Affirm Holdings (NASDAQ: AFRM) opened fiscal 2027 with a beat that ran deeper than the headline numbers. Revenue of $1.26 billion cleared consensus by 3.7%, and GAAP diluted EPS of $0.47 landed 24% above the $0.38 estimate. The structural shift matters more: the Affirm Card is becoming the core growth engine, dragging profitability up with it.
GMV grew 34% year over year to $14.4 billion, the twelfth straight quarter above 30%. The Affirm Card alone contributed $3.3 billion, up 117%. Active cardholders more than doubled to 6.0 million. The card attach rate hit roughly 21%, up nine percentage points from a year ago. Card GMV now makes up 23% of total GMV, versus about 13% last year. This is no side project.
Revenue Less Transaction Costs (RLTC), Affirm's preferred unit economics metric, rose 36% to $617 million. RLTC as a percentage of GMV expanded seven basis points to 4.30%, above the 3.75-4% medium-term target. The gain came despite a 29-basis-point increase in provision for credit losses. Funding costs, processing expenses, and loss on loan purchase commitments all improved enough to more than compensate. Average annualized cost of funds fell 69 basis points year over year to 6.0%, though it rose 27 basis points sequentially as benchmark rates climbed.
Operating income surged to $187 million (14.8% margin) from $64 million (6.8% margin) a year prior. Adjusted operating income rose 44% to $380 million, with adjusted operating margin expanding to 30.1% from 28.3%. The gap between 194% GAAP operating income growth and 44% adjusted growth reflects leverage from shrinking stock-based compensation, which dropped from $86 million to $56 million year over year. That tailwind won't last forever. For now, it amplifies the bottom-line story.
Management raised guidance and sounded confident. For fiscal Q2, Affirm expects GMV of $17.9-$18.2 billion and revenue of $1.435-$1.465 billion. Full-year GMV should exceed $65.25 billion, with operating margin above 14.75% and adjusted operating margin above 30.75%. The implied revenue yield of roughly 8.49% for the full year sits slightly below Q1's 8.79% but still above the 7.5-8.5% medium-term range. Q1's revenue yield looks like a peak. The margin trajectory does not.
Credit quality needs watching. The 30+ day delinquency rate on monthly installment loans excluding Peloton rose to 2.9%, up nine basis points year over year and 35 basis points sequentially. That sequential jump is the largest in recent quarters, though the absolute level stays within historical ranges. Recent vintages are tracking to roughly 3.5% ultimate net charge-offs, in line with prior cohorts. The allowance for credit losses as a percentage of loans held for investment rose to 6.3% from 5.9% a year ago. Management is building reserves, not assuming improvement.
Funding capacity hit a record $31.7 billion, up from $26.6 billion a year ago, enough to support over $70 billion in annual GMV. Affirm closed three ABS transactions during the quarter, including its first five-year note, and added a second major rating agency. Net cash improved to $1.9 billion, up $761 million year over year. The balance sheet has never been stronger.
Can the card sustain its momentum without degrading unit economics? Card GMV grew 117% from a base that was already $1.5 billion. The attach rate is still only 21%. Room to run exists, but each incremental point requires reaching consumers less predisposed to adopt new payment methods. The transformer-based underwriting model that delivered a 3.4% conversion lift is a real advantage. It will need to keep improving as the portfolio scales and credit conditions shift.
For now, Affirm has validated its thesis: a payments network growing above 30% while expanding margins. The guidance suggests management sees more ahead. The risk is that the sequential delinquency uptick signals something more than seasonality. With $1.9 billion in net cash and funding capacity for $70 billion in GMV, Affirm has the resources to manage through a credit cycle rather than merely ride one.