Affirm Holdings, Inc. (AFRM) FY2026 Earnings: Revenue $4.3B (+32.2%)
AFRM — FY2026 Annual Financial Report Analysis
Full Year · Fiscal year 2026 · Published by Pham Hop
Affirm's fiscal 2026 (to June 30) brought its first full-year GAAP operating profit, $417M on revenue up 32% to $4.26B and GMV up 37% to $50.2B, with credit steady; $1.93B net income is mostly a one-time tax benefit.
Revenue
$4.3B
+32.2% YoY
Net income
$1.9B
Diluted EPS
$5.53
Operating margin
9.8%
This period vs a year ago
Same period last year
This period
Revenue▲+32.2%
≈$3.2B
$4.3B
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Overview
Affirm is a "buy now, pay later" (BNPL) lender: when a shopper checks out at a merchant such as Amazon or Shopify stores, or swipes the Affirm Card, Affirm pays the merchant up front and the shopper repays Affirm in instalments, either interest-free (Affirm charges the merchant a fee instead) or with interest. In fiscal 2026, the year ended June 30, 2026, Affirm posted its first full year of GAAP operating profit: $417.0 million, against a $87.3 million operating loss a year earlier, on revenue up 32% to $4.26 billion. Volume through the platform grew 37% to $50.2 billion.
The reported net income of $1.93 billion ($5.53 per diluted share) is mostly an accounting event, not cash earned: about $1.5 billion of it is a one-time, non-cash tax benefit from releasing the "valuation allowance" on Affirm's US deferred tax assets. That is the accounting step a company takes once it judges it will be profitable enough to actually use its past tax losses. Income before tax, the cleaner measure, was $492.7 million, up from $61.5 million.
At a glance
GMV $50.2 billion, +37%. Gross merchandise volume (GMV), the dollar value of purchases financed through Affirm, grew faster than revenue (+32%). Growth came from more shoppers (27.8 million active, +21%) using it more often (7.0 transactions each, +20%).
Operating income $417.0 million, a 9.8% operating margin, vs a 2.7% loss margin. Operating margin is the share of revenue left after running the business, before interest on corporate debt and tax. Revenue grew 32% while total operating expenses grew 16%.
30+ day delinquencies 2.5%, up 0.19 points. The share of monthly instalment loans (excluding Peloton and Pay-in-4) at least 30 days behind edged up year on year, and the allowance for credit losses rose to 5.9% of loans from 5.6%. Credit is stable, not improving.
Key figures
Metric
FY2026 (year to Jun 30, 2026)
FY2025
YoY Change
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Gross merchandise volume (GMV)
$50.2B
$36.7B
+37%
Total revenue
$4,261.1M
$3,224.4M
+32.2%
Revenue less transaction costs (RLTC, non-GAAP)
$2,085.0M
$1,482.2M
+40.7%
Operating income (loss)
$417.0M
$(87.3)M
Loss to profit
Operating margin
9.8%
(2.7)%
+12.5 pts
Adjusted operating margin (non-GAAP)
29.0%
24.1%
+4.9 pts
Income before income taxes
$492.7M
$61.5M
+702%
Net income
$1,929.8M
$52.2M
NM (tax benefit)
Diluted EPS
$5.53
$0.15
NM (tax benefit)
Active consumers
27.8M
23.0M
+21%
30+ day delinquency (monthly instalment, ex-Peloton), Jun 30
2.5%
~2.3%
+0.19 pts
Allowance for credit losses / loans held for investment
5.9%
5.6%
+0.3 pts
Net charge-offs
$611.6M
$500.8M
+22.1%
NM = not meaningful, as the 10-K itself labels these comparisons. The prior-year delinquency figure is implied from the company's stated 19-basis-point increase.
Takeaway: Affirm's profit turn came from scale, not from better credit. Revenue less transaction costs grew 41% while the costs of running the company outside lending (technology, marketing, overhead) grew about 6%, and sales and marketing actually fell 21% as Amazon warrant expense rolled off. Loss rates on the loans themselves were roughly flat, so the business is now profitable at today's credit performance, but it has not yet been tested by a worse one.
What "revenue less transaction costs" means, and why it matters here
Affirm's revenue line mixes very different things: merchant fees, card interchange, interest paid by borrowers, and gains when it sells loans to investors. Much of that revenue is used up by the costs of making each loan: expected credit losses, interest on the money it borrows to fund loans, payment processing, and the discount it takes buying 0% loans from its partner banks. Affirm's own measure, RLTC, subtracts those four "transaction costs" ($2.18 billion in FY2026, +25%) from revenue. It is the lending business's gross profit.
RLTC was 4.16% of GMV in FY2026, up from about 4.04% in FY2025 (computed from the reconciliation). The per-dollar economics improved while volume grew 37%. The 10-K points to three reasons:
Cheaper funding. Funding costs rose only 7% ($454.0M) even though average warehouse and securitization debt grew 27% to $7.5 billion, "partially offset by favorable pricing terms" after the Federal Reserve's rate cuts.
Better loan-sale economics. Gain on sales of loans rose 56% to $596.6M on 39% more loans sold ($21.9B of principal), helped by "favorable transaction economics" in the market and a $12.2M lower recourse liability.
Credit costs grew roughly in line with the loan book. The provision for credit losses rose 29% to $796.7M, against a 27% rise in average loans held, while RLTC grew 41%.
One offset: merchant fees as a share of GMV slipped to 2.3% from 2.4%, because more volume comes through Affirm's own app and the Affirm Card, where merchants pay lower fees (the Card was ~15% of transactions, up from ~10%).
Where the growth came from
Product
Share of FY26 GMV
GMV growth
Interest-bearing monthly instalments
70%
+33%
Pay-in-X (e.g. pay in 4, interest-free)
16%
+50%
0% APR monthly instalments
14%
+46%
Interest-free products grew fastest. These earn more from merchants but nothing from borrowers, and cost Affirm more upfront (the loss on purchasing 0% loans rose 29% to $311.9M). Amazon accounted for 22% of GMV, unchanged, and the top five merchants and platforms fell to 44% of GMV from 47%. Card network revenue (interchange on Affirm-issued cards) rose 27% to $294.0M on 47% more card-processed volume.
Credit quality: steady, slightly softer at the margin
For a lender, credit matters more than the margin line, because a small rise in losses on a $9.5 billion loan book can erase a year's operating profit. What the filing shows:
Delinquencies. The shareholder letter puts 30+ day delinquencies on monthly instalment loans (ex-Peloton) at 2.5%, up 19 basis points year on year and down 26 bp from March (June is seasonally a low point, as tax refunds help borrowers pay). Across all loans held for investment, our own count from the 10-K's aging table gives 30–119 days past due at $237.5M, 2.51% of the book, vs 2.46% a year earlier.
Reserves. The allowance for credit losses grew 42% to $563.3M, faster than loans held for investment (+36% to $9.47B). The company states it at 5.9% of loans, up from 5.6%. Affirm is setting aside slightly more per dollar lent.
Charge-offs. Net charge-offs (loans written off as uncollectable, less recoveries) were $611.6M, up 22%. Measured against the average loan balance of $8.15B, that's about 7.5%, vs about 7.8% in FY2025 (our calculation). Short, high-turnover loans make this ratio look higher than a credit card's would.
Vintage losses. Management says recent monthly instalment cohorts are tracking toward about 3.5% lifetime net charge-offs as a share of cohort GMV, "in-line with expectations", and pay-in-4 loans under 1%.
Modifications. Loans modified for borrowers in financial difficulty (payment deferrals or longer terms) rose to 0.25% of loans from 0.17%. That is small, but it can delay when delinquencies appear, which the 10-K acknowledges.
Overall: no deterioration beyond seasonal norms, but the direction on delinquencies, reserves and modifications is slightly up, not down.
What the headline numbers hide
Net income is inflated by a one-time tax item. The ~$1.5 billion valuation-allowance release is non-cash. Going forward, Affirm will record a normal tax expense, even though cash taxes stay low while it uses past losses. FY2027 EPS will therefore look far lower than FY2026's $5.53, even if the business keeps improving.
The prior year's small profit was itself mostly one-off. FY2025's $61.5M pre-tax income included an $82.4M gain on buying back convertible debt below face value. Without it, FY2025 was roughly break-even to slightly loss-making before tax. The FY2026 figure includes only $1.5M of such gains, so the improvement in pre-tax income is if anything understated.
GAAP vs adjusted gap: $818M. Adjusted operating income ($1,235.0M, a 29.0% margin) adds back depreciation and amortization ($302.2M), stock-based compensation ($304.7M) and enterprise warrant/share-based expense ($211.2M, mostly warrants granted to Amazon and Shopify). Stock pay and partner warrants are real costs to shareholders. GAAP operating income is the more honest measure of profitability, and the gap is narrowing: it was $865M in FY2025.
Part of the cost improvement is a warrant roll-off, not efficiency. Amazon warrant expense fell $92.4M (-32%) because a portion fully vested in December 2024, and Shopify warrant expense fell $15.4M after amortization was stretched from six to nine years. Together that is about $108M, roughly a fifth of the $504M swing in operating income.
Cash conversion. Operating cash flow was $1,231.0M against pre-tax income of $492.7M. It is higher because non-cash charges such as the credit-loss provision and stock pay are added back. For a lender this is not "free cash": investing activities used $2.55 billion net, mostly to grow the loan book, funded by $2.0 billion of net new borrowing.
Dilution. Diluted weighted shares rose 2.3% to 348.8M, and shares outstanding rose ~3.7% to 337.2M (Class A and B). Affirm paid $325.2M in taxes on employees' net-settled stock awards and bought back no stock this year.
Q4 FY2026 in brief (April–June 2026)
GMV $14.1B (+36%), revenue $1,166.0M (+33%), RLTC $589.1M (+39%), operating income $147.3M (12.6% margin vs 6.6%), adjusted operating margin 30.3% vs 27.0%. Q4 net income of $1,616.6M includes the tax-allowance release, which was booked this quarter. It was the 11th straight quarter of 30%+ GMV growth.
Outlook
Management's first fiscal 2027 guidance (from the Aug 27 shareholder letter):
Q1 FY2027 (Jul–Sep 2026)
Full FY2027
GMV
$13.7–14.0B
More than $64.0B
Revenue
$1,190–1,220M
~8.49% of GMV (same as FY26)
RLTC
$575–590M
~4.16% of GMV (same as FY26)
Operating margin (GAAP)
11.5–13.5%
More than 14.5%
Adjusted operating margin
28.0–30.0%
More than 30.5%
A GMV floor of $64.0 billion implies at least ~27% growth, a step down from 37%. Management names two Q1 headwinds: a large merchant promotion from Q1 FY26 that won't repeat, and another enterprise merchant that has moved its pay-later volume to its own wallet (the effect ends in the final month of Q1). Guidance assumes short-term interest rates rise in FY2027, which would reverse the funding-cost tailwind that helped FY2026, yet RLTC is still guided flat as a share of GMV. Affirm also applied in January 2026 to charter its own Nevada industrial bank (pending FDIC approval) and is expanding to Australia and the UK, which management says won't be material to FY2027 growth.
Our read: the guide asks for GAAP operating margin to rise from 9.8% to above 14.5% while growth slows and funding gets more expensive. That depends on operating costs continuing to grow much more slowly than revenue, and on loss rates staying where they are. The numbers to watch in the Q1 FY2027 report (expected early November) are the 30+ day delinquency rate against September 2025's level, the allowance-to-loans ratio (5.9% now), and whether RLTC holds near 4.1–4.2% of GMV once rates stop falling. Q1 is seasonally the weakest quarter for delinquencies, so a year-on-year comparison matters more than the quarter-on-quarter one.