Affirm Holdings, Inc.’s AFRM shares gained 21.8% on Feb. 7, reflecting investor optimism about the company's prospects, after a robust quarter. AFRM’s strong quarterly results benefited from higher network revenues and servicing income. Higher transactions, robust repeat customer engagement and a successful holiday shopping season also boosted performance. However, the results were partly offset by an escalating expense level, which was primarily due to a significant increase in provision for credit losses.

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The company posted fiscal second-quarter earnings of 23 cents per share, which beat the Zacks Consensus Estimate of a loss of 20 cents per share. The metric rose nearly six-fold year over year.

Total net revenues amounted to $866.4 million (exceeded management’s expectation of $770-$810 million), which surged 46.6% year over year. The top line surpassed the consensus mark by 7.7%.

Affirm Holdings, Inc. Price, Consensus and EPS Surprise

Affirm Holdings, Inc. price-consensus-eps-surprise-chart | Affirm Holdings, Inc. Quote

Q2 Performance of Affirm Holdings

Active merchants of Affirm Holdings increased 20.8% year over year to 337,000 as of Dec. 31, 2024. The Gross Merchandise Value (GMV) of $10.1 billion increased 34.7% year over year on the back of strength in general merchandise, travel and ticketing categories and a robust holiday season. The metric crossed management’s expected range of $9.35-$9.75 billion and came higher than the Zacks Consensus Estimate of $9.6 billion.

Total transactions of 38.1 million soared 45.4% year over year, driven by a significant rise in repeat customer transactions.

Servicing income improved 27.9% year over year to $28.7 million but missed the consensus mark of $29 million. The uptick can be attributed to growth in the off-balance sheet platform portfolio. Interest income of $409.4 million surged 42% year over year but missed the consensus mark of $414.4 million.

Merchant network revenues totaled $244.9 million, which grew 30% year over year and beat the Zacks Consensus Estimate of $232.8 million. The metric gained from a growing GMV.  Card network revenues rose 48.1% year over year to $58.1 million, attributable to the higher usage of Affirm and single-use virtual debit cards. The metric beat the consensus mark of $52.3 million.

Total operating expenses of $870.7 million increased 14.1% year over year due to higher loss on loan purchase commitment, funding costs, and processing and servicing expenses. Provision for credit losses escalated 26.6% year over year to $153 million. Nevertheless, sales and marketing decreased 15.6% on a year-over-year basis.

Affirm Holdings generated an adjusted operating income of $237.8 million compared with $92.6 million in the prior-year quarter. Adjusted operating margin was 27.4%, exceeding management’s estimated 21-23% range. The metric was 15.7% in the year-ago quarter. Net income was $80.4 million in the fiscal second quarter against a net loss of $166.9 million in the prior-year quarter.

Financial Position of Affirm Holdings (as of Dec. 31, 2024)

Affirm Holdings exited the fiscal second quarter with cash and cash equivalents of $1.2 billion, which increased 18.5% from the fiscal 2024-end figure. Total assets of $10.5 billion rose 10.1% from the fiscal 202-end.

Funding debt amounted to $2.2 billion, which rose 18% from the fiscal 2024-end figure. Total stockholders’ equity of $2.8 billion grew 2% from the fiscal 2024-end figure.

AFRM generated $312 million of net cash from operations during the December quarter compared with $74.3 million in the prior-year quarter.

3Q25 Guidance

Affirm Holdings forecasts third-quarter fiscal 2025 GMV in the range of $8-$8.3 billion. Revenues are anticipated to be in the range of $755-$785 million. Transaction costs are estimated to be between $415 million and $430 million. The weighted average shares outstanding are expected to be 324 million. It projects the adjusted operating margin within 20-22%.

4Q25 Guidance

Affirm Holdings forecasts fourth-quarter fiscal 2025 GMV in the range of $9-$9.3 billion. Revenues are anticipated to be in the range of $810-$840 million. Transaction costs are estimated to be between $435 million and $450 million. The weighted average shares outstanding are expected to be 328 million. It projects the adjusted operating margin to be within 23-25%.

Fiscal 2025 View

Management anticipates GMV to be in the range of $34.74-$35.34 billion in fiscal 2025. Revenues are anticipated to be in the range of $3.13-$3.19 billion.  Adjusted operating margin is now estimated to be within 22.5-23.5%. Weighted average shares outstanding are estimated to be 323 million.

Affirm Holdings Zacks Rank

Affirm Holdings currently sports a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Business Services Sector Releases

Of the other Business Services sector industry players that have reported December-quarter results so far, the bottom-line results of Mastercard Incorporated MA, Visa Inc. V and Trane Technologies plc TT beat the Zacks Consensus Estimate.

Mastercard reported fourth-quarter 2024 adjusted earnings of $3.82 per share, which surpassed the Zacks Consensus Estimate by 3.8%. The bottom line improved 20% year over year. Net revenues of the leading technology company in the global payments industry advanced 14% year over year to $7.5 billion. The top line beat the consensus mark by 1.4%. Gross dollar volume increased 12% on a local-currency basis to $2.6 trillion. Cross-border volumes rose 20% on a local currency basis. 

Switched transactions improved 11% year over year to 42.2 billion. Value-added services and solutions’ net revenues of $3.1 billion advanced 16% year over year. Mastercard’s clients issued 3.5 billion Mastercard and Maestro-branded cards as of Dec. 31, 2024. Adjusted operating income was $4.22 billion, which grew 15% year over year. Adjusted operating margin improved 10 bps year over year to 56.3%.

Visa’s first-quarter fiscal 2025 EPS of $2.75 outpaced the Zacks Consensus Estimate of $2.66 by 3.4%. The bottom line increased 14% year over year. Net revenues of $9.5 billion improved 10% year over year. The top line beat the consensus mark by 1.8%. Visa's payments volume increased 9% year over year on a constant-dollar basis in the fiscal first quarter. Processed transactions (implying transactions processed by Visa) grew 11% year over year to 63.8 billion. 

On a constant-dollar basis, the cross-border volume of Visa rose 16% year over year. Excluding transactions within Europe, its cross-border volume (that boosts a company’s international transaction revenues) also rose 16% year over year on a constant-dollar basis. Service revenues increased 8% year over year to $4.2 billion in the December quarter. Data processing revenues of $4.75 billion grew 9% year over year. International transaction revenues rose 14% year over year to $3.44 billion. 

Trane Technologies reported fourth-quarter 2024 adjusted EPS of $2.61, which surpassed the Zacks Consensus Estimate by 2.8% and increased 20.3% year over year. Revenues of $4.9 billion beat the consensus mark by 2.2% and rose 10.2% year over year on a reported basis and organically. Bookings were up 11% year over year on a reported basis and organically. The Americas segment’s revenues of $3.8 billion increased 12.2% year over year on a reported basis and organically. Bookings were up 1% on a reported basis and organically to $3.7 billion.

The Europe, Middle East and Africa segment’s revenues were $690.3 million, up 5% year over year on a reported basis and 7% organically. Bookings were up 8% year over year on a reported basis and 9% organically to $614.8 million. Revenues from the Asia Pacific segment were up 1% year over year on a reported basis and organically to $381.2 million.

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