To The Moon

$Affirm Holdings, Inc.(AFRM)$

The buy now, pay later (BNPL) sector has long been a polarizing space in financial technology. Critics point to consumer debt risk and regulatory uncertainty, while supporters highlight BNPL’s ability to democratize credit access and drive retail sales. In the midst of this debate, Affirm Holdings (NASDAQ: AFRM) has delivered a set of quarterly results that defied expectations, pushing its stock up nearly 11% in a single session and bringing year-to-date gains in 2025 to approximately 42%.

For long-term investors who recognized Affirm’s potential early in the year, this performance has been a welcome validation. For prospective investors, the question now becomes whether Affirm’s latest rally has priced in too much optimism—or whether the company’s accelerating growth, improved profitability, and expanding network effects justify paying a premium for the stock.

This article will provide an in-depth review of Affirm’s latest quarter, the broader industry tailwinds supporting BNPL adoption, and the risks that investors must weigh. We will also examine Affirm’s valuation using discounted cash flow modeling and forward earnings multiples, before concluding with a clear investment verdict.

Performance Overview: A Quarter That Surprised the Market

Affirm’s earnings release delivered multiple surprises, not only in headline growth but also in operating leverage. The company reported a sharp increase in gross merchandise volume (GMV), meaningful adoption in its in-store BNPL offering, and continued expansion of its consumer and merchant networks.

Perhaps most importantly, Affirm achieved a milestone that many fintech skeptics had doubted—operating profitability. Management had promised investors a year ago that the company would hit this target by the fourth quarter of fiscal year 2025, and it delivered exactly on schedule.

The market reacted swiftly to this credibility boost. Affirm’s shares surged, adding billions of dollars to its market capitalization. Investors increasingly appear to believe that Affirm has crossed a structural inflection point, one that could set the stage for a more sustainable, scalable business model going forward.

Expanding Merchant and Consumer Ecosystem

At the core of Affirm’s success is its two-sided network model, which thrives on the reciprocal relationship between merchants and consumers.

• Merchant growth: Affirm now counts 377,000 active merchants, up 24% year over year. These merchants include both small retailers and major national brands that rely on BNPL to increase conversion rates and drive sales.

• Consumer adoption: Active consumers excluding discontinued businesses rose 24% to 23 million, marking the sixth straight quarter of accelerating year-over-year growth. Not only is Affirm adding new users, but the pace of adoption is increasing.

This virtuous cycle is central to Affirm’s long-term strategy. More merchants attract more consumers, while higher consumer adoption encourages additional merchants to sign up. Each side of the equation reinforces the other, creating a flywheel effect similar to what has historically powered major payment networks like Visa and Mastercard.

The Psychology of BNPL: Why It Resonates with Consumers

One of BNPL’s greatest strengths lies in its ability to lower purchase friction. Consider a $500 product. A consumer may hesitate to make the purchase outright. But breaking it down into five $100 installments feels more approachable, and for many buyers, more psychologically palatable.

This is particularly appealing in a consumer environment where wages have not always kept pace with inflation, and households are increasingly budget-conscious. By spreading out payments, BNPL enables consumers to access products they might otherwise forgo, while merchants benefit from higher sales conversion rates.

Affirm and its peers effectively “grease the wheels” of consumer spending—a dynamic that can both stimulate economic activity and draw scrutiny from policymakers concerned about rising household debt.

Profitability Milestone: A Turning Point for Affirm

The most significant highlight from Affirm’s quarter was its transition to operating profitability. Achieving this goal required disciplined cost management and a deliberate strategy to scale without ballooning expenses.

From fiscal 2023 to fiscal 2025, Affirm nearly doubled its gross merchandise volume while keeping headcount essentially flat. This operational discipline boosted revenue per employee to over $1.5 million, an impressive metric for a fintech player still in growth mode.

The company’s ability to achieve profitability while sustaining high double-digit growth suggests that its business model is maturing. This milestone also provides management with greater credibility in the eyes of institutional investors who previously questioned whether BNPL companies could achieve sustainable profitability.

Financial Highlights: Strong Top-Line Growth

Several key metrics from the quarter underscore Affirm’s momentum:

• Gross Merchandise Volume (GMV): Grew 43% year over year to $10.4 billion, supported by strength among top partners.

• In-Store Penetration: GMV from in-store card usage rose 187%, a meaningful achievement given Affirm’s historic reliance on e-commerce. This opens a new frontier for growth.

• Active Cardholders: Nearly doubled to 2.3 million, with attach rates up 10%.

• Consumer Engagement: Active consumers rose to 23 million, the sixth straight quarter of accelerating growth.

• Merchant Expansion: Merchant count rose 24%, continuing the flywheel dynamic.

Together, these metrics highlight a company that is not only growing but also accelerating its growth rate across multiple key verticals.

Industry Context: BNPL’s Place in the Modern Economy

The BNPL sector has grown rapidly over the past five years, fueled by consumer demand for flexible payment options and merchant interest in boosting conversion rates. Companies like Affirm, Afterpay (acquired by Block), Klarna, and PayPal’s “Pay in 4” have become household names.

The sector, however, operates in an environment of both opportunity and challenge:

• Tailwinds:

  Increasing e-commerce penetration worldwide.

  Younger generations’ preference for installment-based purchasing.

  Merchants’ desire to reduce cart abandonment.

• Headwinds:

  Regulatory scrutiny around consumer debt accumulation.

  Rising interest rates, which can pressure BNPL providers’ funding costs.

  Competition from large, established players like Apple Pay Later.

Affirm’s ability to achieve profitability at scale distinguishes it from some peers still struggling to balance growth and margin expansion.

Comparison to Visa and Mastercard: A Network Model in the Making

Affirm’s model draws frequent comparisons to established payment giants. Visa, for example, operates one of the most profitable networks in the world, with more than four billion cards in circulation and operating profit margins north of 60%.

Affirm is still in the early innings, but the structural similarities are clear: a two-sided platform connecting merchants and consumers, where growth on one side reinforces the other. If Affirm captures even a fraction of Visa’s long-term success, the upside for shareholders could be substantial.

Valuation Analysis: Premium, but Justified

Valuing high-growth fintech companies requires balancing near-term risk with long-term potential.

• Discounted Cash Flow (DCF): My intrinsic value estimate for Affirm currently stands at $67 per share, though this does not yet factor in the latest quarterly results. With new data incorporated, I expect this estimate to rise modestly.

• Forward Price-to-Earnings (P/E): After its earnings-driven rally, Affirm trades around $88.22 per share, equating to a forward P/E of 40. This is near the upper end of its historical valuation range, though context matters—until recently, Affirm posted negative forward earnings, making the current multiple a reflection of newfound profitability.

While valuation is undeniably stretched, investors often pay premiums for businesses demonstrating accelerating growth and credible paths to scale. Affirm appears to fit that profile.

Risks Investors Should Watch

Despite Affirm’s encouraging progress, several risks warrant close monitoring:

1. Regulatory Risk: BNPL remains under scrutiny from regulators concerned about consumer debt burdens and financial literacy. Changes in disclosure requirements or credit underwriting standards could impact Affirm’s growth trajectory.

2. Macroeconomic Sensitivity: A slowdown in consumer spending, particularly in discretionary categories, could weigh heavily on BNPL transaction volumes.

3. Competition: Tech giants and payment incumbents continue to expand BNPL offerings, raising the risk of margin compression.

4. Valuation Risk: At a forward P/E of 40, expectations are high. Any misstep in execution could lead to outsized downside volatility.

5. Credit Risk: While Affirm’s underwriting has been relatively disciplined compared to peers, exposure to borrower defaults remains a structural risk in consumer finance.

Long-Term Outlook: A Scalable Growth Story

Affirm has moved beyond the question of “if” BNPL can achieve profitability. The conversation has now shifted to “how far” and “how fast” the company can scale.

The merchant-consumer flywheel is working as intended. Engagement is accelerating. In-store adoption is opening new growth channels. And management has proven its ability to achieve targets and deliver on commitments.

If Affirm can continue expanding its footprint while maintaining cost discipline, it could emerge as one of the most transformative consumer finance platforms of the decade.

Investment Verdict: Reiterating Buy Rating

Affirm’s latest quarter confirms the company’s progress on multiple fronts: growth, profitability, and network expansion. The stock is no longer inexpensive, but given the trajectory of key metrics, I believe the premium is justified.

• Intrinsic Value: $67+ per share (DCF model, pending update with new results).

• Current Price: $88.22 (after earnings rally).

• Forward P/E: ~40, reflecting premium growth.

I am reiterating my buy rating on Affirm. For long-term investors, the stock offers a compelling opportunity to participate in the rise of a disruptive financial network that continues to prove skeptics wrong.

✅ Key Takeaways for Investors

1. Affirm achieved operating profitability in Q4 2025, a major credibility milestone.

2. Merchant and consumer adoption is accelerating, reinforcing the network effect.

3. In-store BNPL transactions are emerging as a new growth driver.

4. Valuation is elevated but justified given strong execution and long-term potential.

5. Regulatory and macroeconomic risks remain, but Affirm’s discipline sets it apart.

6. Affirm remains a buy for investors willing to tolerate volatility in exchange for long-term growth.