Affirm Q1 Earnings Beat on Rising Active Merchants, Stock Up 15%

Core Insights - Affirm Holdings, Inc. (AFRM) shares increased by 15.4% following the release of its first-quarter fiscal 2026 results, driven by strong growth in Gross Merchandise Value (GMV), transaction volumes, active merchants, and card network revenues, although offset by high expenses and rising credit loss provisions [1] Financial Performance - Affirm reported Q1 fiscal 2026 earnings per share (EPS) of 23 cents, exceeding the Zacks Consensus Estimate of 11 cents and improving from a loss of 31 cents per share in the prior year [2][9] - Total revenues rose by 33.6% year over year to $933.3 million, surpassing management's expectations of $855-$885 million and beating the consensus mark by 5.5% [2] - GMV reached $10.8 billion, a 42% increase year over year, exceeding management's expected range but falling short of the Zacks Consensus Estimate of $13.1 billion [3][9] - Total transactions increased by 52.2% year over year to 41.4 million, driven by repeat customer transactions, although it missed the consensus mark of 44.2 million [4] Revenue Breakdown - Servicing income grew by 53% year over year to $39.7 million, missing the consensus mark of $40.3 million [4] - Interest income increased by 20% year over year to $454.1 million, falling short of the Zacks Consensus Estimate of $481.7 million [4] - Merchant network revenues improved by 36.2% year over year to $251.1 million, missing the consensus mark of $304.8 million [5] - Card network revenues rose by 46% year over year to $69.3 million, attributed to higher usage of Affirm Card and virtual cards, but also missed the consensus mark of $81 million [5] Expense and Profitability Metrics - Total operating expenses increased by 4.6% year over year to $869.7 million, driven by higher costs in various areas including loan purchase commitments and technology expenses [6] - Provision for credit losses rose by 1.8% year over year to $162.8 million [6] - Adjusted operating income surged by 103.6% year over year to $264 million, with an adjusted operating margin improving by 970 basis points to 28.3%, surpassing management's estimated range of 23-25% [7] Financial Position - As of September 30, 2025, Affirm had cash and cash equivalents of $1.4 billion, a 5.5% increase from the end of fiscal 2025 [8] - Total assets increased to $11.5 billion from $11.2 billion at the end of fiscal 2025 [8] - Funding debt rose by 9.6% to $1.8 billion compared to June 30, 2025 [8] - Total stockholders' equity increased to $3.3 billion from $3.1 billion at the end of fiscal 2025 [10] Future Guidance - For Q2 fiscal 2026, Affirm forecasts GMV in the range of $13-$13.3 billion and revenues between $1.03-$1.06 billion, with an expected adjusted operating margin of 28-30% [11] - For the full fiscal year 2026, management anticipates GMV to exceed $47.5 billion, up from a previous estimate of over $46 billion, with revenues expected to be 8.4% of GMV [12]