Is Affirm Stock Buy Now, Profit Later or Buy Now, Pay Later?
The "Buy Now, Pay Later" (BNPL) wave continues to reshape how consumers approach purchases, and Affirm Holdings (NASDAQ: AFRM) is a significant force within this transformation. Offering flexible payment solutions, Affirm recently reported a noteworthy financial milestone, marking a return to profitability with a quarterly GAAP net income.
This achievement, alongside ongoing strong growth, positions Affirm’s stock as an intriguing prospect for investors. But does this BNPL leader’s current trajectory translate into a "buy now" or a “pay later” opportunity for your portfolio?
Affirm’s Strong Numbers and Strategic Wins
Affirm's recent financial disclosures showcase a company that is maintaining a healthy upward trajectory while executing a solid market strategy. In the third quarter of its 2025 fiscal year, Affirm processed an impressive $8.6 billion in Gross Merchandise Volume (GMV), marking a 36% increase compared to the same quarter in the previous year.
This robust activity directly boosted its top line, with revenue also climbing 36% year-over-year to $783.1 million.
This growth is supported by an expanding and increasingly engaged user base. The company now serves 21.9 million active consumers, a 23% year-over-year jump.
A key component of its strategy, the Affirm Card, is demonstrating remarkable momentum. It accounted for $807 million in gross merchandise volume (GMV) in the third quarter, representing a 115% year-over-year surge, with approximately 2 million active cardholders.
Affirm's 0% APR offerings have been particularly effective in attracting new users to the card. Overall user engagement is also deepening, with transactions per active consumer rising 19% to 5.6, and repeat customers accounting for a significant 94% of transactions in the quarter.
Beyond impressive sales figures, Affirm is making clear progress towards sustainable profitability. The third-quarter GAAP net income of $2.8 million stands as a positive signal. Furthermore, its Revenue Less Transaction Costs (RLTC), a non-GAAP measure indicating core profitability per transaction, grew 53% year-over-year to $352.6 million.
Strategic alliances are pivotal to Affirm's expansion strategy. Its partnership with Shopify (NYSE: SHOP) has been extended through June 2028, and includes a global rollout with a beta currently live in Canada and plans for the United Kingdom.
The recent addition of Costco.com to its merchant network further strengthens its market presence, complementing existing relationships with major retailers like Amazon (NASDAQ: AMZN) and Target (NYSE: TGT).
Affirm also strategically leverages its 0% APR monthly installment products, which made up 13% of total GMV in the third quarter. GMV for this specific product category grew 44% year over year.
These interest-free options are successfully attracting higher-credit-quality consumers, with approximately 80% of this volume in the third quarter originating from prime and super-prime borrowers.
Looking ahead, Affirm's guidance for the remainder of fiscal year 2025 indicates continued expansion in gross merchandise volume (GMV) and revenue, accompanied by improving adjusted operating margins.
Affirm's Plan for Sustained Success
Although the company is making progress, Affirm operates in a dynamic and highly competitive financial market. All businesses face challenges, and Affirm is no different, but the company is proactively developing strategic plans to address potential risks.
For instance, the highly competitive nature of the BNPL sector puts pressure on fee negotiations and requires constant innovation in fee structuring to stay ahead of the competition. Affirm differentiates itself from its competitors by offering transparent pricing, AI-driven underwriting, and an expanding product ecosystem, including the Affirm Card, to foster loyalty and unique value.
Affirm will always face the economic and credit risks common to the consumer finance industry. While Q3 FY2025 delinquencies improved sequentially, they rose year-over-year. Affirm mitigates this risk through advanced underwriting, short loan terms that facilitate rapid adjustments, recession planning via adjustments to credit criteria, and regular credit bureau reporting.
Finally, Affirm must continue to monitor the evolving global regulations for BNPL services, upholding its commitment to responsible lending. As a growth tech stock, its valuation is subject to fluctuations in investor sentiment and guidance, resulting in stock price volatility. Management focuses on long-term value and strategic transparency to mitigate this risk as much as possible; however, Affirm still maintains a beta of 3.66, suggesting it is more volatile than the overall market.
A Calculated Growth Play in Fintech?
Affirm Holdings showcases a compelling growth story in the rapidly expanding Buy Now, Pay Later market, underscored by recent positive strides in its financial health, including a notable quarterly GAAP profit. Opportunities for expansion through product innovation, especially with the Affirm Card, and deepening strategic partnerships appear significant.
While inherent risks related to intense competition and economic cyclicality remain, Affirm is implementing proactive strategies focused on technological superiority, responsible lending, and product diversification. For investors seeking exposure to the fintech sector and for those with a tolerance for the associated volatility, Affirm's current performance and strategic direction present a compelling “buy now” case for careful consideration.
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