Affirm Q4 Revenue Soars 33%, Is BNPL the Future Trend?

TradingKey - Affirm (AFRM.US) reported fourth-quarter fiscal 2025 earnings on Thursday showing revenue and profit exceeding market expectations, with strong performance driving its share price up 16% in after-hours trading.

Source: Google Finance

Financial report data showed the company's revenue for the quarter reached $876 million, higher than the market expectation of $837 million and a significant 33% increase from $659 million in the same period last year. Gross Merchandise Volume (GMV) also performed strongly, growing 43% year-over-year to $10.4 billion. At the same time, the company reported that its active consumer base grew 24% to 23 million, with transaction frequency per user also increasing 20% year-over-year.

As one of the largest "Buy Now, Pay Later" installment payment service providers in the United States, a major highlight of Affirm's business growth comes from the adoption of Affirm Card. The adoption rate of Affirm Card accelerated, driving in-store spending growth of 187%, with the card discount rate rising to 10%. Related debit card business revenue reached $67.1 million in the fourth fiscal quarter, far exceeding the expected $58 million.

Affirm's revenue structure is changing, with approximately one-third of revenue still coming from interest paid by consumers, while the company's product portfolio is gradually shifting toward more interest-free "Buy Now, Pay Later" plans.

While zero-interest plans typically have lower profit margins than interest-bearing products, they attract consumers with higher credit quality, who tend to purchase larger items in stores, and the company's revenue also comes from fees paid by these merchants.

“This consistent execution led Affirm to achieve operating income profitability in FQ4’25 – right on the schedule we committed to a year ago,” management stated in the company’s shareholder letter. “Profitability is of course a point in the journey, not the destination," management added, emphasizing a focus on long-term growth, product innovation, and operational discipline.

For the next fiscal quarter, Affirm provided first-quarter revenue guidance, expecting it to be between $855 million and $885 million, with GMV projected between $10.1 billion and $10.4 billion. This revenue guidance is largely in line with market expectations.

Bank of America analysts previously noted that the Federal Reserve's future rate-cutting cycle will benefit Affirm by lowering financing costs and increasing loan sale gains. Additionally, the company raised the annual interest rate cap for merchant loans from the previous 30% to 36%, which analysts believe "should continue to drive yield and GMV growth."

At the same time, partnerships with tech giants such as Apple, Amazon, and Shopify have also provided support for its user growth and transaction scale expansion.