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If you’ve ever split a purchase into separate payments at checkout, there’s a good chance you’ve been a customer of Affirm Holdings (NASDAQ: AFRM). The company sits at the center of the buy-now-pay-later (BNPL) boom. And after years of prioritizing growth over profits, it’s starting to deliver both at once.

That’s the good news. But there are reasons to be cautious.

Strong Growth and Profitability Signal Momentum

Affirm’s most recent quarter was a standout. In its second fiscal quarter ended Dec. 31, gross merchandise volume (GMV), which is the total value of purchases financed through its platform, hit $13.8 billion, up 36% from a year earlier.

Revenue climbed 30% to $1.12 billion, and net income jumped 61% year over year, reaching $130 million. The company also beat Wall Street’s expectations, reporting earnings of 37 cents per share. Overall, Affirm enjoyed an adjusted operating margin of 30%.

The underlying operating numbers were equally encouraging. Total transactions in the second quarter jumped 44% to nearly 55 million, and the number of merchants offering Affirm at checkout grew 42% to 478,000. The number of active customers rose 23% to 25.8 million.

The increased adoption is vital because, beyond any single partnership, it points to a network effect that can become self-reinforcing over time.

Expansion Strategy and Partnerships Drive Scale

Management has laid out a clear roadmap. Full-year GMV is projected to reach $48.3-$48.85 billion, with revenue between $4.09 and $4.15 billion. If Affirm hits its targets, it could help convince the world that it’s successfully moved from fast-growing startup to a durable, growing business.

The company is also firming up and expanding its reach. Partnerships with Shopify (NASDAQ: SHOP), Wayfair (NYSE: W), Intuit (NASDAQ: INTU), Expedia (NASDAQ: EXPE), Worldpay, Fiserv (NASDAQ: FISV), and others show the company moving beyond discretionary retail spenders and pushing deeper into everyday commerce. A partnership with Stripe, for example, lets shared payment tokens move to Stripe-connected sellers.

Analyst Sentiment and Stock Volatility

Given the company’s prospects, analysts are broadly bullish on the stock at this point, slating it as a Moderate Buy. Of 28 firms covering Affirm, 19 rate it a Buy and nine have it as a Hold. The 12-month target ranges between $55 and $110, with an average target price of $85 per share, nearly double the current market price.

The current price, though, is still a far cry from where it traded at various points of enthusiasm in the past. The stock is down more than one-third from where it was trading five years ago soon after its IPO and has fallen again—roughly 40%—since the start of this year. Those kinds of dips, recoveries, and dips may or may not bring moments of opportunity.

Credit Risks and Competitive Pressure

While revenue and profits look good, no investment in a company like Affirm comes without meaningful risk.

Keep in mind that credit markets are generally jittery these days. Delinquency loan rates at Affirm are up, and provisions for credit losses have risen. Affirm is basically a lender, and if the economy softens and consumers struggle to repay, those losses could climb, and profits fall. And unlike a traditional bank with decades of credit cycle experience, Affirm is still navigating in a relatively young category.

Competition is also stiff. PayPal (NASDAQ: PYPL), Klarna (NYSE: KLAR), Afterpay, and major banks are all pushing installment payment products. Affirm’s partnerships help defend it, but they also create the risk of losing a major partner. Walmart (NASDAQ: WMT) shifted its primary BNPL relationship to Klarna last year. Those types of shifts can hit volume and revenue quickly.

One other thing that might be worth noting is that the company’s CEO, Max Levchin, has sold more than $110 million in company shares since September 2025. Nearly half of that came in January when the stock was above $80 per share. The significance, however, is questionable as there are many possible reasons for these sales. But for anyone considering investing in the company, it’s worth keeping track. There are no records of any recent significant purchases.

Overall, Affirm belongs in the high-risk, high-reward portion of any diversified portfolio that includes the financial services sector. The growth story is there, profitability is improving, and the company’s partnership strategy is building. It could be an attractive play for those who are interested in digital payments and consumer lending as a longer-term investment. Or for those who want to chase rallies. However they approach it, investors will want to be wary of the risks associated with AFRM stock before starting a position. 

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