How strong was Affirm's underlying growth and profitability this quarter?

GMV grew 35% to $11.6 billion and revenue grew 33% to $1,039 million. Profitability improved sharply: GAAP operating margin reached 8.5% versus a loss a year earlier, and Adjusted Operating Margin reached 27.0%. Growth in RLTC (41%) outpaced revenue growth, indicating better unit economics.

What drove the margin expansion?

The largest driver was lower funding costs. Average annualized cost of funds fell about 126 bps YoY to 5.8%, helped by repeated ABS repricings and favorable repricing across funding channels. RLTC as a percent of GMV rose 19 bps, with a 27 bp funding-cost benefit partly offset by a 17 bp revenue decline. Operating expenses grew more slowly than RLTC, so incremental margins were strong.

Are credit quality trends a concern?

Some metrics moved the wrong way. 30+ day delinquencies excluding Peloton and Pay in X rose 29 bps YoY to 2.8%, and the allowance for credit losses rose to 6.0% of loans held for investment. Management attributes roughly half the delinquency increase to a smaller denominator from seasonal tax-refund dynamics and says recent monthly installment cohorts track to about 3.5% ultimate net charge-offs, consistent with history. Pay in 4 vintages are tracking to losses below 1% of GMV.

Could the deferred tax valuation allowance release affect reported earnings?

Yes. Management said that if its earnings trajectory continues, there may be sufficient positive evidence to release a significant portion of the U.S. deferred tax valuation allowance by the end of fiscal 2026. Such a release would likely produce a large one-time GAAP net income benefit in that period, which would distort comparisons with underlying operating results. The amount has not been quantified in this filing.

What should investors watch in the near term?

Key items include whether FQ4'26 revenue ($1,080-1,110M) and GMV ($13.15-13.45B) guidance is met, whether delinquencies and the allowance ratio stabilize, the medium-term financial framework to be presented at the May 12, 2026 Investor Forum, and the timing of any deferred tax asset release. Investors should also note that the letter's key metrics are non-GAAP and that the company's stated long-term RLTC target range is 3-4% of GMV, against which the current 4.31% is above range.

AFRM 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed May 7, 2026. Cited figures are marked; the original filing is the authoritative source.

Affirm Holdings (AFRM) reported fiscal third-quarter 2026 results (quarter ended March 31, 2026) via a shareholder letter furnished under Item 2.02 of an 8-K.

The headline numbers were strong: GMV rose 35% to $11.6 billion^a, the company's 10th consecutive quarter of over-30% GMV growth. Revenue grew 33% to $1,039 million, and Revenue Less Transaction Costs (RLTC, a non-GAAP unit-economics measure) grew 41% to $498 million, or 4.31% of GMV, above management's 3-4% long-term target range. GAAP operating income swung to $88 million (8.5% margin) from a loss a year earlier, and net income reached $103 million versus $3 million.

Non-GAAP Adjusted Operating Income rose 62% to $281 million^b, a 27.0% margin. Much of the margin improvement was driven by funding costs, which fell about 126 basis points year over year to 5.8%, aided by repeated ABS repricings (the latest revolving deal priced under a 5% blended yield). Credit metrics warrant monitoring: 30+ day delinquencies ex-Peloton and Pay in X rose 29 bps year over year to 2.8%, and the allowance for credit losses rose to 6.0% of loans held for investment from 5.7%.

Management characterized the increase as largely in line with expectations and partly a seasonal denominator effect. Forward guidance for fiscal Q4 2026 calls for GMV of $13.15^c-13.45 billion and revenue of $1,080-1,110 million, and full-year FY2026 operating margin of 8.9-9.4%. Management also flagged a possible release of a significant portion of the U.S. deferred tax valuation allowance by fiscal year-end, which could produce a material one-time GAAP earnings benefit.

The filing is largely a management communication rather than a regulatory event. The information is furnished, not filed, under Section 18, and the letter's non-GAAP measures and forward-looking statements carry the usual caveats. Investors should weigh the strong top-line and margin trajectory against rising delinquency and allowance levels, and should note that the Investor Forum on May 12, 2026 is expected to provide medium-term financial framework detail.

02—Key points

Key Highlights

GMV grew 35% YoY to $11.6B; revenue grew 33% to $1,039M, and RLTC grew 41% to $498M (4.31% of GMV, above the 3-4% long-term target range).
GAAP operating income of $88M (8.5% margin) versus an $8M loss a year earlier; net income of $103M versus $3M, with diluted EPS of $0.30 versus $0.01.
Non-GAAP Adjusted Operating Income rose 62% to $281M, with a 27.0% margin (up ~5 points); over 70% of incremental RLTC dollars flowed to Adjusted Operating Income.
Average annualized cost of funds fell to 5.8%, down ~126 bps YoY, a key driver of RLTC margin expansion; funding capacity reached $28.2B.
Credit watch items: 30+ day delinquencies (ex-Peloton and Pay in X) rose to 2.8%, and the allowance for credit losses rose to 6.0% of loans held for investment from 5.7%; management says the trend is in line with expectations.
Card momentum continues: active cardholders reached 4.4M (more than doubled YoY), Card GMV grew 146% to $2.1B, and card attach rate reached ~17%.
Guidance: FQ4'26 revenue of $1,080-1,110M and GMV of $13.15-13.45B; FY2026 operating margin of 8.9-9.4%; possible significant release of the U.S. deferred tax valuation allowance by fiscal year-end 2026.

03—Questions

Frequently Asked Questions

How strong was Affirm's underlying growth and profitability this quarter?
GMV grew 35% to $11.6 billion and revenue grew 33% to $1,039 million. Profitability improved sharply: GAAP operating margin reached 8.5% versus a loss a year earlier, and Adjusted Operating Margin reached 27.0%. Growth in RLTC (41%) outpaced revenue growth, indicating better unit economics.
What drove the margin expansion?
The largest driver was lower funding costs. Average annualized cost of funds fell about 126 bps YoY to 5.8%, helped by repeated ABS repricings and favorable repricing across funding channels. RLTC as a percent of GMV rose 19 bps, with a 27 bp funding-cost benefit partly offset by a 17 bp revenue decline. Operating expenses grew more slowly than RLTC, so incremental margins were strong.
Are credit quality trends a concern?
Some metrics moved the wrong way. 30+ day delinquencies excluding Peloton and Pay in X rose 29 bps YoY to 2.8%, and the allowance for credit losses rose to 6.0% of loans held for investment. Management attributes roughly half the delinquency increase to a smaller denominator from seasonal tax-refund dynamics and says recent monthly installment cohorts track to about 3.5% ultimate net charge-offs, consistent with history. Pay in 4 vintages are tracking to losses below 1% of GMV.
Could the deferred tax valuation allowance release affect reported earnings?
Yes. Management said that if its earnings trajectory continues, there may be sufficient positive evidence to release a significant portion of the U.S. deferred tax valuation allowance by the end of fiscal 2026. Such a release would likely produce a large one-time GAAP net income benefit in that period, which would distort comparisons with underlying operating results. The amount has not been quantified in this filing.
What should investors watch in the near term?
Key items include whether FQ4'26 revenue ($1,080-1,110M) and GMV ($13.15-13.45B) guidance is met, whether delinquencies and the allowance ratio stabilize, the medium-term financial framework to be presented at the May 12, 2026 Investor Forum, and the timing of any deferred tax asset release. Investors should also note that the letter's key metrics are non-GAAP and that the company's stated long-term RLTC target range is 3-4% of GMV, against which the current 4.31% is above range.

04—Continue

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