Affirm (AFRM) Q2 2026 earnings review
GAAP Profitability Arrives with a Bang
Affirm delivered a breakout quarter, swinging decisively to GAAP profitability with $118M in operating income (10.5% margin) compared to a $4M loss a year ago. Revenue grew 30% YoY to $1.12B, fueled by a 36% surge in GMV to $13.8B. The 'Big Nothing' 0% APR event and the explosive 159% growth in Affirm Card GMV were the primary catalysts. While RLTC margin compressed slightly due to the mix shift toward 0% APR products, the company demonstrated massive operating leverage, proving it can grow aggressively while generating real earnings.
🐂 Bull Case
The skepticism regarding Affirm's path to GAAP profitability has been answered. Revenue grew 30% while non-GAAP sales and marketing expense actually declined 4%. Operating income expanded by $122M YoY, demonstrating that the platform can scale costs effectively.
The Affirm Card is rapidly becoming a dominant driver, with GMV up 159% YoY to $2.2B. Active cardholders doubled to 3.7 million. This product successfully bridges the gap to everyday spend, driving frequency (transactions per active consumer up 20%).
🐻 Bear Case
Revenue Less Transaction Costs (RLTC) as a % of GMV compressed to 3.93% from 4.13% a year ago. This was driven by a mix shift toward 0% APR products (32% of GMV vs 28% prior year), which generate lower immediate yield despite their marketing value.
30+ day delinquencies (excluding Peloton/Pay-in-X) rose to 2.7%, up from 2.3% in 25Q4 and 2.5% a year ago. While management cites this is within expectations, the upward trend in a 'strong' consumer environment warrants monitoring.
⚖️ Verdict: 🟢🟢
Strong Bullish. The arrival of substantial GAAP profitability ($118M) while maintaining 30%+ topline growth is a pivotal moment. Affirm is monetizing its network effects (Card, 0% offers) and controlling costs better than expected. The slight yield compression is a worthy trade-off for the volume and user acquisition velocity.
Key Themes
Affirm Card Explosion
The Affirm Card is the undisputed growth engine, with GMV surging 159% YoY to $2.2B. It now drives significant in-store volume (orders of magnitude higher than non-card surfaces) and is increasing user habituation. Active cardholders hit 3.7 million (+100% YoY), with a rising attach rate of 14%.
'The Big Nothing' Event Strategy
Affirm's inaugural 'Big Nothing' event (3 days of 0% APR) was a strategic success, driving a 5% to 27% GMV lift for participating merchants. This proves Affirm's ability to act as a demand generation engine, not just a payment utility. Daily cardholder signups jumped 21% during the event, proving the synergy between merchant promos and user acquisition.
RLTC Margin Compression
Revenue Less Transaction Costs (RLTC) margin dropped to 3.93% of GMV, down from 4.13% last year. The driver is the deliberate mix shift to 0% APR loans (now 32% of GMV). While this drives volume, it creates a structural headwind to unit economics that relies on funding cost efficiencies to offset.
Funding Cost Efficiency
A massive tailwind to the P&L is the collapse in funding costs, which fell 109 basis points YoY to 6.2%. Strong execution in the ABS market (pricing at ~5.96%) and favorable repricing are allowing Affirm to absorb lower merchant fees on 0% products while still expanding operating income.
Credit Normalization
30+ day delinquencies (ex-Peloton) ticked up to 2.7%, the highest level in the last 6 quarters. While recent vintages are tracking to ~3.5% net charge-offs (inline with expectations), the sequential rise from 2.3% in 25Q4 suggests consumer credit is normalizing, potentially limiting future approval rates.
Operating Leverage
Affirm is growing revenue (+30%) significantly faster than expenses. Non-GAAP Technology & Data Analytics spend grew only 23%, and Sales & Marketing actually declined 4%. This discipline allowed Adjusted Operating Margin to expand to 30% from 27% a year ago.
Other KPIs
Accelerating. Up 36% YoY, accelerating slightly from the 35% growth seen in the prior year period. Growth was broad-based, with 0% APR products (+60% YoY) outpacing the average.
Stable. Up 29% YoY. While absolute dollars grew robustly, the margin on GMV fell to 3.93% due to lower revenue yields on 0% APR products, partially offset by better funding costs.
Reversing. A dramatic turnaround from net earnings of $80M in the prior year (which was driven by other income) and losses in quarters prior. Core operating performance is now the primary driver of profitability.
Guidance
Accelerating. The midpoint implies ~30% YoY growth. This is consistent with year-to-date performance. The guide assumes GMV of ~$48.6B, implying continued momentum in merchant adoption and card usage.
Decelerating. This implies a sequential drop of ~12% from Q2, reflecting typical post-holiday seasonality. YoY growth at the midpoint remains healthy at ~26% ($985M vs $783M in 25Q3).
Decelerating. Down from 30.0% in Q2, primarily due to seasonal revenue volume declines against a relatively fixed cost base.
Stable. The full-year outlook confirms that Affirm has structurally turned the corner on profitability, maintaining positive GAAP margins for the full year.
Key Questions
Delinquency Trend Ceiling
30+ day delinquencies have drifted up to 2.7%. At what level does this trend trigger credit tightening that would materially impact GMV growth guidance?
RLTC Margin Floor
With the strategy to aggressively syndicate 0% APR offers, should investors expect RLTC margins to permanently settle below the historical 4% level, or will funding efficiencies continue to offset this mix shift?
International Contribution
With the UK launch and new partnerships (Virgin Media O2), when will international markets become a reportable segment or a material contributor to GMV?