8-K: Affirm Q2 FY26: Strong Growth, Profitability Surges

Affirm Holdings, Inc. announced robust second fiscal quarter 2026 results, showcasing significant growth in GMV, revenue, and a return to strong operating profitability.

Summary

• Gross Merchandise Volume (GMV) grew 36% year-over-year to $13.8 billion, accelerating from a 35% growth rate in the prior year.
• Total revenue increased 30% year-over-year to $1,123 million.
• Revenue Less Transaction Costs (RLTC) grew 29% to $543 million.
• The company achieved a net income of $129.6 million, a $49.2 million improvement compared to $80.4 million in the prior year's quarter.
• Operating Income was $117.6 million, a significant improvement from a $4.3 million loss in FQ225, representing 10.5% of revenue.
• Adjusted Operating Income rose 42% to $337 million, with Adjusted Operating Margin expanding to 30.0% of revenue.
• Active consumers increased 23% to 25.8 million, and transactions per active consumer grew 20% to 6.4.
• Active merchant count increased 42% to 478 thousand.
• Affirm Card GMV grew 159% to $2.2 billion, and active cardholders more than doubled to 3.7 million.
• GMV from 0% APR products, including Pay in X, grew 60% year-over-year, outpacing overall growth.
• Funding capacity increased to $28.0 billion, capable of supporting over $65 billion in annual GMV.
• Average annualized cost of funds declined to 6.2% in FQ226, a 109 basis point improvement year-over-year.
• The net cash position increased by $408 million year-over-year to $1.1 billion.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a very strong report, demonstrating significant operational execution, robust financial performance, and effective strategic initiatives, particularly in profitability and growth.

Positives

• GMV growth accelerated to 36% year-over-year, reaching $13.8 billion, indicating strong market penetration and consumer adoption.
• Total revenue increased by 30% to $1,123 million, demonstrating robust top-line expansion.
• The company returned to significant operating profitability, reporting an Operating Income of $117.6 million compared to a loss of $4.3 million in the prior year.
• Adjusted Operating Income surged 42% to $337 million, with the Adjusted Operating Margin expanding by 3 percentage points to 30.0%.
• Active consumers grew 23% to 25.8 million, and transactions per active consumer increased 20% to 6.4, highlighting strong customer engagement and retention.
• The Affirm Card showed exceptional growth, with GMV up 159% to $2.2 billion and active cardholders increasing 121% to 3.7 million.
• The 'Big Nothing' 0% APR event successfully drove a 5% GMV lift for participating merchants (27% on Affirm surfaces) and increased daily Affirm cardholder signups by 21% without sacrificing unit economics.
• AI-powered yield optimization technologies, AdaptAI and BoostAI, contributed to a 10% year-over-year improvement in checkout conversion and an average 5-15% increase in GMV for merchants using BoostAI.
• Funding capacity expanded to $28.0 billion, supported by new forward flow agreements and warehouse funding, indicating strong capital market access.
• The 2025-X2 ABS issuance, the largest static securitization to date, priced at a favorable all-in cost of funds of 5.96%, representing over a 100 basis point improvement from the previous transaction and was six times oversubscribed.
• New multi-year partnership with Intuit to become the exclusive pay-over-time solution for QuickBooks Payments, expanding reach to small and mid-market businesses.
• Renewed and expanded exclusive partnership with Expedia in the US and Canada, and signed Virgin Media O2 in the UK, demonstrating continued strong merchant relationships.

Negatives

• Revenue as a percentage of GMV decreased by 40 basis points year-over-year to 8.14%, primarily due to a mix shift towards direct-to-consumer (D2C) GMV and 0% APR products.
• Revenue Less Transaction Costs (RLTC) as a percentage of GMV decreased by 20 basis points to 3.93%.
• 30+ day delinquencies, excluding Peloton and Pay in X loans, increased 18 basis points year-over-year to 2.7%.
• An enterprise merchant substantially completed its transition to its own wallet solution during FQ126, which could impact Affirm's Pay Later volumes from that partner.

Risks

• The company's ability to attract and retain additional merchant partners, commerce platforms, and consumers, and to grow existing relationships.
• Operating in a highly competitive and evolving industry, requiring continuous innovation and adaptation.
• The need to maintain a consistently high level of consumer satisfaction and trust in its brand.
• Concentration of a large percentage of revenue and GMV with a small number of merchant partners and commerce platforms.
• The ability to sustain its revenue growth rate or the growth rate of its related key operating metrics.
• Maintaining and renewing existing funding arrangements and building new funding relationships, as well as the impact if existing funding sources become unwilling or unable to provide funding.
• The ability to effectively underwrite loans facilitated through its platform and accurately price credit risk, and the performance of these loans.
• The impact of elevated market interest rates and corresponding higher negotiated interest rate spreads on its business.
• The terms and conditions of its securitizations, warehouse credit facilities, and forward flow agreements.
• The impact of general economic conditions, including inflation, recessionary concerns, tariffs, and potential instability of consumers and financial institutions.
• The ability to achieve sustained profitability in the future.
• The potential for pending and future litigation, regulatory actions, and compliance issues.
• Developments in the regulatory environment, including governmental actions to cap interest rates.
• The ability to continue to attract and retain highly skilled employees.

Future Outlook

Affirm projects strong performance for the remainder of fiscal year 2026. For Fiscal Q3 2026, GMV is expected to be $11.00 to $11.25 billion, with revenue between $970 and $1,000 million, and an Adjusted Operating Margin of 24.5% to 25.5%. For the full Fiscal Year 2026, GMV is guided to be $48.30 to $48.85 billion, revenue between $4,086 and $4,146 million, and an Adjusted Operating Margin of 27.4% to 28.1%. The company anticipates an increasing mix of 0% APR GMV, a modest decline in short-term benchmark interest rates, and expects its Equity Capital Required (ECR) Ratio to remain below 5%. International expansion is not expected to be a material growth contributor in FY26. The company also expects to release a significant portion of its U.S. deferred tax valuation allowance by the end of fiscal year 2026 if its earnings trajectory continues.

Management Comments

• "We delivered another round of excellent results in Affirm's second quarter of FY26."
• "Affirm truly shines when the transaction really matters, and for higher AOV baskets we saw a progressively greater lift."
• "Consumers aren't avoiding credit. They're avoiding credit that profits from their confusion."
• "My sincere gratitude to all Affirmers for another great quarter – in the age of AI, its the humans that make this company such a privilege (and so much fun) to lead."

Industry Context

StockSavvy.ai notes that Affirm's strong performance, particularly in 0% APR offers and the Affirm Card, indicates a growing consumer preference for transparent, fixed-term credit alternatives over traditional revolving credit cards, especially during periods of economic uncertainty and high interest rates. The company's focus on AI-driven optimization tools like AdaptAI and BoostAI positions it well within the broader fintech trend of leveraging technology for enhanced efficiency and customer experience, potentially widening its competitive moat against traditional lenders and other BNPL providers.

Comparison to Industry Standards

• Affirm's estimated growth rate of more than 5x overall U.S. credit card spend in 2025 and 4x e-commerce growth suggests significant market share capture and outperformance relative to broader payment and retail trends.
• The successful execution of its 26th ABS bond offering, 2025-X2, at an all-in cost of funds of 5.96% (over 100 basis points improvement from 2025-X1) demonstrates strong capital markets access and investor confidence, potentially outperforming some peers in a challenging funding environment.
• The expansion of partnerships with major players like Intuit (QuickBooks Payments), Expedia, Virgin Media O2, and Wayfair indicates strong merchant adoption and integration, a key differentiator in the competitive BNPL landscape.

Stakeholder Impact

• Shareholders are likely to benefit from the strong financial performance, return to profitability, and the authorized convertible note repurchase, which could signal confidence and potentially reduce dilution.
• Consumers benefit from expanded access to transparent 0% APR offers, the growing utility of the Affirm Card, and clear upfront pricing, potentially saving on borrowing costs compared to traditional credit cards.
• Merchants gain from increased Gross Merchandise Volume (GMV), higher conversion rates driven by AI tools like AdaptAI and BoostAI, and expanded partnership opportunities with Affirm.
• Employees may experience positive morale and continued investment in product development and international expansion, as noted by management's gratitude.
• Creditors and investors in securitized products demonstrated strong demand for Affirm's ABS issuance, indicating confidence in the company's loan performance and funding strategy.

Next Steps

• Planning the next 'Big Nothings' 0% APR events to continue driving GMV and consumer engagement.
• Continuing to roll out BoostAI across the entire merchant network to further optimize offers and increase GMV.
• Attending the Morgan Stanley Technology, Media, and Telecom Conference on March 3-4, 2026, in San Francisco, CA.
• Attending the Wolfe FinTech Forum on March 11, 2026, in New York, NY.
• Hosting the Affirm 2026 Investor Forum on May 12, 2026, to provide updates on vision, initiatives, and financial framework.
• Potential release of a significant portion of the U.S. deferred tax valuation allowance by the end of fiscal year 2026, contingent on continued earnings trajectory.

Key Dates

Recommendation

The company delivered exceptional financial results, marked by accelerating GMV growth, a significant return to operating profitability, and robust expansion of its consumer and merchant networks. Strategic initiatives like the Affirm Card and AI-driven optimization are proving highly effective. Favorable funding conditions and new key partnerships further strengthen its market position and future growth prospects, making it a compelling investment opportunity.

Keywords

Buy Now Pay Later, BNPL, Fintech, Financial Technology, Consumer Lending, Affirm Card, 0% APR, E-commerce, Digital Payments, AI, Artificial Intelligence, Credit, Financial Results, Earnings, AFRM