Affirm Reports Impressive Fiscal Q3 Growth Amid Market Adjustments
Affirm has shown remarkable growth in its fiscal third quarter, achieving a gross merchandise value (GMV) of $8.6 billion, which translates to a 36% year-over-year increase. Revenues also rose significantly, reaching $783 million, mirroring the same growth percentage. Despite these gains, the company indicated a potential slowdown in growth rates, leading to an 8% decline in share prices during after-hours trading.
Strong Performance of the Affirm Card
The performance of the Affirm Card has been particularly noteworthy, with GMV soaring 115% year-over-year to $807 million. This surge in popularity has resulted in 2 million active cardholders, reinforcing the platform’s expanding consumer base which now totals 21.9 million—up 23% from the previous year.
Building Confidence in a Shifting Economy
Affirm remains optimistic about navigating various macroeconomic conditions. The company anticipates increased demand for payment flexibility, particularly in challenging economic times. As consumers seek more manageable payment options, Affirm plans to adjust its credit approval processes to maintain its target results.
Transaction Growth Across Categories
In its quarterly report, Affirm highlighted an influx of 1.8 million new users transacting within its ecosystem. Notably, all but one spending category experienced growth, emphasizing the attractiveness of installment payments. However, forward guidance suggests a slowdown in transaction growth, particularly influenced by upcoming tariff impacts in March and April.
Expanding Merchant Partnerships
Affirm’s partnerships with merchants played a crucial role in driving growth, especially with its 0% APR monthly installments being a key offering. CEO Max Levchin noted that approximately 44% of the $8.6 billion GMV stemmed from these promotions, showcasing their effectiveness in boosting both sales and the company’s revenue.
Insight into Consumer Behavior
During an analyst call, CFO Rob O’Hare elaborated on healthy repayment rates and consumer confidence. With daily GMV reaching about $100 million, Affirm has gathered comprehensive data on repayment trends, observing no signs of consumer stress. An increase in prepayments was also noted as a positive indicator.
Future Outlook and Growth Projections
Looking ahead, Affirm forecasts quarterly revenues between $815 million and $845 million, slightly below market expectations. However, Levchin maintained that the overall year-on-year growth would still be robust at 34%, although it is a reduction from the 36% growth seen in the latest quarter. The analytics predict a moderate approach due to expected shifts in consumer spending patterns in the coming months.
Navigating Economic Challenges
Levchin’s shareholder letter emphasized the company’s readiness to adapt to various economic scenarios. They anticipate that in a recession, demand for Affirm’s services will rise as both shoppers and merchants seek flexible payment options. Historical data, particularly from the pandemic, has informed their strategies for addressing credit stress and potential market fluctuations.
