10-Q: Affirm Soars in Q2 2026, Amazon Warrant Price Cut

Affirm Holdings, Inc. reported robust financial performance for Q2 2026, with significant revenue and net income growth, alongside a notable amendment to its Amazon warrant agreement and plans to establish Affirm Bank.

Summary

• Total revenue, net, increased by 30% to $1.12 billion for the three months ended December 31, 2025, compared to $866.4 million in the prior year period.
• Net income surged by 61% to $129.6 million for the three months ended December 31, 2025, up from $80.4 million in the same period last year.
• Operating income dramatically improved to $117.6 million, reversing an operating loss of $4.3 million in the prior year period.
• Gross Merchandise Volume (GMV) grew by 36% to $13.8 billion for the three months ended December 31, 2025.
• Active consumers increased by 23% to 25.8 million as of December 31, 2025.
• Transactions per active consumer rose by 20% to 6.4 as of December 31, 2025.
• The exercise price for Amazon warrants vesting on or after February 1, 2026, was amended from $100.00 to $63.06 per share.
• Applications were submitted on January 23, 2026, to establish Affirm Bank, a proposed Nevada-chartered industrial loan company.
• Provision for credit losses increased by 40% to $214.2 million for the three months ended December 31, 2025.
• Average Order Value (AOV) decreased to $251 for the three months ended December 31, 2025, from $267 in the prior year, driven by diversification and increased repeat usage of low-AOV offerings like Affirm Card.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong report, demonstrating significant financial and operational growth, coupled with strategic initiatives like the Affirm Bank application. While credit loss provisions increased, overall profitability and user engagement metrics are highly positive, indicating robust business momentum.

Positives

• Total revenue, net, increased by 30% to $1.12 billion for the three months ended December 31, 2025, from $866.4 million in the prior year.
• Net income grew by 61% to $129.6 million for the three months ended December 31, 2025, compared to $80.4 million in the same period last year.
• Operating income significantly improved to $117.6 million, a substantial turnaround from an operating loss of $4.3 million in the prior year period.
• Gross Merchandise Volume (GMV) increased by 36% to $13.8 billion for the three months ended December 31, 2025, indicating strong platform activity.
• Active consumers grew by 23% to 25.8 million, demonstrating expanding user adoption and engagement.
• Transactions per active consumer increased by 20% to 6.4, highlighting increased repeat usage and customer loyalty.
• Submitted applications to establish Affirm Bank, a strategic move to enhance funding flexibility and diversification.
• Sales and marketing expenses decreased by 27% for the three months ended December 31, 2025, primarily due to lower Amazon and Shopify warrant expenses as portions became fully vested or benefit periods were extended.

Negatives

• Provision for credit losses increased by 40% to $214.2 million for the three months ended December 31, 2025, reflecting higher expected future losses on loans.
• Average Order Value (AOV) decreased to $251 for the three months ended December 31, 2025, from $267 in the prior year, indicating a shift towards lower-value transactions.
• Other income, net, decreased by 82% to $15.6 million for the three months ended December 31, 2025, primarily due to a significant reduction in gains from early extinguishment of convertible debt (fewer repurchases).
• The exercise price for Amazon warrants vesting on or after February 1, 2026, was reduced from $100.00 to $63.06 per share, which could represent a significant cost or dilution for Affirm.

Risks

• Macroeconomic conditions, including inflation, elevated interest rates, and recessionary concerns, may negatively impact consumer spending and loan repayments.
• Continued uncertainty regarding the magnitude, duration, and impact of tariffs on global trade could affect business operations.
• Volatile capital markets may impact the ability to secure funding on acceptable terms or at all, despite current improvements.
• Regulatory developments, including increased oversight from the Consumer Financial Protection Bureau (CFPB) and state agencies, could lead to financial penalties or changes in business practices.
• Governmental actions to cap interest rates could adversely affect the business model and profitability.
• Credit risk is inherent in the consumer loan portfolio, with exposure to default risk on both purchased and directly originated loans.
• Nonperformance by financial institutions holding cash and issuers of cash equivalents and available-for-sale securities poses a credit risk.

Future Outlook

Affirm anticipates continued growth in its network, diversity, and mix of funding relationships. The company is evaluating the impact of the 'One Big Beautiful Bill Act' on its financial statements. Management expects that continued positive pretax earnings performance may lead to the release of a significant portion of the domestic valuation allowance within the fiscal year ending June 30, 2026. The establishment of Affirm Bank is expected to provide greater flexibility and diversification in financial services.

Management Comments

• Our mission is to deliver honest financial products that improve lives.
• Our solutions, which are built on trust and transparency, are designed to make it easier for consumers to spend and save responsibly and with confidence, easier for merchants and commerce platforms to convert sales and grow, and easier for commerce to thrive.
• We believe our proprietary technology platform and data give us a unique advantage in pricing risk.
• We continue to optimize our underwriting and take other actions to manage consumer loan repayment, increase collections and minimize losses.
• Recent pretax earnings performance has improved the mix of positive versus negative evidence considered in evaluating the realizability of our deferred tax assets. If these trends continue, we expect that additional positive evidence may be available within our fiscal year ending June 30, 2026 to support the conclusion that a significant portion of the domestic valuation allowance is no longer needed.

Industry Context

StockSavvy.ai notes that Affirm's strong GMV and active consumer growth reflect the continued expansion and adoption of Buy Now, Pay Later (BNPL) solutions within the broader e-commerce and retail sectors. The decrease in Average Order Value (AOV) suggests a successful strategy in diversifying transaction types and increasing repeat usage, aligning with a trend towards integrating BNPL for everyday purchases rather than just large-ticket items. The application to establish Affirm Bank indicates a strategic move to gain greater control over lending operations and potentially reduce funding costs, a common challenge for FinTechs reliant on external bank partnerships and capital markets in a fluctuating interest rate environment.

Comparison to Industry Standards

• StockSavvy.ai observes that Affirm's reported 36% GMV growth and 23% active consumer growth for the quarter ended December 31, 2025, are competitive within the BNPL sector, which has seen varying growth rates among players like Block (Afterpay) and PayPal (Pay in 4).
• The increase in transactions per active consumer to 6.4 suggests strong customer retention and engagement, a key metric for long-term value in the BNPL industry, often compared to loyalty programs of traditional credit card companies or other digital payment platforms.
• The decrease in Average Order Value (AOV) to $251 indicates a strategic shift towards smaller, more frequent transactions, a trend also observed in competitors expanding into everyday spending categories, moving beyond high-ticket items that initially drove BNPL adoption.

Management Changes

Corporate Governance

Legal Proceedings

• Kusnier v. Affirm Holdings, Inc.: A putative class action lawsuit alleging materially false/misleading statements regarding consumer debt, regulatory arbitrage, data harvesting, public regulatory actions, and vulnerability to interest rate changes. The action was dismissed with prejudice on September 30, 2025, but plaintiffs filed a notice of appeal on October 29, 2025.
• Quiroga v. Levchin, et al.: A shareholder derivative lawsuit with allegations similar to the Kusnier action, stayed by agreement of the parties on May 1, 2023.
• Jeffries v. Levchin, et al.: A shareholder derivative lawsuit with allegations similar to the Kusnier and Quiroga actions, stayed by agreement of the parties on August 15, 2023.
• Vallieres v. Levchin, et al.: A shareholder derivative lawsuit with allegations similar to the Kusnier, Quiroga, and Jeffries actions, stayed by agreement of the parties on November 30, 2023.
• The aggregate amount or range of losses estimable from legal proceedings is not expected to have a material adverse effect on the consolidated financial position, results of operations, or cash flows.

Related Party Transactions

• Second Amendment to the Amended and Restated Warrant to Purchase Class A Common Stock with Amazon.com Services LLC, effective November 2, 2025, amending the exercise price for certain warrants from $100.00 to $63.06.
• Commercial agreements with certain subsidiaries of Amazon.com, Inc. (Amazon) involving warrants and installment financing services.
• Commercial agreement with Shopify Inc. (Shopify) involving warrants, with the benefit period extended from six to nine years during fiscal year 2025.

Stakeholder Impact

• Shareholders: Positive financial results and strategic initiatives (Affirm Bank) could drive share price appreciation. However, the reduced Amazon warrant exercise price represents potential future dilution or cost, and ongoing legal proceedings introduce uncertainty.
• Customers: Continued expansion of flexible payment options, including Affirm Card, and efforts to optimize underwriting and loan modifications aim to improve the consumer experience and access to credit.
• Employees: Stock-based compensation, including the grant of PSUs to the CEO and Rule 10b5-1 plans for other executives, aligns employee incentives with company performance.
• Partners (Amazon): The amended warrant agreement provides Amazon with a significantly lower exercise price for future warrant vesting, strengthening the partnership but potentially at a cost to Affirm's shareholders.
• Creditors: Strong financial performance and diversified funding relationships enhance the company's ability to meet debt obligations, while the Board's authorization for note repurchases indicates proactive debt management.

Next Steps

• Evaluate the impact of the 'One Big Beautiful Bill Act' on consolidated financial statements.
• Continue to optimize underwriting and loan modification programs to manage credit risk.
• Pursue the establishment of Affirm Bank to enhance funding flexibility and diversification.
• Execute the Marketing Plan and other marketing initiatives to drive conversion and adoption of the Program on Participating Sites.
• Explore and potentially implement Phase 2 Opportunities with Amazon to expand the scope of the Program.
• Board of Directors authorized repurchase of up to $176 million in aggregate principal amount of 2026 Notes, commencing January 1, 2026, through November 13, 2026.

Key Dates

Recommendation

Affirm's Q2 2026 results demonstrate strong operational momentum, with significant growth in revenue, GMV, active consumers, and a notable return to operating profitability. The strategic move to establish Affirm Bank could provide long-term funding advantages and regulatory flexibility. While the increase in credit loss provisions and the reduced Amazon warrant exercise price are considerations, the overall growth trajectory, expanding user engagement, and proactive management of funding and risk suggest a positive outlook. The company's ability to scale its platform and diversify its offerings, even with a lower AOV, indicates a robust business model. Therefore, a 'buy' recommendation is warranted for investors looking for growth in the FinTech space, with an understanding of the inherent risks in consumer lending and regulatory scrutiny.

Keywords

Affirm, BNPL, FinTech, payments, e-commerce, Amazon partnership, financial results, quarterly report, consumer lending, credit risk, warrants