What Management Said
Read the full Q1 2026 transcript ↗For historical non-GAAP financial measures, reconciliations to the most directly comparable GAAP measures can be found in our earnings supplement slide deck, which is available on our investor relations website. We're really proud of our ability to execute in the ABS market and in the capital markets more broadly. What we produce is something very special and very unique, and it's highly valued in the debt capital market. Can you just put a finer point in terms of why your full year 2026 guide is unchanged for that metric?
I think most broadly, we're really focused on 4% being an upper bound for revenue-less transaction cost take rates. There will be puts and takes within given quarters, just given different capital markets transactions and other sort of idiosyncratic things that can happen in a given quarter. Really, that goal is to make sure that we're maximizing growth and profitability. I would not call our underwriting practices a natural selection, just for the record.
Given we are growing at 40% year-over-year, a couple of basis points is not a thing that I lose sleep over. And maybe since you did mention that you're testing cash flow underwriting, what kind of impact that could have on your ability to approve transactions and see growth in volume per card? Cash flow underwriting is really helpful for younger consumers and just folks who are kind of overlooked by the rest of the ecosystem. The growth of Card is regulated by a couple of factors, our willingness to market it.
What went well
- Extended U.S. agreement with Amazon for an additional five years through January 2031
- Strong capital-markets execution: another ABS deal priced well and expanding relationships with Blue Chip forward CLO buyers
- Added roughly half a million Affirm Card members in the quarter, with higher discretionary-spend capture per new cohort
- 0% Days ('Big Nothing Days') promotion was a success, proving Affirm can drive merchant demand beyond bottom-of-funnel
- RLTC reached ~4.2% of GMV, running slightly above the 4% target, helped by better provision performance
What went wrong
- Core 0% longer-term merchant fee rate trended lower due to a one-off adjustment to a single large merchant's very-long-dated 0% program
- A few basis points of demand slowdown detected among government employees during the shutdown (though no rise in delinquencies)
- RLTC running above 4% is viewed as temporary; management reiterated 3%-4% is the right long-term range and expects the take rate to normalize toward 4%
- AOV drifted down slightly quarter-over-quarter to the $260-$270 range as the mix shifted to lower-AOV categories like apparel and beauty
- Management declined to break out GMV mix, per-partner Card share, or OpEx line items, limiting model visibility
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Operating margin (adjusted) | FY2026 | more than 7.5% |
| RLTC as % of GMV | FY2026 | 4% target |
| RLTC as % of GMV | Q2 FY2026 | near 4% |
| GMV | Q2 FY2026 | $13 billion-$13.3 billion |
| RLTC dollars | FY2026 | taken up in updated outlook |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Overall growth | 40% | Broad-based network growth across merchants, consumers and the Affirm Card |
| RLTC as % of GMV | +48 bps to 4.2% | Better provision performance and favorable funding/product mix |
| Fashion and beauty GMV | 30% | Growth in lower-AOV discretionary categories like apparel and beauty |
| Transaction count per customer | up meaningfully | Higher purchase frequency and rising share of consumer spend, led by the Affirm Card |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| 0% APR loans / promotions | Fastest-growing loan product for several quarters | Ran the multi-day '0% Days' promotion, merchant-funded; leaning in heavily and plan to repeat it bigger | — |
| Affirm Card | Goal of 10 million active cards and $7,500 annual discretionary spend per card | Just under 1/3 of the way to the card count and roughly 1/3-1/2 of the way on spend; testing cash-flow underwriting to reach younger/thin-file consumers | — |
| PSP / platform partnerships | — | Signed Worldpay for Platform; PSPs speed integration and reach, with bespoke economics, and support international expansion (e.g., Shopify) | — |
| Capital markets / funding | — | Constructive ABS market with flight to quality; priced a strong deal and expanded Blue Chip CLO buyer relationships | — |
| Credit / underwriting in new verticals | — | Robust model-building process lets Affirm enter services (ServiceTitan, auto repair, elective medical) confidently; consumer credit healthy including among government employees | — |
Q&A Summary
Why is Affirm executing so well in the funding markets when peers are struggling?
Strong asset performance drives investor appetite; Affirm is expanding Blue Chip forward CLO buyer relationships while scaling its ABS program, aided by a best-in-class capital-markets team that educates investors on the product.
How should we think about the PSP strategy holistically after the Worldpay for Platform signing?
PSPs are an important channel that mainly speeds integration and adds doors/merchants; Affirm stays highly involved in the sale and program configuration, and its breadth of products enables more connections than competitors.
Why is the FY2026 RLTC take-rate guide unchanged when the quarter ran at ~4.2%?
Management treats 4% as an upper bound and reinvests upside into growth and reach; there are quarterly puts and takes, and long-term the right range is 3%-4%, so 4% remains the FY2026 target.
Is healthy consumer spending and low delinquency a function of Affirm's underwriting or genuine consumer health?
Underwriting is carefully engineered, not 'natural selection'; Affirm is a small sample but sees healthy borrowing and repayment, and even among government employees during the shutdown there was no repayment loss, only a few basis points of demand slowdown against 40% YoY growth.
What drives how fast the Affirm Card penetrates, and what could cash-flow underwriting do?
Card is marketed only to existing Affirm customers and rolled out deliberately at slightly higher credit quality; cash-flow underwriting helps approve younger and thin-file consumers, and long-term Affirm expects to offer the Card to essentially every acquired user.
Can you give more color on the Amazon agreement extension?
The key point is a five-year commitment through January 2031; renewal talks ran for the better part of a year and both companies are pleased with the consumer value provided.
How aggressively will you lean into 0%, and what did you learn from 0% Days?
Affirm will keep leaning in heavily; 0% deals attract higher credit quality with FICO uplift, and the promotion proved Affirm can drive merchant demand with truly transparent 0% offers (no late or hidden fees), funded increasingly by merchants.
Where is the additional operating leverage in the raised margin guide coming from?
It is a function of growth, not cost-cutting; the updated outlook takes RLTC dollars up and a good portion of those incremental dollars flow down to operating income.
Does moving into services verticals like ServiceTitan and auto repair change your underwriting?
Yes, and that is part of the moat; Affirm's robust, fast model-building process lets it incorporate new data and bifurcate underwriting for new verticals quickly, making entry into services, elective medical and auto lower-risk.
What are you seeing in top-of-wallet behavior and substitution on the Affirm Card?
Affirm sees rising discretionary-spend capture and higher starting points per cohort; it is capturing spend that wouldn't have happened on revolving credit and in some cases cannibalizing card volume, but is still under 1/3 of the way to its 10M-card and $7,500-spend targets.
More on Affirm Holdings, Inc.
Reported 2025-11-06 · figures from the Affirm Holdings, Inc. Q1 2026 earnings call.
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