Affirm reported excellent Q2 FY2026 results with GMV growing 36% year-over-year, driven by a 160% surge in Card GMV and a 42% increase in active merchants. The ROTC margin remains robust, guided slightly above 4% for the second half, supported by record-low funding costs where ABS spreads tightened to under 100 basis points. Management highlighted the health of the consumer and the success of the 'Big Nothing' event, while announcing a bank charter application for long-term regulatory certainty. Despite guiding for a sequential deceleration in GMV growth to 30% and 25% in Q3 and Q4 respectively due to tough comps and a large merchant transition, the company raised its margin expansion outlook for the full year.
| Metric | Value | Change |
|---|---|---|
| GMV Growth | 36% | Year-over-Year |
| Active Merchants | +42% | Year-over-Year |
| Card GMV Growth | ~160% | Year-over-Year |
| Active Cardholders | +121% | Year-over-Year |
| Card 0% Deals Growth | +190% | Year-over-Year |
| ROTC Margin Guidance | Slightly above 4% | Q3 & Q4 |
| ABS Spread | <100 bps | Latest Deal |
| Top 5 Merchant Concentration | 23% | Blended Down |
| Other Category GMV | 15% | of Total GMV |
Affirm Card as a Core Growth Engine: The Affirm Card has evolved from a novelty product to a primary growth driver, with GMV increasing just under 160% year-over-year and active cardholders growing 121%. Management noted that 0% deals on the card grew 190%, indicating strong consumer adoption and engagement. This product diversification reduces reliance on any single merchant and increases the frequency of user engagement.
Capital Markets Excellence: Affirm is executing exceptionally well in funding markets, recently pricing an ABS deal with a spread under 100 basis points and a weighted average yield below 4.6%, levels not seen since 2021. This provides a significant tailwind to margins and validates the credit quality of their asset base to institutional investors.
Strategic Expansion via Partnerships: The company is leveraging partnerships to unlock new verticals and distribution channels. The announcement with Intuit (QuickBooks) opens up the massive services sector, while the Fiserv partnership aims to embed Affirm's white-label BNPL capabilities into regional banks. Additionally, international expansion in the UK with partners like Wayfair and Vimeo is scaling effectively.
AI-Driven Merchant Spend: The launch of Boost AI transforms Affirm's merchant value proposition into an advertising model, allowing merchants to allocate budgets for automated A/B testing of promotional offers. This product not only increases merchant spend but also deepens integration by optimizing conversion, creating a sticky, data-driven feedback loop.
Guided GMV Deceleration: Management guided GMV growth to slow sequentially from 36% in Q2 to 30% in Q3 and 25% in Q4. While attributed to tough comps and the transition of a large retail partner, this deceleration may raise concerns about the sustainability of hyper-growth as the company laps prior periods.
Provisioning Tick-Up: Provisions increased by a few basis points during the quarter. While management attributes this to optimization for ROTC rather than credit deterioration and emphasizes the health of the consumer, any uptick in provisions warrants close monitoring given the macroeconomic backdrop.
Bank Charter Timeline Uncertainty: While applying for an industrial bank charter is a positive step for regulatory certainty, the approval timeline is 'years' away and subject to regulatory approval. Management explicitly warned investors not to modify models for this, indicating no immediate financial or operational relief is expected from this initiative.
Overall: Management exhibited a high degree of confidence and dismissiveness toward competitive threats, repeatedly emphasizing the simplicity and superiority of their product. They were candid about the health of the consumer and the strength of their capital markets execution, showing little patience for concerns regarding credit quality or competitive dynamics.
Confidence: HIGH - Management used definitive language regarding credit quality ('no disturbances in the force') and competitive positioning ('Your answer to the question is no'). They provided specific metrics to back up their optimism and spoke with certainty about their product roadmap and unit economics.
~30%
~25%
Slightly above 4%
Raised vs 90 days ago
Hedging & Uncertainty: Management displayed minimal hedging regarding current operational performance and credit quality, using phrases like 'quite healthy' and 'no disturbances in the force.' However, they employed more tentative language regarding future timelines and product impacts, specifically around the bank charter ('timeline is certainly years') and new vertical tests ('put nothing in your model for now'). This suggests high confidence in the existing business but appropriate caution regarding long-term speculative initiatives.
The consumer we see today is quite healthy. - Max Levchin, CEO
We're not seeing any disturbances in the force. - Max Levchin, CEO
Your answer to the question is no. - Max Levchin, CEO
The timeline is certainly years. - Max Levchin, CEO
We're operating and executing in capital markets really the best we've seen post the rate movement of the world. - Rob O'Hare, CFO
Analyst Sentiment: Analysts were largely inquisitive about the sustainability of growth, competitive dynamics, and the mechanics of new verticals. There was skepticism regarding competitive pressure from cash-back offers, which management firmly dismissed.
Management Responses: Management was direct, confident, and occasionally blunt in their responses. They effectively deflected concerns about competition and credit, while providing detailed technical explanations for margin drivers and product strategy.
Discussion on GMV deceleration drivers and top 5 merchant concentration.
Inquiry into competitive 'cash back' incentives and their impact on Affirm's pricing.
Deep dive into the 'Other' category verticals and the Affirm Card growth trajectory.
Questions regarding the bank charter application timeline and regulatory environment.
Analysis of funding costs, ABS execution, and private credit demand.
Affirm is executing at a high level, proving the viability of its unit economics and asset quality. The Card product is a massive growth vector that is successfully diversifying the business away from reliance on any single merchant. With funding costs collapsing and margins expanding, the path to profitability is becoming clearer. While guidance implies a growth deceleration, the underlying fundamentals of the business—merchant adoption, consumer health, and capital markets access—remain robust, supporting a positive long-term thesis.
Management reports the consumer is 'quite healthy' with willingness and ability to repay, showing no deviation from prior trends.
Capital markets are 'very constructive' with ABS spreads under 100bps and yields below 4.6%, signaling strong investor demand for BNPL assets.
Management notes active conversations with regulators but no specific threats like BNPL rate caps. The bank charter application is a proactive move for certainty.