Affirm Swings Wildly Post Q3 Earnings: Is the Fintech Losing Steam?

Affirm Holdings, Inc. AFRM has seen its stock fluctuate sharply following its fiscal third-quarter 2025 earnings report last Thursday. Shares plummeted 14.5% on Friday as investors reacted negatively to the company’s fourth-quarter outlook. However, the stock rebounded 15.8% on Monday after Affirm announced a new buy now, pay later (BNPL) partnership with World Market. It remained relatively stable on Tuesday.

These rapid shifts have left investors questioning Affirm’s growth trajectory. Can a single merchant addition trigger such a reversal, especially when the company already boasts a merchant network exceeding 358,000 partners? Let’s examine Affirm’s recent earnings, growth prospects, and financial fundamentals to determine whether the stock is worth holding.

Key Highlights From AFRM’s Q3 Earnings

It reported third-quarter fiscal 2025 earnings of 1 cent per share against the Zacks Consensus Estimate of a loss of nine cents and the prior-year quarter’s loss of 43 cents. Revenue rose 36% year over year to $783.1 million, near the upper end of the company’s guidance range of $755–$785 million.

Gross Merchandise Value (GMV) reached $8.6 billion, up 36% from the prior year and ahead of the $8.1 billion Zacks Consensus Estimate. The growth was supported by strong performance across Affirm’s largest merchant partner, wallet integrations, and direct-to-consumer channels. Transactions totaled 31.3 million, up 45.6% year over year, driven largely by repeat customers.

While fiscal fourth-quarter 2025 guidance fell short of Wall Street expectations, Affirm continues to diversify its business, which could support long-term momentum. The company anticipates Q4 revenue between $815-$845 million and GMV between $9.4-$9.7 billion. Read more here.

AFRM’s Long-Term Growth Drivers Remain Intact

Repeat customer growth is becoming a significant strength for Affirm. In the fiscal third quarter, 94% of transactions came from returning customers, which underscores growing brand loyalty and potential for more predictable revenue. The company’s move into everyday consumer categories such as home goods and lifestyle, exemplified by the recent World Market deal, supports this shift toward more stability.

Affirm is also expanding internationally. Having entered the U.K. market after success in North America, it now plans to extend operations into Western Europe, starting with France, Germany and the Netherlands, in partnership with Shopify. This global push, backed by existing merchant relationships, could unlock significant growth potential.

The company’s model benefits both merchants and consumers. By reducing cart abandonment and offering flexible, transparent payment options — including 0% APR monthly installments — Affirm drives sales for partners while building a strong user base. Notably, 0% APR plans rose 44% year over year in the fiscal third quarter and accounted for 13% of GMV.

In addition to its BNPL offerings, Affirm is investing in complementary financial products, including debit solutions and business-to-business tools. These innovations can drive more frequent usage, deepen customer relationships and strengthen its merchant ecosystem.

Favorable Earnings Estimates for AFRM

The Zacks Consensus Estimate for Affirm’s fiscal 2025 earnings suggests a 95.8% year-over-year improvement, while fiscal 2026 earnings are expected to surge nearly 960%. Revenue projections are also strong, with fiscal 2025 and 2026 expected to grow 36.9% and 23.3%, respectively. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

It has delivered solid financial results lately, beating earnings estimates in each of the trailing four quarters, the average surprise being 102.2%.

Affirm Holdings, Inc. Price and EPS Surprise

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

AFRM’s Price Performance & Valuation

Affirm’s stock has soared 67% over the past year, significantly outperforming the broader industry and the S&P 500 Index. During this time, major BNPL service provider PayPal Holdings, Inc. PYPL grew 13.2% while Block, Inc. XYZ declined 18.6%.

Price Performance – AFRM, PYPL, XYZ, Industry & S&P 500

In terms of valuation, Affirm is trading at a premium. Its 4.47X forward 12-month sales is higher than the three-year median of 3.49X. Meanwhile, PayPal and Block are currently trading at 2.09X and 1.39X, respectively.

AFRM’s Headwinds to Monitor

As of March 31, 2025, Affirm had a funding debt of $1.9 billion. Although it is a growing company, its long-term debt-to-capital ratio of 72.8% is significantly higher than the industry’s average of 12.9%, which remains a concern. It needs to demonstrate sustained earnings over the coming quarters to assure investors about its capacity to service its debt obligations.

Operating expenses have also been rising. In fiscal 2022, 2023 and 2024, expenses increased 76.6%, 25.9%, and 5.4%, respectively. In the fiscal third quarter, they rose another 7.4%. As Affirm continues to invest in growth and innovation, cost management will be critical to protecting margins.

Competition in the BNPL space remains fierce. In addition to rivals like PayPal, Klarna and Block, traditional financial institutions and credit card companies are entering the market. Walmart’s recent decision to switch from Affirm to Klarna illustrates the intensity of the competitive landscape and may signal challenges to Affirm’s merchant retention efforts.

Conclusion: Is Affirm a Buy, Sell, or Hold?

Affirm’s fiscal Q3 performance demonstrated strong revenue growth, improved margins, and rising transaction volumes, particularly from loyal, repeat customers. Its expanding merchant network, new partnerships like World Market, and push into international markets all reflect long-term growth potential. However, near-term concerns remain. Elevated debt levels, rising expenses, and intense competition, especially from both fintech peers and traditional companies, pose risks to margin stability and market share expansion.

Given these mixed signals, Affirm currently has a Zacks Rank #3 (Hold). Investors may want to watch for more sustained profitability and clearer margin improvement before adding or expanding positions. Affirm remains a company with high potential — but at current valuation levels, patience may be the smartest play.

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

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This article originally published on Zacks Investment Research (zacks.com).

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