Affirm (NASDAQ: AFRM) has deployed a new transformer-based machine learning model for real-time underwriting at checkout in the U.S. The system leverages 14 years of transaction-level data to approve additional eligible consumers, including those with limited credit histories or no FICO scores.

The company reported that the initial deployment produced 3.4% more completed purchases compared to a control group. Affirm stated that these additional loans performed better than a comparable expansion under its previous machine learning models.

Model Architecture and Performance

The new model identifies patterns within and across credit accounts, analyzing how they change over time without requiring separate measures designed for each pattern in advance. This approach allows the system to find more signal in existing data beyond traditional credit-bureau measures such as balances, utilization, and payment history.

Libor Michalek, President of Affirm, noted that the architecture enables the company to find new information within data it already possesses. "Seeing a credit history more clearly means we can responsibly say yes to more people," Michalek said.

Real-Time Decisioning

Affirm built a proprietary algorithm to ensure the transformer model maintains the same level of explainability as traditional machine learning models while remaining fast enough for real-time use. The company emphasized that underwriting is central to its business model, which promises individual purchase decisions based on what a person can responsibly repay that day.

"The goal isn’t to approve every transaction, it’s to make the right decision for each one," Michalek added. "We don’t benefit from extending credit that can’t be repaid, which means saying yes to more people only works when we get even better at saying no."

What the Numbers Show

The disclosed performance metrics highlight a divergence between volume expansion and risk management. While the model drove a 3.4% increase in completed purchases by approving applications previously declined, the company asserts that loan performance improved relative to prior expansion attempts. This suggests the transformer architecture may identify creditworthiness signals in thin-file consumers that previous models missed, allowing for growth without a corresponding rise in default rates.

Affirm Holdings Inc. (NASDAQ: AFRM) reported fiscal 2026 fourth quarter adjusted earnings per share (EPS) of $0.48, beating the analyst consensus estimate of $0.34 by 41.18%. The buy-now-pay-later lender posted quarterly sales of $1.165 billion, surpassing the estimated $1.106 billion. Following the results, Affirm stock rose 7.76% to $83.44 in extended trading on Thursday.

The results mark a substantial improvement over the prior year, with adjusted EPS rising 140% from $0.20 in the same period last year. Revenue grew 32.93% year-over-year from $876.417 million. Gross Merchandise Volume (GMV) reached $14.1 billion, up 36% year-over-year. Total transactions during the quarter increased to 53 million, growing 41% and outpacing overall GMV growth.

Executive Promotions & Strategic Focus

CEO Max Levchin announced promotions within the executive team, highlighting a focus on tighter execution and future product development. Michael Linford was promoted to President, while Pat became Senior Vice President and General Manager of Global Markets. Levchin stated these changes allow him to focus deeper on developing next-generation products and services, some of which may not show up in results until fiscal 2029.

Earnings History & Estimates

The market had projected continued momentum from the previous quarter, where Affirm reported revenue of $1.04 billion, up 33% year-over-year. Management had guided for Q4 GMV between $13.15 billion and $13.45 billion, with revenue expected in the range of $1.08 billion to $1.11 billion.

In the prior quarter (Q3 FY26), actual EPS of $0.30 surpassed the consensus estimate of $0.17. GAAP EPS came in at $4.62, well above the consensus estimate of $0.35, helped by stronger core trends and a one-time tax benefit from a deferred tax asset reversal.

Credit Quality & Product Mix

Investors are closely monitoring delinquency trends following competitor Klarna Group Plc’s disclosure of worsening loan performance in Germany. Affirm’s 30-plus day delinquency rate on monthly installment loans stood at 2.8%, while its allowance for credit losses was 6.0% of loans held for investment entering the quarter.

Management emphasized control over credit outcomes, noting that credit targets are inputs rather than outputs. On product mix, Levchin noted an acceleration in 0% share within point-of-sale integrations, partly due to the "Big Nothing" event. However, direct-to-consumer products like the Affirm Card drive a shift back toward interest-bearing loans, with north of 80% of direct-to-consumer loans being interest-bearing. The Affirm Card’s attach rate reached 19% of active users, with cardholders spending roughly 2x the amount of typical customers.

International Expansion & Merchant Growth

Affirm is seeing significant traction in international markets, particularly in the UK, with positive consumer and merchant reception. Levchin described early feedback as a "love fest," noting strong consumer uptake due to transparent pricing.

Regarding merchant acquisition, Levchin addressed that Affirm is available at only 80 of the top 250 e-commerce sites and about 10% of e-commerce merchants. He attributed slower penetration among large enterprises to complex, outdated systems requiring major modifications, viewing this as significant greenfield opportunity rather than an impediment. Management described the market as having an "enormous amount of greenfield" potential for further merchant expansion.

Services volume nearly doubled year over year, supported by two large platform wins, although adoption remains early and requires further customization. Analysts highlighted the expanded partnership with Shopify Inc (NASDAQ: SHOP) to launch Shop Pay Installments in Australia as another potential growth driver.

Analyst Consensus & Technical Setup

Affirm carries a Buy rating with an average price target of $93.09. Recent analyst actions include:

• Needham: Buy (raises target to $100.00)
• B of A Securities: Buy (raises target to $104.00)
• Morgan Stanley: Equal-Weight (raises target to $82.00)
• BMO Capital: Outperform (raises target to $101.00)
• Oppenheimer: Outperform (raises target to $100.00)

Technically, the stock trades above its 20-day SMA ($75.99) and 50-day SMA ($77.04), holding support near the mid-$70s. The Relative Strength Index (RSI) sits at 51.06, indicating neutral momentum without extreme overbought or oversold conditions. Key resistance lies at $81.00, while support is identified near $71.50, close to the 100-day SMA at $70.51.

What the Numbers Show

Affirm’s valuation profile is driven primarily by growth expectations rather than value metrics. Benzinga Edge rankings assign a Bullish score of 94.5 to Growth and 82.07 to Momentum, contrasting with a Neutral Value score of 32.75. This divergence suggests the market is pricing in sustained top-line expansion, making the upcoming revenue and GMV figures critical for justifying current valuations.

CEO Max Levchin stated, “We delivered another outstanding set of results this quarter, especially in the broader context of global economic uncertainty.”

Looking ahead, Affirm expects first-quarter revenue in a range of $1.19 billion to $1.22 billion, versus the $1.16 billion analyst estimate. For fiscal 2027, the company expects revenue of more than $5.44 billion versus the $5.287 billion estimate, with GMV expected to exceed $64 billion and the revenue-to-GMV ratio projected at 8.5%. Affirm also expects adjusted operating margin above 30.5% and GAAP operating margin above 14.5%.