AFRM Q2 Deep Dive: Network Effects, Product Expansion, and Profitability Shape Outlook

Buy now, pay later company Affirm (NASDAQ:AFRM) beat Wall Street’s revenue expectations in Q2 CY2026, with sales up 33% year on year to $1.17 billion. On top of that, next quarter’s revenue guidance ($1.21 billion at the midpoint) was surprisingly good and 3.6% above what analysts were expecting. Its GAAP profit of $4.62 per share was significantly above analysts’ consensus estimates.

Is now the time to buy AFRM? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Affirm delivered a strong second quarter, with management highlighting robust network effects and continued expansion into new merchant categories as key contributors to performance. CEO Max Levchin emphasized that both existing and new consumer credit products drove growth, and the company’s ability to tailor solutions for merchants helped accelerate adoption. Levchin described the quarter as Affirm’s “most profitable ever,” attributing success to operational focus and a disciplined approach to credit risk, while also noting that recent executive promotions should support tighter execution and product development.

Looking ahead, Affirm’s guidance is shaped by a growing addressable market and the company’s strategy to further diversify its product portfolio. Levchin pointed to plans for additional product launches, especially those aimed at in-store payments and offline commerce, describing these as significant opportunities for growth. CFO Rob O’Hare cautioned that tax rate volatility could impact reported earnings, but management remains focused on scaling their network and delivering value through expanded merchant partnerships and new financing options. Management expects continued investment in technology and product innovation to support growth in upcoming quarters.

Key Insights from Management’s Remarks

Management attributed second quarter results to broad-based adoption of Affirm’s products, entry into new markets, and ongoing improvements in both merchant and consumer engagement.

• Merchant network expansion: Affirm continued to sign large merchants, particularly in the services vertical, which saw volume nearly double year-over-year. Management noted that integrations with top e-commerce sites remain a multi-quarter sales process, given legacy systems and complex merchant requirements.
• Growth in offline and card transactions: Approximately 30% of Affirm Card transactions now occur offline, reflecting growing adoption for in-store purchases. Levchin discussed ongoing efforts to reduce friction and improve the in-store experience, with product enhancements expected in coming quarters.
• Product mix shift: The company saw a higher proportion of interest-bearing loans in its direct-to-consumer products, while point-of-sale integrations experienced increased share of 0% APR offers. Management highlighted that promotions like the "Big Nothing" event and tailored financing programs for merchants are helping to diversify revenue streams.
• International expansion progress: Early results from the United Kingdom have been positive, with both consumers and merchants responding favorably to Affirm’s transparent pricing model. Levchin noted minimal competitive response so far, suggesting a unique market position.
• Network effects as growth driver: Levchin emphasized that Affirm’s long-term strategy centers on building a robust network connecting consumers and merchants, which in turn drives profitability, merchant adoption, and pricing power. The company’s focus on network effects differentiates it from competitors and supports sustainable growth.

Drivers of Future Performance

Affirm’s outlook for the next quarter and year is shaped by continued product innovation, deeper merchant integration, and efforts to grow its presence in both online and offline commerce.

• Expansion of merchant partnerships: Management believes there is substantial room to grow by onboarding additional large merchants, especially those not yet integrated due to complex legacy systems. The company expects merchant adoption to be a multi-year opportunity, with ongoing execution by the sales team.
• In-store and card product enhancements: Affirm is investing in reducing friction for offline transactions, aiming to make in-store use of its card and payment solutions more compelling. Levchin indicated that improvements in consumer experience could drive higher attach rates and increased spending per cardholder.
• Credit risk management and macro uncertainty: While the company’s credit performance remains stable, management highlighted that credit policy adjustments are made incrementally and continuously in response to consumer data and macroeconomic indicators. O’Hare cautioned that tax rate volatility and capital markets dynamics could impact reported profitability, but the company remains focused on disciplined underwriting and responsible growth.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) the pace of new merchant signings, particularly in services and international markets; (2) consumer response to upcoming in-store and Affirm Card product enhancements; and (3) the impact of credit policy adjustments on approval rates and loss metrics. Progress on technology-driven improvements and network expansion will also serve as key indicators of execution.

Affirm currently trades at $86.59, up from $78.62 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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