Affirm Holdings, Inc.

Affirm Holdings, Inc. operates in the financial technology industry, aiming to reinvent payments and commerce through honest financial products. The company's business model is predicated on simplicity, transparency, and a consumer-first approach, notably charging $0 in late fees for missed payments and not profiting from consumer mistakes. Affirm's competitive advantages include self-reinforcing network effects, with 94% ¹ of transactions in fiscal year 2025 driven by repeat consumers, and a proprietary technology and data infrastructure built on machine learning and artificial intelligence. This technology allows for transaction-level risk assessment, outperforming traditional credit models, and has been calibrated and validated on approximately 343 million ² loans. The company also boasts deep capital markets expertise, utilizing a diverse funding model including warehouse credit facilities, securitization transactions, pass-through loan sales, and forward flow loan sale arrangements. As of June 30, 2025, Affirm had approximately 377 thousand ³ active merchants and 23.0 million ⁴ active consumers.

Affirm generates revenue through a core business model that involves merchant fees, interest income from consumers, and card network revenue. Merchant fees are earned when the company facilitates a sale, with larger fees generally associated with 0% APR financing products. Interest income is earned on interest-bearing installment loans originated or purchased from originating bank partners, with simple interest and no deferred or compounding interest or late fees. Card network revenue is derived from a portion of interchange fees when the Affirm Card or one-time-use virtual cards are used over established card networks. The company's primary customer segments are consumers seeking flexible payment options and merchants looking to enhance demand generation and consumer acquisition.

The company offers three main loan product offerings: Pay-in-X, 0% APR monthly installment loans, and interest-bearing monthly installment loans. Pay-in-X, consisting of short-term payment plans with one to four 0% APR installments, represented 14% ⁵ of total gross merchandise volume (GMV) in fiscal year 2025. 0% APR installment loans accounted for 13% ⁶ of total GMV in fiscal year 2025, generating larger merchant fees. Interest-bearing monthly installment loans constituted the largest portion, representing 72% ⁷ of total GMV in fiscal year 2025, and are the primary source of interest income from consumers.

Affirm's platform also includes several consumer-facing features such as "Affirm at Checkout" for pay-over-time options, "Consumer-first borrowing" with individual transaction underwriting, the "Affirm Marketplace" offering tailored deals (24% ⁸ of transactions in fiscal year 2025 occurred here), the "Affirm Card" for physical or virtual payments with post-purchase installment loan options, and the "Affirm Money Account," an FDIC-insured, high-yield savings account offered in partnership with Cross River Bank. For merchants, the platform provides "Affirm at Checkout" via a direct API, flexible 0% APR and interest-bearing offerings, brand-sponsored and other promotional strategies, a merchant dashboard with analytics, access to the Affirm App marketplace, and Affirm prequalification to improve conversion rates.

For the fiscal year ended June 30, 2025, Affirm reported total revenue, net of $3.224 billion ⁹, an increase of 39% ¹⁰ from the prior year. Total operating expenses were $3.311 billion ¹¹, leading to an operating loss of $87.273 million ¹². After other income, net of $148.737 million ¹³, the company achieved income before income taxes of $61.464 million ¹⁴. Income tax expense was $9.279 million ¹⁵, resulting in net income of $52.186 million ¹⁶. Basic EPS was $0.16 ¹⁷ and diluted EPS was $0.15 ¹⁸. Cash and cash equivalents stood at $1.354 billion ¹⁹, with total debt (funding debt and notes issued by securitization trusts) of $6.456 billion ²⁰ as of June 30, 2025.

Comparing fiscal year 2025 to fiscal year 2024, total revenue, net increased by $901.413 million ²¹, or 39% ²². Merchant network revenue grew by $208.051 million ²³, or 31% ²⁴, and card network revenue increased by $79.907 million ²⁵, or 53% ²⁶. Interest income saw a substantial rise of $403.866 million ²⁷, or 34% ²⁸, while gain on sales of loans increased by $184.469 million ²⁹, or 94% ³⁰. Servicing income also increased by $25.119 million ³¹, or 26% ³². Operating expenses increased by $372.839 million ³³, or 13% ³⁴. Notably, sales and marketing expenses decreased by $141.558 million ³⁵, or 25% ³⁶, primarily due to a $135.2 million ³⁷ decrease in Amazon warrant expense as a portion of warrants became fully vested. Technology and data analytics expense increased by $87.866 million ³⁸, or 18% ³⁹, driven by amortization of internally-developed software and data infrastructure costs. The average balance of loans held for investment increased by 28% ⁴⁰ to $6.5 billion ⁴¹.

During the reported period, Affirm continued to expand its platform and product suite. The company facilitated consumer purchases of $36.7 billion ⁴² in GMV for the fiscal year ended June 30, 2025. The number of active consumers grew by 23% ⁴³ to approximately 23.0 million ⁴⁴, and transactions per active consumer increased by 20% ⁴⁵ to 5.8 ⁴⁶. Affirm Card transactions represented approximately 10% ⁴⁷ of total transactions, up from 8% ⁴⁸ in the prior year. The company also completed the reincorporation from Delaware to Nevada effective July 1, 2025.

Affirm's growth strategy is multi-pronged, focusing on expanding solutions for both merchants and consumers. This includes innovating new consumer product solutions to expand purchasing power and deliver personalized benefits through AdaptAI, Affirm’s AI-powered personalized promotion platform. Concurrently, the company aims to increase merchant feature functionality by delivering new tools, experiences, and channels designed to strengthen customer acquisition strategies, thereby improving conversion rates, average order values (AOVs), and customer satisfaction.

A key growth vector for Affirm is increasing consumer transaction frequency and in-store usage. The company plans to drive repeat use of its platform by serving consumers beyond their initial purchases through consumer-centric tools and offerings, and by increasing the diversity of merchants on its network. The Affirm Card is highlighted as an important component of this strategy, as consumers using it have demonstrated higher transaction frequency per user and greater in-store usage. This strategy is expected to lead to increased transaction volume on the platform and expansion of both the consumer and merchant networks. As of June 30, 2025, the company reported approximately 5.8 ⁴⁹ transactions per active consumer, a 20% ⁵⁰ increase from June 30, 2024.

Affirm also plans to expand its consumer reach through continued marketing to increase brand awareness and highlight the value of its platform, aiming to attract new consumers. As the consumer network grows, the company expects its models to become more efficient and robust, enabling the platform and its facilitated loans to serve a wider spectrum of consumers. Simultaneously, merchant reach will be expanded by deepening penetration with existing merchants and increasing the number of merchant partnerships through dedicated sales teams and platform partner collaborations. The company notes that Affirm transactions currently represent a small percentage of total transaction volume for its merchants, indicating significant room for growth.

Geographic expansion is another strategic priority, with the platform currently available in the United States, Canada, and the United Kingdom. Affirm expects to continue expanding internationally into Western Europe and Australia, specifically mentioning planned expansion into the Netherlands, France, and Germany. The company believes that merchants and consumers globally can benefit from its transparent and fair commerce approach.

Operationally, Affirm's technology and data analytics expenses increased by $87.9 million ⁵¹, or 18% ⁵², in fiscal year 2025, primarily due to amortization of internally-developed software and data infrastructure and hosting costs. Capitalized projects in service grew by 78% ⁵³ from approximately 830 ⁵⁴ projects as of June 30, 2024, to 1,470 ⁵⁵ projects as of June 30, 2025. The company also noted a reallocation of significant resources in the second half of fiscal year 2025 to prioritize system stability and reduce outages, which may delay certain strategic objectives, including product launches and international expansion.

Regarding capital allocation, Affirm's principal sources of liquidity include cash and cash equivalents, available-for-sale securities, and available capacity from various funding facilities. As of June 30, 2025, the company had $2.2 billion ⁵⁶ in cash and cash equivalents and available-for-sale securities, $5.2 billion ⁵⁷ in available funding debt capacity (excluding purchase commitments), and $330.0 million ⁵⁸ in borrowing capacity under its revolving credit facility. The company believes these sources are sufficient to meet existing operating, working capital, capital expenditure requirements, and planned growth for at least the next 12 months. The company also noted a $250.0 million ⁵⁹ repurchase of common stock shares in connection with the issuance of the 2029 Notes during fiscal year 2025.

The company explicitly flagged several structural headwinds and execution risks. Macroeconomic conditions, including elevated interest rates and recessionary concerns, have impacted and may continue to impact consumer spending and borrowing willingness. While the U.S. Federal Reserve began decreasing the federal funds interest rate in late 2024, the overall interest rate environment remains elevated compared to historical levels, potentially leading to higher transaction costs. The company also noted that the average order value (AOV) decreased to $273 ⁶⁰ in fiscal year 2025 from $292 ⁶¹ in fiscal year 2024, driven by diversification of its merchant base and an initiative to drive repeat usage of low-AOV offerings like the Affirm Card. This trend may lead to a decline in revenue as a percentage of GMV in the medium term.

Affirm faces material risks across several categories. Macroeconomic conditions, including elevated interest rates and potential recessionary concerns, could adversely impact consumer spending and their ability to repay loans, leading to increased delinquencies, defaults, and charge-offs. The company's reliance on a small number of commercial partners, such as Amazon and Shopify, and originating bank partners, Celtic Bank and Lead Bank, and a single card issuing bank partner, Evolve Bank & Trust, presents concentration risk; the loss or decreased business with any of these could materially harm operations. The highly competitive industry, with larger competitors having more diversified products and lower-cost funding, poses a threat to Affirm's ability to sustain growth and profitability. Regulatory risks are significant, including potential challenges to its originating bank partner model, which could result in violations of state licensing and interest rate laws, leading to fines, penalties, or unenforceability of loans. The company is also subject to extensive consumer protection laws, including those enforced by the CFPB, which could impose increased compliance costs, fines, and mandated changes to business practices. Cybersecurity threats, including cyber-attacks and data breaches, could lead to operational disruptions, reputational damage, and significant liabilities, as evidenced by the Evolve Bank & Trust cybersecurity incident reported in June 2024. Furthermore, the use of generative AI-powered solutions introduces risks of inaccurate or biased outputs, potential intellectual property infringement claims if data rights are insufficient, and the evolving regulatory landscape around AI, such as the EU Artificial Intelligence Act, could impose significant compliance burdens and costs. The company's maximum exposure to losses from risk sharing arrangements with third-party loan buyers was $91.1 million ⁶² as of June 30, 2025, and $76.9 million ⁶³ for retained interests in unconsolidated securitization trusts.

Management's message to shareholders emphasizes the company's mission to deliver honest financial products and its belief in reinventing payments and commerce through modern technology and a mission-driven approach. They highlight the company's commitment to transparency, charging $0 in late fees, and not profiting from consumer mistakes, which they believe fosters trust-based relationships. Management noted achieving GAAP operating income profitability in the fourth quarter of fiscal 2025, a significant milestone. Key strategic priorities include expanding solutions for both merchants and consumers, innovating new consumer products like AdaptAI, increasing merchant feature functionality, and driving repeat consumer usage and in-store transactions, particularly through the Affirm Card. Geographic expansion into Western Europe and Australia is also a stated priority. Management acknowledges the challenges of the macroeconomic environment, including elevated interest rates, and the need to continuously optimize underwriting and manage loan performance.