Fiona Nanna, ForeMedia News

5 minutes read. Updated 9:54AM GMT Fri, 8th November, 2024

Affirm Holdings Inc., a leading provider of “buy now, pay later” (BNPL) loans, delivered impressive fiscal first-quarter results, surpassing Wall Street expectations on both revenue and profit forecasts. The fintech company, headquartered in San Francisco, is witnessing significant growth in its gross merchandise volume (GMV) and has set ambitious goals for future profitability.

Affirm’s First-Quarter Earnings Outperform Analyst Projections

Affirm posted a fiscal first-quarter loss per share of 31 cents, better than the expected 35 cents, according to analysts from LSEG. Revenue for the quarter reached $698 million, significantly beating the anticipated $664 million. These strong financial results reflect Affirm’s growth strategy and its ability to harness the momentum in the booming BNPL sector. Affirm’s gross merchandise volume hit $7.6 billion, surpassing analysts’ consensus estimate of $7.28 billion from StreetAccount, marking a notable 35% year-over-year increase.

The company reported a 41% increase in revenue from the previous year’s $496.5 million. Additionally, revenue less transaction costs (RLTC) reached $285 million, exceeding prior guidance of $265 million to $280 million, underscoring Affirm’s operational efficiency and strong demand for its financial services.

Projected Profitability and Future Revenue Forecast

In line with its goals, Affirm expects to achieve profitability on a GAAP basis by the fiscal fourth quarter of 2025. This target was highlighted in a previous letter to shareholders by CEO Max Levchin, emphasizing Affirm’s commitment to sustainable growth and operational efficiency. For its upcoming second quarter, the company forecasts revenue between $770 million and $810 million, with an average of $790 million, surpassing the StreetAccount consensus of $785 million. Additionally, Affirm projects GMV for the quarter to fall between $9.35 billion and $9.75 billion, positioning it ahead of the estimated $9.48 billion.

Strategic Partnerships Drive Affirm’s Expansion

Affirm’s growing partnerships with global giants like Apple, Amazon, and Shopify have fueled the company’s market expansion and profitability. The recent collaboration with Apple, which enables Apple Pay users on iPhones and iPads in the U.S. to apply for Affirm loans directly, marks a milestone in Affirm’s partnership-driven growth model. This initiative, along with Affirm’s alliance with Amazon and Shopify, is expected to bolster its user base and increase transaction volumes, ultimately enhancing revenue growth.

According to Kevin Kennedy, an analyst at global research firm Third Bridge, “Affirm’s growth story has continued, particularly as they add new strategic distribution partners.” Kennedy emphasized that Affirm’s advanced underwriting capabilities, especially for high-priced and interest-bearing BNPL purchases, provide a competitive edge. “The payments space faces commoditization risk, and BNPL is no exception. However, Affirm’s focus on large-ticket interest-bearing purchases sets it apart and strengthens its position,” he added.

Affirm Faces Competition from Other BNPL Giants

The BNPL market is becoming increasingly competitive, with companies like Block, the parent company of Square, making strategic moves. Block’s $29 billion acquisition of Afterpay in 2021 exemplifies the fierce rivalry within the BNPL space, as players vie to capture market share. Despite these competitive pressures, Affirm’s robust partnerships and profitable business model place it in a strong position to expand its market influence.

Conclusion and Market Impact

As of Thursday’s close, Affirm’s shares were nearly flat for the year but have surged over 70% since the end of August, reflecting growing investor confidence. This upward trend aligns with Affirm’s continuous market expansion and revenue growth, setting the company apart as a strong contender in the BNPL sector. Affirm’s quarterly earnings call, scheduled for 5:00 p.m. ET, is expected to provide further insights into the company’s future strategies and growth trajectory.

Meta Description: Affirm Holdings reports better-than-expected Q1 earnings, beating analyst expectations on revenue and GMV. Key partnerships with Apple, Amazon, and Shopify drive growth, positioning Affirm as a top BNPL provider.