Affirm tumbles 4.4% on earnings miss as BNPL growth shows mixed signals
Card business surges 159% but profitability concerns weigh on investor sentiment
Affirm Holdings shares fell 4.4% in Tuesday trading after the buy now, pay later lender delivered quarterly results that showed robust revenue growth but missed earnings expectations, highlighting the mixed performance of its expanding card business against persistent profitability pressures.
The San Francisco-based company reported revenue of $1.12 billion, beating analyst estimates by 6.4%, while gross merchandise volume surged 36% to $13.8 billion. However, earnings per share came in at just $0.37, significantly below the $0.84 that analysts had anticipated, according to trading signal data.
The earnings miss occurred despite significant improvement in operating margins, which expanded by 11 percentage points to reach 10.5%. This operational improvement underscores Affirm's progress in scaling its business model more efficiently, even as bottom-line results fell short of Wall Street expectations.
Affirm's card business emerged as the standout performer, with card GMV skyrocketing 159% to $2.2 billion and active cardholders growing 121% to 3.7 million. This explosive growth suggests that Affirm's strategy to transition from a pure point-of-sale financing provider to a more integrated card-based platform is gaining traction with consumers.
The company's net cash position stands at $1.1 billion, providing a substantial buffer as it continues to invest in growth. Additionally, Affirm's board authorized the repurchase of $176 million in convertible notes, a move that could reduce future dilution and signal management's confidence in the company's financial position.
Despite the revenue beat and strong GMV growth, investors appear focused on the earnings shortfall and what it suggests about the path to sustainable profitability. Affirm currently trades at 89 times trailing earnings, reflecting high expectations for future growth that Tuesday's results may have called into question.
Analysts remain broadly positive on the stock, with 21 buy ratings compared to 8 holds and no sell ratings, according to market data. The consensus target price of $91.73 suggests significant upside potential from Tuesday's closing price of $59.42, though Tuesday's sell-off indicates that some investors are reassessing that optimistic view.
Affirm's performance comes amid a broader evolution in the buy now, pay later sector, which has faced increased competition from traditional financial institutions and regulatory scrutiny in various markets. The company's ability to grow its card business by 159% while maintaining overall GMV growth of 36% demonstrates its competitive position in this crowded landscape.
The stark divergence between top-line growth and bottom-line performance raises questions about Affirm's unit economics and the sustainability of its current spending trajectory. While the 11-percentage-point improvement in operating margins is encouraging, the earnings miss suggests that achieving consistent profitability remains a work in progress.
Looking ahead, investors will be watching closely whether Affirm can maintain the explosive growth of its card business while simultaneously narrowing the gap between revenue expansion and earnings performance. The company's strong balance sheet, with $1.1 billion in net cash, provides it with flexibility to navigate what remains a challenging environment for fintech companies seeking to demonstrate sustainable profitability.
The 52-week trading range of $30.90 to $100.00 illustrates the volatility that has characterized Affirm's stock, and Tuesday's 4.4% decline places shares roughly midway between those extremes. With institutional investors holding 83.4% of outstanding shares, the stock's next moves will likely be influenced by how these sophisticated investors interpret the balance between growth and profitability in Tuesday's results.