Affirm Holdings Inc Earnings - Q4 2025 Analysis & Highlights
Affirm Holdings Inc.'s Q2 2026 earnings call highlighted strong growth in GMV and active cardholders, particularly driven by the Affirm Card and international expansion. The company also discussed its application for a bank charter for regulatory certainty and its strategy for merchant diversification and 0% APR offerings.
Key Financial Results
GMV year-over-year for the quarter was up just under 160% for the Affirm Card.
Active cardholders increased by 121% year-over-year.
0% deals on the Card went up about 190% year-over-year.
RLTC take rates are expected to be slightly above 4% in Q3 and Q4.
The company saw benefits on the transaction cost side, particularly on funding costs, with cost of funds coming in within the ABS market.
Gain on sale had a very large beat this quarter.
0% loans have been increasing as a percentage of the mix.
Business Segment Results
The "other" category in GMV is now up to 15% of total and is growing at triple digits.
The "other" category represents a huge number of relatively small merchants.
Wallet partnerships are included in the "other" category and are experiencing high growth.
Services is an example of a category that has reached critical mass and has been broken out from the "other" category.
Capital Allocation
The ABS deal was priced with a spread of under 100 basis points, which has not been seen since 2021.
The weighted average yield in the ABS deal was below 4.6%.
The company is operating and executing in capital markets at its best since the rate movement.
Industry Trends and Dynamics
The consumer is currently healthy, able and willing to pay back loans.
The company is seeing strong demand and ability/willingness to repay.
The regulatory climate at bodies issuing bank charter approvals has changed.
There is a lot of noise in the environment regarding information for consumers.
The ABS market is still very constructive.
The company is not hearing about potential caps on BNPL rates specifically.
There are dynamic conversations at the federal level about credit card rates.
The company is tracking all federal and state level regulations and has active conversations with regulators.
Competitive Landscape
Competitors are becoming more aggressive in pursuing prominent presenting, winning new merchants, and offering cash back incentives.
The company's promotional go-to-market strategy does not seem to be affected by competitors' offers.
The company's 0% interest offers are easy to understand and have no hidden asterisks, which has become a moat.
The company has not seen any impact from ultra-aggressive offers like 50% cash back.
Macroeconomic Environment
The company is not seeing a big deviation in consumer trends, credit trends, or overall economic health in the current quarter compared to the past one.
Growth Opportunities and Strategies
The Affirm Card is a significant growth engine, with GMV up just under 160% year-over-year and active cardholders up 121%.
The company has plans for further development of the Card.
International expansion, particularly in the UK, is a significant driver of growth.
The company announced deals in the UK with US brands and Shopify.
Wayfair is live in the UK in a beta phase.
The company partnered with VMO2 in the UK.
The company applied for an industrial loan company bank charter as a long-term investment in regulatory certainty.
The Intuit partnership allows consumers to pay over time for services billed through QuickBooks, unlocking a new side of transactions.
The company is testing a rent product that allows for time-shifting payments (e.g., splitting rent into two parts) rather than extending payment terms.
BoostAI allows merchants to allocate funds for Affirm-specific promotions and uses automated AB testing to maximize sales.
The company is actively engaged with the industry to understand the best way to deliver its product in Agentic commerce.
The company aims to be a universal acceptance mark like Visa or American Express.
The company is offering its platform to financial institutions that want to issue debit cards with buy now, pay later capacity through partnerships with core banking software providers like Fiserv.
Financial Guidance and Outlook
RLTC take rates are expected to be slightly above 4% in Q3 and Q4.
The company expects to see margin expansion in FY 2026.
GMV growth is projected to slow to 30% in Q3 and 25% in Q4.
The slowdown in GMV growth is partly due to comping the transition with a large retail partner.
The timeline for bank charter approval is certainly years, and the company does not know if or when it will be approved.
The company is not breaking out the impact of BoostAI on its numbers.
Regulatory Environment
The company believes that regulators like the FDIC will see them as a good actor prepared for the "big leagues" due to their application for an industrial loan company bank charter.
The company is regulated by 51 distinct entities (federal and 50 states).
The company's approach to loan allocation to partners is on a vertical slice, generally providing broad exposure to everything originated.
The company is committed to not selecting particular assets for on and off-balance sheet, with exceptions for concentration limits or test products.
