Affirm (AFRM) Q4 2026 earnings review
The $1.6B Profit Is an Accounting Entry. The 39% Is Real.
Affirm beat the top of every guided range: GMV grew 36% to $14.1B (4.5% above the top of guidance), revenue rose 33% to $1,166M, and revenue less transaction costs (RLTC) jumped 39% to $589M. GAAP operating margin hit 12.6%, up from 6.6% a year ago and the highest in company history. Ignore the $1.6B net income headline: $1.46B of it is a one-time release of the deferred tax valuation allowance. Stripping that out, net income was roughly $161M (derived), still more than double last year's $69M. Guidance for FY27 calls for GMV above $64B (+28%) and operating margin above 14.5%, a meaningful deceleration from 36% growth but with another leg of margin expansion. No buyback activity this quarter; $176M of convertible-note repurchase authorization remains unused.
🐂 Bull Case
RLTC grew 39% while non-GAAP operating expenses grew 25%, so 54 cents of every incremental RLTC dollar dropped to GAAP operating income (71 cents on an adjusted basis). Management has beaten its initial full-year operating margin guide two years running (FY26: guided more than 6%, delivered 9.8%), and FY27 starts at more than 14.5%.
Affirm Card active cardholders more than doubled to 5.2M with attach rate at 19%, and card GMV grew 124% to $2.8B. Card users generate almost $4,000 of annual GMV, twice the average consumer, and management says more than 80% of direct-to-consumer volume is interest-bearing, which supports the take rate.
FY26 GMV was originally guided at 'more than $46B' and came in at $50.2B. FY27's 'more than $64B' follows the same pattern, and the Q1 guide absorbs two known headwinds (a shifted promotional event and the final month of a lost enterprise merchant).
🐻 Bear Case
30+ day delinquencies ex-Peloton were higher than the prior year in every quarter of FY26 and ended at 2.5% vs 2.3%. Q4 provision for credit losses grew 42%, faster than 36% GMV growth. Management insists the consumer is fine; the data says the book is getting slightly riskier each quarter.
FY27 GMV guidance implies 28% growth versus 37% in FY26. Q4 itself got a low-single-digit boost from a promotional event that moved from Q1 to Q4, so underlying growth was already closer to the low 30s. General merchandise, the largest category at 31% of GMV, grew just 13%.
Funding costs falling 103 bps to 5.8% were the single largest driver of margin expansion this year. The FY27 outlook explicitly assumes short-term benchmark rates rise, and management guides RLTC only to a 'similar' 4.16% of GMV. Equity capital required also rose to 4.4% of the portfolio from 3.8%, meaning more balance-sheet intensity.
⚖️ Verdict: 🟢
Positive. A clean beat on every guided line, record operating margin, and a credible path to 14.5%+ margins in FY27 outweigh the concerns. It is not a 5 because growth is guided to slow by eight points, the headline net income is a tax artifact, and delinquencies have quietly run above prior-year levels all year while management says nothing has changed.
Key Themes
Affirm Card Is Now the Entire D2C Growth Story
Direct-to-consumer GMV grew 49% to $4.7B, and the letter states this was driven entirely by Affirm Card, which grew 124% to $2.8B. Cardholders added 0.8M sequentially to reach 5.2M (attach rate 19%, up 9 points YoY), the fastest quarterly add in the past year. Card users generate almost $4,000 of trailing GMV, more than twice the average active consumer, and card-driven in-store GMV is more than ten times in-store spend on non-card surfaces. Management's stated goal remains 10M cardholders spending $7,500 a year; on cardholders it is roughly halfway there.
Merchant Network Growth Accelerating: 571K Merchants, +51%
Active merchant growth accelerated for the fourth straight quarter (24% → 30% → 42% → 44% → 51%), driven by three scaling wallet partnerships, ISV partners, and the ramp of the Intuit QuickBooks invoicing integration. Merchants with more than $1,000 of trailing GMV grew 53% to 237K, so this is not just long-tail noise. New launches since April include Bed Bath & Beyond, ServiceTitan, and Crate and Barrel, plus a signed deal with Etsy and a Samsung renewal. Management says Affirm is live at only about 80 of the top 250 US e-commerce sites and 10% of all US e-commerce merchants, and merchant dollar-based net expansion has averaged 120% over three years.
Services Verticals Nearly Doubled
Services GMV grew 98% and home/lifestyle grew 49%, both far above the 36% company average, while the 'other' bucket (long-tail merchants and wallet partners) grew 88% to become the second-largest category at 16% of GMV. Within services, professional services grew 74%, elective medical 85%, and automotive products and services 140%. Management says GMV from these non-retail integrations is 'in the billions annually' and growing at double the company rate, driven by a couple of large services platforms signed recently. Levchin cautioned the 2x pace may not hold, but said the integrations are 'not even out of the first inning.'
AI Productivity Showing Up in the Cost Base
Management claims AI tooling cut the fully-loaded cost per shipped feature by roughly 30% over the last six months, with headcount discipline maintained since 2023. The numbers are consistent with this: non-GAAP technology and data analytics expense grew 32% while transaction count grew 41%, and total non-GAAP operating expenses grew 25% against 39% RLTC growth. Levchin reiterated there are no AI-related layoffs planned; AI is being used to ship more, not to cut people.
Delinquencies Ran Above Prior Year All Fiscal Year
Management repeated that the consumer 'is doing fine' and Affirm controls credit outcomes. The data contradicts the spirit of that message: 30+ day delinquencies ex-Peloton were 2.5% at June 30 versus 2.3% a year ago (+19 bps), and every quarter of FY26 printed above the same quarter of FY25 (2.8/2.8, 2.7/2.5, 2.8/2.5, 2.5/2.3). Provision for credit losses grew 42% in Q4, accelerating from 2% in Q1 and outpacing 36% GMV growth, and net charge-offs rose from $128M in Q1 to $170M in Q4. Allowance sits at 5.9% of loans versus 5.6% a year ago. None of this is a crisis (60+ and 90+ day rates are flat and cohorts still track toward 3.5% ultimate losses), but the book is 44% non-prime and the direction is consistently worse, not stable.
0% APR Monthly Installments Decelerated Hard
The 0% APR monthly installment product, 13% of GMV, grew just 27% in Q4, well below the 36% company average and a sharp slowdown from 93% in FQ4'25, 74% in FQ1'26, and 65% in FQ2'26. This was the product management called the core merchant-acquisition engine a year ago. Likely causes are the departed enterprise merchant (which carried a high share of long-dated 0% loans), the shift of some large partners to evergreen Pay-in-X offers instead, and merchant fee rates on longer-term 0% loans that have trended lower over the year per the supplement. Interest-bearing loans (72% of GMV) grew 36% and are now the mix gainer, which helps revenue yield but changes the growth narrative.
General Merchandise Grew 13%, Marketplace Volume Flat
General merchandise is Affirm's largest category at 31% of GMV and grew only 13%, reflecting the enterprise merchant that moved Pay Later volume to its own wallet in FQ1'26. The letter says the headwind abates only in the final month of FQ1'27. Separately, Affirm Marketplace GMV (app and website-initiated volume excluding card) was roughly flat year over year at about $1.9B (derived from the D2C chart: $4.7B D2C less $2.8B card, versus roughly the same split a year ago). Management is pitching the app as a shopping destination, but the non-card app volume is not growing; all D2C growth is the card.
Rates Rising Into FY27 While Balance Sheet Intensity Increases
The FY27 outlook explicitly assumes short-term benchmark rates increase versus FY26, based on the forward curve. Funding costs falling 103 bps to 5.8% contributed 18 bps of the 9 bp RLTC margin improvement this quarter; without that tailwind, RLTC as a percent of GMV would have declined. Management previously said a 100 bp rate move translates to roughly 40 bps of funding cost with a one-to-two-year lag. At the same time, funding debt doubled to $3.3B, on-balance-sheet non-securitized loans rose to $4.1B from $2.0B, and equity capital required increased to 4.4% of the platform portfolio from 3.8%. More loans on Affirm's own balance sheet means more direct rate and credit exposure.
Growth Guide Leans on Uncertain Promotional Event Timing
Top five partners still represent 42% of GMV (down from 46%). The Q4 beat included a low-single-digit growth boost from an annual promotional event at a large enterprise merchant that shifted from Q1 to Q4. The FY27 outlook assumes that event recurs in FQ4'27 but states the timing 'is currently uncertain and could be delayed beyond FY27.' Investors should treat the FY27 GMV guide as carrying a few points of event risk in the last quarter, and Q1'27 faces the mirror-image comp headwind.
Tax Valuation Allowance Release Resets the EPS Baseline
Affirm released the valuation allowance on a majority of its US deferred tax assets, booking a $1,447M income tax benefit and a $1,467M deferred tax asset on the balance sheet. This is non-cash: cash taxes paid in the quarter were $2.8M. The consequence is that GAAP EPS will now carry a mid-to-high-20s percent tax rate (per the CFO) rather than the near-zero rate of the past two years, so pre-tax income ($169M in Q4, up 136%) is the cleaner measure of earnings power going forward. The CFO flagged tax-rate volatility from stock-based compensation as the reason no EPS guide was given.
Leadership Reshuffle: Levchin Steps Back to Build
COO Michael Linford was promoted to President (alongside Libor Michalek), taking on Legal and Compliance, Revenue, and Global Markets. Pat Suh, an 11-year veteran, becomes SVP and Managing Director of Global Markets to lead international. Levchin will spend more time on a small zero-to-one team (internally 'zt1') working on early proofs of concept, and said on the call the output will show up 'in fiscal 2029 and so on.' The bench is deep and tenured, but investors should note the founder-CEO is deliberately moving further from day-to-day operations.
International: Australia Launches, UK Signs Costco, Not Material in FY27
ShopPay Installments powered by Affirm launched in Australia with Shopify, the UK added Costco, Royal Caribbean expanded, and a Stripe UK integration went live. The company also added warehouse funding capacity for Canadian originations. Levchin said early UK merchant feedback was 'a love fest' and that no meaningful competitive response has emerged. The outlook is explicit that expansion outside North America will not be a material growth contributor in FY27, so this is a FY28+ story.
Macro: Consumer 'Fine' per Management, World Cup Boosted Ticketing
Levchin said Affirm is not large enough to read macro tea leaves but that its consumer is performing and credit remains 'the input, not the output' of the business. Travel and ticketing grew 28% with ticketing GMV up 70% in June on World Cup demand, a one-off tailwind that will not repeat. Management noted a slight 4% decline in average order value to $266, attributed to Pay-in-X mix rather than consumer trade-down.
Other KPIs
Stable to slightly up. RLTC margin rose 9 bps YoY and sits above the 3.75-4% medium-term range for the fourth consecutive quarter. The bridge: +18 bps from lower funding costs, +11 bps from processing and servicing efficiency, offset by -17 bps from lower revenue yield (network revenue fell to 2.8% of GMV from 3.0% as D2C mix grew) and -3 bps from higher provision and loan purchase commitment costs. Average cost of funds fell to 5.8% from 6.8% a year ago and 7.7% two years ago, the lowest in three and a half years, on ABS spreads tightening (the $550M 2026-X1 deal was four times oversubscribed). Funding capacity reached $30.0B, enough to support more than $70B of annual GMV.
Accelerating. Operating cash flow of $296M less $67M of capitalized software and equipment, versus $24M of free cash flow a year ago. Full-year free cash flow was $993M (derived) on $1,231M of operating cash flow, up from $602M in FY25. Total liquidity ended at $2.6B (cash plus securities) against $1.1B of convertible notes, for a net cash position of $1.47B, up $121M sequentially and roughly $400M year over year. Note that for a lender operating cash flow excludes loan originations, which sit in investing; the $13.3B of loans originated in Q4 were funded by $10.7B of new funding debt.
Decelerating relative to RLTC. Technology grew 32% (infrastructure +35% on 41% more transactions, plus headcount for Affirm Bank and international), sales and marketing grew 36% on co-marketing spend, and G&A grew 16%. Opex as a percent of revenue fell to 20% from 21% on a non-GAAP basis. On a GAAP basis, stock-based compensation was $67M (flat) and enterprise warrant expense $53M ($50M of it Amazon warrant vesting), and full-year warrant expense fell 34% to $211M, ahead of the 'at least 30%' decline guided a year ago.
Accelerating and the fastest-growing revenue line. Loans sold grew 26% and gain on sale as a percent of loans sold rose 29 bps on better pricing. The CFO cautioned this line is lumpy: quarters with a non-consolidated ABS deal (two in FY26, a similar plan for FY27) show elevated gain on sale, and Q4 was one of them. Servicing income grew 36% to $46M, stable at about 2% of the off-balance-sheet portfolio.
Guidance
Decelerating. The $13.85B midpoint implies 29% YoY growth versus 36% in Q4 and 42% in the year-ago quarter, and a 1.5% sequential decline from $14.06B. Two known headwinds are embedded: the enterprise promotional event that occurred in FQ1'26 moved to FQ4 and will not repeat, and the lost enterprise merchant only laps in the final month of the quarter. Given Affirm beat the top of its Q4 GMV guide by 4.5%, a print above $14.0B would not be surprising.
Decelerating in line with GMV. Revenue midpoint of $1,205M implies 29% growth (33% in Q4) at 8.7% of GMV, a seasonal step-up from 8.3%. RLTC midpoint of $582.5M implies 28% growth (39% in Q4) at 4.21% of GMV, essentially flat with Q4's 4.19%. The RLTC growth deceleration is sharper than the revenue deceleration because Q4 benefited from the funding-cost tailwind that is now fully in the base.
Stable sequentially, up sharply YoY. GAAP midpoint of 12.5% compares with 6.8% in FQ1'26 and 12.6% in Q4; adjusted midpoint of 29% compares with 28.3% a year ago. A flat sequential margin on lower sequential revenue implies management is not cutting spend into the seasonal dip.
Decelerating. Implies at least 28% growth versus 37% in FY26 and 38% in FY25. The Q1 guide midpoint is 21.6% of $64B, almost exactly Q1's share of FY26 GMV (21.4%), so the full-year guide assumes no acceleration through the year. Management's initial guides have been conservative: FY26 started at 'more than $46B' and finished at $50.2B,. International is explicitly excluded as a material contributor, and the FQ4'27 promotional event carries timing risk.
Applying the ratios to $64B implies revenue of roughly $5.4B (+28%), RLTC of roughly $2.66B (+28%), GAAP operating income of at least ~$790M (+89%), and adjusted operating income of at least ~$1.66B (+34%), all derived. Margin expansion of 470+ bps at the GAAP level comes from operating leverage and continued shrinkage of warrant expense rather than from unit economics, since RLTC margin is guided flat despite rising benchmark rates in the forward curve. The CFO said the run-rate GAAP tax rate will be in the mid-to-high 20s but declined to guide EPS given expected volatility.
Scorecard against the most recent (May) guidance: GMV $50.2B vs $49.3-49.6B (1.2% above the top); revenue $4,261M vs $4,175-4,205M (1.3% above); RLTC $2,085M vs $2,031-2,046M (1.9% above); GAAP operating margin 9.8% vs 8.9-9.4%; adjusted operating margin 29.0% vs 28.2-28.8%. Against the original August 2025 guide the beats were much larger: GMV 'more than $46B' became $50.2B and operating margin 'more than 6%' became 9.8%. Warrant expense fell 34% versus 'at least 30%' guided. ECR ratio finished at 4.4%, within the sub-5% target.
Key Questions
Why Are Delinquencies Higher Every Quarter?
30+ day delinquencies ex-Peloton exceeded the prior year in all four quarters of FY26, and Q4 provision grew 42% against 36% GMV growth. How much of this is deliberate mix (card, services, 44% non-prime) versus deterioration in like-for-like cohorts, and what delinquency level would trigger tightening?
What Happened to the Marketplace?
Non-card direct-to-consumer GMV appears flat year over year at roughly $1.9B while the letter attributes all D2C growth to the card. If the app is meant to become a shopping destination, why is app-initiated non-card volume not growing?
How Much Rate Increase Is in the FY27 Guide?
Funding costs contributed 18 bps of RLTC margin improvement in Q4 and the outlook assumes benchmark rates rise. What cost of funds is embedded in the 4.16% RLTC assumption, and what offsets (spread tightening, mix, pricing) are expected to hold margin flat?
Is the 0% Monthly Slowdown Structural?
0% APR monthly installments grew 27% versus 65-93% in prior quarters, and merchant fee rates on longer-term 0% products have trended lower. Is this the lost enterprise merchant lapping, cannibalization by evergreen Pay-in-X, or merchants pushing back on subsidy cost?
How Big Is the FQ4'27 Event Risk?
The Q4 growth rate got a low-single-digit lift from the shifted promotional event, and the FY27 outlook says its timing could slip beyond the fiscal year. Roughly how many GMV dollars does that event represent, and what does FY27 growth look like without it?