Affirm stock has rallied sharply on the back of stronger profitability, expanding merchant adoption and improving funding costs, but a new competitive twist is changing the conversation. The key date now is August 20, when the company is scheduled to report earnings after the close.
At issue is a proposed $60.50-per-share offer for PayPal by Stripe and Advent International, a transaction that would value PayPal at more than $53 billion. For Affirm, the significance is indirect but substantial: Stripe is one of its most important distribution partners, while PayPal operates a competing buy now, pay later business.
That creates a new question for investors. Affirm’s core fundamentals remain strong, yet part of its growth engine runs through infrastructure that could end up partially controlled by a company with ownership exposure to a direct rival.
Key Facts
- Affirm reported March-quarter gross merchandise volume of $11.6 billion, up from $8.6 billion a year earlier.
- Revenue reached $1.04 billion in the quarter, while net income rose to $102.9 million from $2.8 million.
- Active merchants increased 43.8% year over year to 515,200, and active consumers climbed to 26.8 million.
- Revenue less transaction costs, or RLTC, came in at 4.3% of GMV, above the company’s long-term target of more than 4%.
- Stripe and Advent offered $60.50 per share for PayPal, with roughly $50 billion in committed bank financing attached to the proposal.
Affirm stock and Stripe-PayPal channel risk
Affirm’s investment case has shifted in recent quarters from pure growth to earnings quality. The company has now posted consecutive quarters with revenue above $1 billion, generated positive GAAP net income, and shown that scale is translating into better operating leverage. In the March quarter, operating income turned positive at $88.4 million, compared with a loss of $8.4 million a year earlier.
Those gains matter because they suggest Affirm is no longer being valued only on future potential. Investors are now measuring execution in concrete terms: transaction growth, margin resilience, merchant expansion and funding efficiency. Transactions rose to 45.3 million from 31.3 million, while transactions per active consumer increased to 6.7 from 5.6, indicating deeper engagement rather than just user growth.
The complication is distribution. Affirm has built a broad merchant network, but it also relies on strategic partnerships to reach more checkout surfaces. Stripe is central to that strategy through integrations in physical retail, digital checkout and newer commerce channels. If Stripe were to become a 50% owner of PayPal, it would also gain a stake in a BNPL competitor operating across a much larger consumer ecosystem. That does not automatically threaten Affirm’s position, but it introduces a new layer of incentive risk that the market may not have fully priced in.
Affirm’s business is still compounding, but the distribution path that supports that growth has become more complicated.
Why RLTC margins matter more than headline growth
Among the many figures investors track in consumer fintech, Affirm’s RLTC margin may be the most important. In the March quarter, RLTC reached $498.2 million, or 4.3% of GMV, up from 4.1% a year earlier. That improvement came even as GMV grew nearly 35%, a notable result in a lending-linked model where faster expansion can often pressure spreads.
The supporting factor was funding. Transaction costs fell to 4.7% of GMV from 5.0%, helped by a roughly 125-basis-point decline in funding costs year over year. Affirm also renewed and expanded its forward-flow agreement with Canada Pension Plan Investment Board, which committed $1.7 billion over 24 months to purchase loans. For investors, that combination suggests the platform is scaling with stronger capital-market support rather than with a heavier equity burden.
Implications for Investors
The near-term debate around Affirm stock centers on whether operating momentum can outweigh strategic uncertainty. On one side, the numbers remain strong: merchant growth above 40%, improving margins, lower funding costs and a profitable quarter. On the other, the stock has already rallied substantially, and expectations heading into August 20 are likely to be demanding.
Credit performance remains another critical watch-point. The allowance for credit losses rose to 6.0% of loans held for investment, up from 5.7% a year earlier and 5.4% at the June 2025 fiscal year-end. Management attributed the increase largely to seasonality and elevated tax-season prepayments rather than rising delinquencies. Investors will want fresh evidence on that point, because any sign that credit costs are moving higher for structural reasons could quickly pressure valuation.
Portfolio positioning may therefore hinge on time horizon and risk tolerance. Growth-oriented investors may still see opportunity if Affirm can sustain RLTC above 4%, continue posting revenue above $1 billion and show that merchant and card adoption are offsetting competitive threats. More cautious investors may focus on valuation sensitivity, credit trends and the possibility that a Stripe-PayPal tie-up changes checkout economics over time. With a high-beta profile and a history of sharp moves around earnings, the stock is likely to remain volatile.
The next major catalyst is clear. If Affirm delivers another quarter of strong GMV growth, stable credit and durable margins on August 20, the recent rally could gain new support. If margins soften or channel risk becomes more explicit, investors may reassess how much of the growth story is already reflected in the share price.