hit 24.1 million. Active merchants increased 30% to 419,000.
Affirm founder and CEO Max Levchin said there’s still plenty of room for the Affirm Card to grow, especially as the lender explores cash flow underwriting and increases the card’s marketing reach.
“The growth of [Affirm Card] card is regulated by a couple of factors [and] our willingness to market it,” Levchin said. “We’re still not really driving it full thrust, not because we don’t want to, not because we don’t care, but because we’ve been just very, very deliberate about opening it to many segments of our users, including some of the slightly lower credit quality. So we’ve maintained slightly higher credit quality on the card on average.
“As we get more comfortable with our ability to underwrite everyone for this … we will continue marketing it to the general population,” Levchin said.
Credit performance remained strong despite cracks in other areas of consumer finance, such as
The government shutdown had little effect on payment trends, Levchin said.
“We’ve been looking at data from government employees because of the shutdown to understand what it practically means for the ecosystem and us in particular. And we do not see any loss of repayment,” Levchin said. “In other words, the delinquencies and defaults in that group are just fine, in line with the rest of the general population, but we see a few basis points of a demand slowdown.”
Affirm also upped its fiscal year 2026 guidance, extended its U.S. agreement with Amazon for five years, and expanded its partnership with Shopify to launch Shop Pay Installments in the U.K., Shopify’s BNPL offering that Affirm powers.
“The latest guidance implies at least ~30% GMV growth (up ~400 basis points versus the previous forecast), while the Take Rate and RLTC margin guidance both remain unchanged at ~8.4% and ~4.0% of GMV,” Citizen’s Scharf said.