Business Overview / Sources of Revenue

Affirm Holdings (AFRM) is a leading financial technology company specializing in “buy now, pay later” (BNPL) services that allow consumers to split purchases into installments at the point of sale. Affirm earns revenue primarily from two sources: merchant fees (commissions paid by merchants for each sale, typically around 4–6%) and consumer interest income (interest charged to borrowers on specific loan products)[2][3]. Merchant fees account for the majority of revenue, with additional income from interest on consumer loans. Affirm supplements these offerings with a debit card and savings account. The company does not charge late fees and evaluates borrowers using credit scores and proprietary machine learning models[3]. As of 2025, Affirm has over 22 million users and processes $28 billion in payments annually[3].

Revenue Growth Potential and Recurrence

Affirm Holdings (AFRM) demonstrates strong recurring revenue, with 85% of transactions coming from repeat users as of 2022[3]. While specific recurring revenue percentage isn't explicitly stated, this high customer re-engagement rate suggests a solid foundation of returning customers.

Revenue growth has been impressive, with annual increases of 55.01% (2022), 17.69% (2023), and 46.29% (2024)[5]. The most recent quarterly data shows a 35.92% year-over-year increase for Q1 2025[5].

Looking forward, Affirm's growth potential appears strong based on historical performance and marketplace GMV expansion[1]. However, some analysts suggest the stock may be overvalued at current prices, with $40 considered a more attractive entry point as of June 2025[4].

Given Affirm's consistent double-digit growth trajectory and high customer retention, the company likely has potential to maintain 20-30% annual revenue growth over the next 5+ years, though exact projections remain uncertain.

Economic Moat Factors

Affirm Holdings (AFRM) possesses a moderate economic moat, primarily driven by its proprietary technology infrastructure, high transaction security, and extensive merchant partnerships[5]. Its unique machine learning risk assessment and real-time credit decisioning technology are complex to replicate, supported by 173 patent applications and significant R&D investment, creating technological differentiation and some barriers to entry[5]. Affirm’s large merchant network and 12.7 million active consumers enable some network effects, while strong retail partnerships and a reputation for transparency further strengthen its brand positioning[2][5]. However, switching costs for merchants and consumers remain relatively low in the competitive “buy now, pay later” space, limiting moat depth. Affirm’s scale and custom-built ecosystem induce some economy-of-scale benefits, but long-term moat sustainability will depend on continued innovation and deepening network integration[5][2].

Leadership

Affirm Holdings’ founder and CEO is Max Levchin, who has led the company since January 2012, giving him over 13 years in the role[3][4][5]. Levchin, also a co-founder of PayPal, holds a significant ownership stake in Affirm, directly owning about 5.2% of the company[4]. The management team includes President Libor Michalek, COO Michael Linford, and Chief Legal Officer Katherine Adkins[1][4]. Levchin’s leadership is central to Affirm, and the management team has an average tenure of approximately 1.9 years[4].

Financial Health

Affirm Holdings’ financial health is mixed. The company holds $1.36–$1.9 billion in cash against $7.3–$7.5 billion in debt, a high debt-to-equity ratio of about 255%, indicating a leveraged balance sheet[4][5]. Affirm does generate positive free cash flow, with a strong operating cash flow margin of 28.1%; its free cash flow margin is not explicitly stated but implied to be positive and growing[4][5]. The company has been dilutive, issuing more shares rather than repurchasing them[4]. Affirm remains unprofitable, with a net margin of -7.1%[5].

Last updated Jun 1, 2025