Affirm Beats Q3 Expectations as Buy Now Pay Later Adoption Accelerates

Buy now, pay later pioneer Affirm Holdings reported stronger-than-expected third-quarter results Thursday, narrowing its losses significantly as consumer adoption of flexible payment options continues to surge. The fintech company posted a loss of just 6 cents per share, outperforming analyst expectations of an 8-cent loss, while revenue climbed to $792 million, exceeding consensus estimates of $783.1 million and marking a remarkable 36.2% year-over-year increase, according to CNBC.

The results demonstrate Affirm’s resilience despite intensifying competition in the buy now, pay later space and recent concerns about its relationship with major retail partners including Walmart.

Transaction Growth Powers Financial Improvement

Affirm’s improving financial performance was driven primarily by substantial growth in gross merchandise volume (GMV), a key industry metric tracking the total value of transactions processed through its platform. The company reported GMV of $8.4 billion for the quarter, representing a 37% increase from the year-ago period and exceeding analyst expectations of $8.2 billion.

The strong volume metrics reflect successful merchant partnerships and growing consumer acceptance of BNPL services as alternatives to traditional credit cards. Despite historically high interest rates that have pressured consumer spending in other sectors, Affirm’s flexible payment options continue to gain traction among shoppers seeking payment flexibility without revolving debt.

Active consumers on the platform increased 26% year-over-year to reach 21.8 million, while transactions per active consumer grew 24%, indicating deeper engagement with existing users. This stronger user engagement has proved crucial as Affirm works to diversify its revenue streams beyond transaction fees, as highlighted by PYMNTS.com in its previous quarterly analysis.

Pathway to Profitability Taking Shape

In a significant development, Affirm reiterated its commitment to achieving GAAP profitability by the end of its fiscal year 2025, which represents the next quarter. CEO Max Levchin emphasized this milestone during the earnings call, highlighting the company’s focus on sustainable growth and improving unit economics.

“The path to reaching any profitability goal is simply more transactions,” Levchin stated during the conference call. “Fortunately, we see no shortage of demand for the honest financial products Affirm builds and the transactions these products enable.” This improving financial trajectory comes despite ongoing investments in international expansion and new product development.

Adjusted operating income reached $153 million for the quarter, representing 20% of revenue and demonstrating the company’s improving efficiency as it scales its operations. The company’s focus on careful underwriting and pricing discipline has paid dividends in maintaining loan quality even as transaction volumes grow rapidly.

Strategic Initiatives Drive Future Growth

Beyond the quarterly results, Affirm highlighted several strategic initiatives that position it for continued growth. The company’s international expansion is gaining momentum, with its UK operations serving as a gateway to the broader European market where BNPL services have seen strong consumer adoption.

The Affirm Card, which combines debit functionality with buy now, pay later flexibility, continues to gain traction, reaching 2.1 million active users in the quarter, representing growth of 162% from the previous year. Management views the card as critical to expanding beyond its point-of-sale roots and deepening everyday engagement with consumers.

Partnerships with major platforms remain central to Affirm’s strategy. The company’s collaborations with Apple Pay, Amazon, and Shopify continue driving substantial transaction volume, though analysts have raised concerns about potential overreliance on these relationships. Barchart analysts specifically noted the company has been “playing offense, diversifying its merchant base, and locking in key deals” to mitigate partnership risks.

Competitive Pressures and Regulatory Uncertainty

Despite the strong results, Affirm faces mounting competitive pressure in the rapidly evolving BNPL space. The company recently lost its exclusive relationship with Walmart, which selected Swedish competitor Klarna as its new BNPL provider. While Affirm downplayed the significance of this development, noting that Walmart represented only 5% of its GMV and 2% of adjusted operating income in the past six months, the loss raised concerns about the company’s ability to maintain key merchant relationships.

Market observers also noted that the BNPL sector continues to face regulatory scrutiny, though the current administration’s generally favorable stance toward financial innovation has somewhat eased these concerns. Affirm has emphasized its commitment to responsible lending practices, transparent terms, and appropriate consumer protections as differentiators in the increasingly crowded market.

Looking ahead, management provided fourth-quarter guidance that suggests continued momentum, projecting GMV between $9.1 billion and $9.4 billion and revenue between $810 million and $830 million, which would represent year-over-year growth of approximately 32% at the midpoint.