EPS of $0.23 increased by 146.3% from previous year
Gross margin of 69.5%
Net income of 80.36M
""these are programs where merchants and sometimes manufacturers donate, if you will, parts of their margin to our borrowers to give them essentially interest-free or sometimes reduced interest loans."" - Max Levchin
Affirm Holdings Inc (AFRM) QQ2 2025 Earnings Review: Revenue Growth, Margin Resilience, Strategic Global Expansion, and Capital Markets Momentum
Executive Summary
Affirm Holdings reported solid QQ2 2025 results, delivering top-line growth alongside a durable gross margin and a positive quarterly net income. Revenue of $866.4 million rose meaningfully year over year, supported by continued transaction growth and favorable funding dynamics. While operating income remained roughly flat on a GAAP basis, the company generated positive net income of $80.4 million and $0.25 GAAP EPS ($0.23 diluted), underscoring the company’s path to profitability as volumes scale. Free cash flow of $268 million and a strong liquidity position (cash and equivalents plus short-term investments of approximately $1.87 billion) reinforce AFFIRM’s ability to fund growth, while maintaining leverage discipline. Management emphasized that RLTC (risk-adjusted loan-to-credit) targets remain in the 3-4% long-term band, even as the company selectively invests to accelerate growth via zero-percent financing programs, merchant promotions, and broader network effects.
During the earnings call, leadership highlighted several strategic accelerators that could sustain above-trend growth into 2025 and beyond. These include a broadband network-syndication approach to merchant offers across Affirm surfaces (app, card, wallets), ongoing wallet integrations with positive credit quality contributions, and a broadened international agenda (notably the UK) with Shopify as a major enterprise partner slated to go live in the UK in the near term. The firm also flagged ongoing capital-markets momentum, including Sixth Street financing, which is expected to ramp through the second half of 2025, supporting scale to a $50 billion GMV runway in the coming years. AI-enabled productivity improvements and automation were framed as a core productivity lever to optimize headcount and operating leverage without compromising credit quality or growth ambitions.
Net Income: $80.36 million; net margin ~9.3%; EPS (GAAP) $0.25; Diluted EPS $0.23.
EBITDA: $245.5 million; EBITDA margin ~28.3%.
Financial Highlights
Overview of QQ2 2025 metrics with YoY and QoQ context where available:
- Revenue: $866.4 million; YoY growth 46.6%; QoQ growth 24.0% (per earnings metrics).
- Gross Profit: $602.2 million; gross margin 69.5% (stable YoY).
- Operating Income: -$4.32 million; operating margin approx. -0.5% (near breakeven).
- Net Income: $80.36 million; net margin ~9.3%; EPS (GAAP) $0.25; Diluted EPS $0.23.
- EBITDA: $245.5 million; EBITDA margin ~28.3%.
- Cash flow: Net cash provided by operating activities $312.0 million; free cash flow $268.1 million.
- Cash and investments: Cash and cash equivalents $1.200B; short-term investments $0.667B; total cash and short-term investments ~$1.867B.
- Balance sheet: Total assets $10.482B; total liabilities $7.696B; total stockholders’ equity $2.786B. Net debt approximately $6.295B (long-term debt $7.496B; cash net of debt ≈ -$6.296B).
- GMV and funding; RLTC guidance remains 3-4% long term; capital markets actions contributed to better-than-guidance outcomes in the quarter (e.g., securitizations and loan sales).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
866.38M
46.57%
24.04%
Gross Profit
602.21M
58.03%
28.39%
Operating Income
-4.32M
97.49%
96.74%
Net Income
80.36M
148.15%
180.18%
EPS
0.25
146.30%
180.65%
Key Financial Ratios
currentRatio
13.79
grossProfitMargin
69.5%
operatingProfitMargin
-0.5%
netProfitMargin
9.28%
returnOnAssets
0.77%
returnOnEquity
2.88%
debtEquityRatio
2.69
operatingCashFlowPerShare
$0.97
freeCashFlowPerShare
$0.83
priceToBookRatio
7.05
priceEarningsRatio
61.06
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights and quotes from the QQ2 2025 earnings call, grouped by themes:
- Strategy and product
- Max Levchin (CEO): “Another great quarter. So I do not feel a strong need to expound at any length on the numbers. They speak for themselves.” This underscores confidence in the quarter’s reported metrics and the team’s execution.
- On zero-percent loans and network expansion: “these are programs where merchants and sometimes manufacturers donate… parts of their margin to our borrowers to give them essentially interest-free or sometimes reduced interest loans.” Levchin also emphasized network syndication across Affirm’s surfaces (app, card, wallets) to scale promotions and offers.
- Financing and margins
- Levchin: “We definitely think long term we wanna be in between three and four percent [RLTC]… we’re actively trying to do more of zero-percent growth because of the positive selection and reach.” This highlights a measured approach to credit risk and margin management while growing the user base.
- Matthew O’Neill (FT Partners): “Wallet integrations are accretive on the credit quality side of the equation.” Affirm expects wallet partnerships to lift both volumes and retention while maintaining credit quality.
- International and partnerships
- Dan Dolev (Mizuho): UK launch discussion with Shopify as a major enterprise partner; strong market pull for longer-term loans in the UK relative to incumbents. Levchin noted Shopify will be live in the UK “relatively soon.”
- AI and efficiency
- Reginald Smith (JPMorgan): AI discussions and productivity improvements; Max Levchin stated, “we’ve been using machine learning and artificial intelligence since inception” and cited use cases across underwriting, compliance, accounting, and legal to reduce headcount pressure and improve efficiency.
- Capital markets and funding mix
- Kyle Peterson (Needham): Sixth Street partnership represents a meaningful step in the capital program; Levchin indicated a careful, scalable approach that avoids over-reliance on any single funding channel.
- Andrew Jeffrey (Wells Fargo): Durability of funding-cost improvements remains a function of market conditions and disciplined credit execution, with stable governance around risk thresholds and liquidity.
"these are programs where merchants and sometimes manufacturers donate, if you will, parts of their margin to our borrowers to give them essentially interest-free or sometimes reduced interest loans."
— Max Levchin
"The network is valuable because it is aware of the SKUs, aware of the transactions, and delivers great unique reasons for people to buy for consumers to buy on every surface where we play."
— Max Levchin
Forward Guidance
Strategic outlook and forward-looking assessment:
- RLTC target and margin discipline: Management reaffirmed a long-term RLTC target of 3-4%, acknowledging that selective investment (e.g., zero-percent promotions) can be margin-dilutive in the near term but is pursued to expand the addressable market and cross-sell opportunities across the Affirm network.
- Revenue and profitability trajectory: QQ2 2025 demonstrated solid revenue growth plus a positive net income print, suggesting the trajectory toward sustainable profitability as the platform scales and cost leverage improves.
- Capital markets and funding mix: The company intends to continue diversifying capital sources with existing successes (Sixth Street) while remaining disciplined in funding costs and credit performance. The ramp of Sixth Street is expected to occur in H2 2025, with the objective of supporting GMV growth toward milestones like $50B in GMV in the coming years.
- International growth and partnerships: UK go-live with Shopify is a cornerstone for international expansion, with potential to replicate the US mix of BNPL terms and zero-percent offers, subject to regulatory and merchant-partner readiness. The company’s multi-geography, multi-channel approach aims to unlock elevated GMV while maintaining credit discipline.
- AI and productivity: AI-enabled efficiency improvements are embedded in operating plans and are expected to sustain operating leverage without compromising growth. Investors should monitor progress on headcount productivity, automation milestones, and the impact on onboarding and underwriting efficiency.
- Key factors for investors to monitor: (1) Warner-of-zero-percent programs' incremental margin impact versus top-line growth, (2) progress of Sixth Street funding and UK enterprise rollout, (3) expansion of merchant wallet integrations and cross-surface offers, (4) sustained credit performance in any macro scenario, (5) evolution of AR (accounts receivable) dynamics and balance sheet liquidity as Affirm scales toward long-term GMV targets.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
AFRM Focus
69.51%
-0.50%
2.88%
61.06%
UPST
1.00%
-43.50%
-9.16%
-9.29%
SOFI
1.00%
-1.11%
0.30%
97.78%
RBLX
77.80%
-26.60%
-1.69%
-28.93%
HOOD
78.00%
27.70%
2.64%
26.70%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Affirm’s QQ2 2025 results demonstrate a compelling combination of revenue growth, robust gross margins, positive net income, and meaningful free cash flow generation, all supported by a disciplined capital framework. The company’s strategic focus on network effects, merchant promotions, and cross-surface offers (app, card, wallets) positions it to capture incremental GMV through higher conversion and broader consumer reach. Management’s long-term RLTC target of 3-4% and the emphasis on scalable financing via diversified funding channels (including Sixth Street and securitizations) provide a durable growth framework even amid potential macro volatility. The UK expansion with Shopify and a ramping Sixth Street program should contribute to international revenue growth and incremental margin expansion, subject to execution risk and regulatory environment.
Investors should weigh the strong liquidity position and positive cash flows against a sizable long-term debt burden. Key catalysts include: (1) successful UK rollout and broader international monetization, (2) acceleration of merchant-wallet integrations and zero-percent promotions driving higher GMV and conversion, (3) continued AI-driven efficiency gains lifting operating leverage, and (4) a durable funding-cost improvement cycle supported by active capital-market partnerships. Valuation remains elevated relative to some peers, with a price-to-sales multiple around 22.7x and enterprise-value multiples reflective of high-growth BNPL dynamics. If Affirm sustains its execution against the stated revenue, GMV, and margin targets while maintaining credit quality discipline, the stock could deliver solid upside as the long-dated growth opportunity plays out in a more predictable cost base and stronger international footprint. Investors should monitor the evolution of RLTC, GMV growth trajectory, UK monetization progress, sixth-street ramp timing, and the impact of AI-enabled productivity on headcount and Opex.
Overall, Affirm remains well-positioned to capitalize on secular BNPL adoption, merchant-fintech partnerships, and a scalable capital framework, with the potential for material upside as international expansion and product diversification mature.
Key Investment Factors
Growth Potential
- Accelerating BNPL growth with zero-percent financing as a consumer acquisition engine and merchant promotional tool, leveraging the Affirm network across app, card, and wallets.
- International expansion, starting with the UK and enterprise partnerships (e.g., Shopify), with a diversified product set including longer-term financing that remains attractive to merchants and consumers.
- Enterprise and merchant partnerships expanding out of the US footprint, supported by a scalable capital program and continued wallet integration advantages that improve conversion and customer spend.
- Card-driven monetization and higher wallet adoption, enabling deeper customer relationships, cross-sell opportunities, and potential depository-related services as a path to higher spend per cardholder.
Profitability Risk
- Credit risk and macroeconomic sensitivity; regulatory risk in consumer lending and privacy, data, and BNPL-specific rules.
- Funding-cost volatility and reliance on capital markets; need to maintain diversified funding sources to sustain growth under varied market conditions.
- International execution risk, including regulatory compliance, local fintech competition, and merchant onboarding complexity.
- Competitive BNPL landscape and traditional card networks; potential pricing pressure or shifts in consumer demand during cyclical downturns.
Financial Position
- Liquidity robust with cash and cash equivalents plus short-term investments totaling approximately $1.87B as of QQ2 2025, supporting growth investments and capital-market activities.
- Net debt approximately $6.30B with long-term debt around $7.50B; balance sheet strength underpins scalable funding but requires disciplined leverage management and credit risk controls.
- Gross margin strong at 69.5% with a roughly breakeven operating income and a positive net income in QQ2; ongoing emphasis on operating leverage and cost discipline to improve GAAP profitability.
SWOT Analysis
Strengths
Large, diversified merchant network and deep e-commerce integration (app, card, wallets) enabling broad distribution of zero-percent offers.
Strong gross margin (~69.5%) and positive net income with high EBITDA margin (~28.3%), underpinning sustainability as scale accelerates.
Robust cash flow generation (operating CF $312M; free CF $268M) and strong liquidity position (~$1.87B in cash/equivalents and short-term investments).
Card program exhibits superior engagement, economics, and conversion, serving as a high-velocity growth lever.
Strategic capital-market relationships and a scalable funding program (Sixth Street partnership) to support 50B+ GMV trajectory.
Active pursuit of AI-driven productivity and underwriting improvements to deliver operating leverage and headcount efficiency.
Weaknesses
Significant and growing long-term indebtedness; reliance on external funding markets for growth liquidity.
Operating margin remains near breakeven; profitability is contingent on continued cost discipline and favorable funding costs.
Geographic expansion adds execution risk, regulatory exposure, and need for partner onboarding across new jurisdictions.
Opportunities
UK and broader international expansion with integrated BNPL offerings and longer-term loans to capture new merchant bases.
Expanded merchant wallet integrations driving higher transaction volumes and better unit economics.
Continued AI-enabled efficiency gains to improve conversion, underwriting, and operating leverage.
Further diversification of funding sources, potential securitizations, and forward-flow arrangements to support scalable GMV growth.
Threats
Regulatory risk and potential tightening of BNPL-related oversight in the US and internationally.
Macro shocks impacting consumer spend and credit quality; sensitivity to rate and liquidity cycles.
Competition from banks and established card networks plus new fintech entrants; pricing pressure and margin compression possible in a downturn.