This article first appeared on GuruFocus .
Release Date: November 05, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Affirm Holdings Inc ( NASDAQ:AFRM ) delivered strong GMV growth of 34% in Q1 and expects at least 30% growth for the full year, with early Q2 trends even higher.
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The company's new transformer-based underwriting model has doubled approval performance versus traditional models, enabling growth without incremental loss.
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Affirm Holdings Inc ( NASDAQ:AFRM ) is expanding into adjacent verticals like services, with strong uptake and partnerships (e.g., Intuit, ServiceTitan) unlocking new TAM.
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Direct-to-consumer and digital wallet integrations are driving about half of volume, with the Affirm Card showing high interest-bearing loan mix and growing usage.
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Funding costs remain well-managed, with 70% of on-balance-sheet funding fixed-rate and ABS deals oversubscribed, supporting margin stability.
Negative Points
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Provision expenses increased due to experimental loans kept on balance sheet, contributing to higher delinquencies and allowance in the quarter.
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GAAP operating margin guidance for Q2 came in below street expectations, partly due to under-modeled warrant expenses from a large partner program.
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Merchant revenue as a percentage of GMV was lower due to mix shift toward direct-to-consumer, which carries lower interchange revenue.
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Affirm Edge pilots are delayed to 1H next calendar year, with partner onboarding expected to be slow and no specific partners announced yet.
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Agentic commerce and cybersecurity risks are emerging, with potential for fraud and liability challenges as AI-driven shopping scales.
Q & A Highlights
Q: Adam Frisch (Evercore ISI) asked how long Affirm can sustain mid-30s growth with its existing business, and how much longer new initiatives like Affirm Edge and international expansion could extend that runway. A: CEO Max Levchin said the company is targeting at least 30% growth for a very long time, noting Affirm is still less than 4% of e-commerce and live in only four markets. He said the full-year guide sets a floor of at least 30% growth, and the business was growing at a high-30s rate in the first month of Q2.
Q: Rob Wildhack (Autonomous Research) asked about the 27 basis point quarter-over-quarter rise in funding costs and Affirm's ability to offset higher costs elsewhere in the P&L. A: CFO Rob O'Hare attributed part of the sequential increase to balance sheet seasonality, noting funding costs as a percentage of on-balance-sheet loans were down 6% year over year, helping drive a 4.3% RLTC take rate in Q1. He said more than 70% of on-balance-sheet funding is fixed rate, and recent ABS deals, including three- and five-year fixed-rate deals, give the company good visibility into funding costs.
Q: Rob Wildhack (Autonomous Research) asked about Affirm's new transformer-based underwriting model and what it could unlock in accuracy, loss rates and growth. A: CEO Max Levchin said the model learns subtle repayment patterns without human feature engineering, and in testing it performed twice as well as the traditional model at separating good and bad risk. He said this translates to roughly two to three points more approvals with essentially no incremental loss, supporting the company's 30% growth target, with more models in the family coming.
Q: Andrew Jeffrey (William Blair) asked whether the market misperceives Affirm's ability to compound GMV at 30%-plus while maintaining strong credit, given concerns about higher provisions in an uncertain economy. A: CEO Max Levchin stressed that Affirm's short loan duration limits risk, noting the average term is under 98 days, and that credit is "job number zero" with about a third of the company involved in credit management. CFO Rob O'Hare said credit outcomes are an intentional choice point, and he cited a recent ABS deal that priced more than four times subscribed as strong validation from sophisticated credit investors.
Q: Dan Dolev (Mizuho Securities) asked whether merchants should subsidize more 0% Affirm loans in an agentic commerce world, and what the key hook is for merchants. A: CEO Max Levchin said yes, and that Affirm is building programmatic APIs so that brand-sponsored promotions can eventually be deployed by agents themselves. He expects 0% volume to rise significantly in agentic commerce, with agents seeking the best financial terms and Affirm positioned as the only player able to manage differentiated, SKU-level 0% offers.
Q: Nate Senson (Deutsche Bank) asked how CEO Max Levchin is spending his time with the ZT1 team and what that opens up for Affirm. A: CEO Max Levchin said ZT1 targets projects with a risk-adjusted path to $1 billion in revenue within five years of launch, or the ability to move an existing billion-dollar line of business by 15% to 20%. He highlighted brand-sponsored promotions (BSPs), which let brands fund 0% offers at the SKU level, noting about a million SKUs in the Affirm app are already brand-sponsored funded.
Q: Jason Kupferberg (Wells Fargo) asked whether the full-year guide of at least 30% GMV growth implies deceleration from Q1's 34%, or reflects typical conservatism. A: CFO Rob O'Hare said the guide is a floor, not a range, with no ceiling on growth, and that early Q2 and September growth rates were well north of Q1. He said there is nothing specific pointing to a deceleration and the company simply wanted to set a responsible floor for FY27.
Q: Jason Kupferberg (Wells Fargo) asked for details on the first Affirm Edge pilots, including the number and size of bank partners. A: President Michael Linford said Affirm Edge will distribute its credit products through debit card issuers across banks of all sizes, with pilots expected in the first half of the next calendar year. He said development is nearly complete but no partners have been announced, and that bank partners move slowly, so patience is required.
Q: John Hecht (Jefferies) asked whether lower merchant revenue as a percentage of GMV is tied to the growth of direct-to-consumer activity and differing merchant discount rates. A: CFO Rob O'Hare said yes, since most DTC volume runs on physical or virtual cards that generate interchange, which is on average lower than the merchant discount rate from integrated merchants. He noted DTC is heavily interest-bearing, with the Affirm Card historically running more than 80% interest-bearing loans, so all-in compensation is higher despite lower network revenue.
Q: Brian Keen (Citi) asked about higher provision expense as a percentage of GMV and the Q2 GAAP operating margin guide coming in below Street expectations. A: CFO Rob O'Hare said the higher provision stemmed from deliberate approval and origination experiments in September whose loans were kept on balance sheet and are more than properly reserved, and the decision was accretive to the network and new users. On the GAAP margin gap, he pointed to warrant expense tied to a large partner's performance program, where new-user growth, partly from international expansion, is running ahead of external models.
Q: Harshita Rawat (Bernstein) asked about challenges in moving down payments from debit cards to bank accounts, the potential savings, and learnings from digital wallet rollouts. A: CEO Max Levchin said switching from real-time card networks to ACH introduces delay and risk, but Affirm's underwriting scale lets it effectively self-insure and save on interchange. On wallets, he said direct integrations with Apple Pay and Google Pay drive repeat usage and new users by meeting consumers where they prefer to shop, and Affirm is comfortable embracing channel conflict.
Q: Will Mance (Goldman Sachs) asked what Affirm is contemplating
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
