Why Affirm Could Be the Sleeper Fintech of the Decade

After years of being dismissed as a money-losing BNPL experiment, Affirm AFRM just posted its first GAAP profit, grew GMV 36% year-over-year, and added 1.8 million new customers in a single quarter. It's scaling a two-sided network across Amazon AMZN, Shopify SHOP, and now Apple Pay AAPL while moving closer to sustained profitability. Yet the market still seems anchored to its past. At 31 forward earnings and a PEG of just 0.31, Affirm may be quietly becoming one of the most overlooked growth stories in fintech.

1. An Innovative "Buy Now, Pay Later" Business

Affirm is reinventing how consumers pay. Through its Buy Now, Pay Later (BNPL) model, Affirm lets users split purchases into installment payments. No late fees. No hidden charges. Just simple, transparent credit at the point of sale. It's a payments platform, not a bank. Its revenue comes from two engines: merchant fees (retailers pay to boost conversion and basket size) and interest on consumer loans (on non-0% APR plans). With 21.9 million active users, $8.6 billion in GMV, and 358,000 merchants as of third quarter 2025, Affirm is scaling a two-sided network that benefits both sides of the checkout.

Unit economics are promising: roughly 43% gross margin ("revenue less transaction costs" was $994M on $2.3B revenue in FY2024). And it's growing fast. In the most recent quarter, Affirm's GMV reached $8.6 billion, marking a 36% year-over-year increasedriven in part by a standout March, which grew nearly 40%. The platform added 1.8 million new consumers while sustaining a 94% repeat usage rate, underscoring both healthy user acquisition and strong engagement from existing customers.

2. A Moat That's Forming, Not Yet Fortified

Affirm isn't without competition. Klarna, Afterpay (Block XYZ, PayPal PYPL, and even Apple have dabbled in BNPL. But Apple shut down its own offering in 2024 and chose to integrate Affirm directly into Apple Pay. That's a powerful endorsement.

So what's the moat?

• Network Effects: Affirm's app drives demand back to merchants, and merchant scale drives user adoption. But the flywheel isn't as tight as Visa's yet.
• Brand & Trust: Affirm wins with transparency. No junk fees. No revolving debt. Their NPS was 78 back in 2020, and consumers increasingly prefer set payoff terms over credit card traps.
• Technology & Underwriting: Their secret sauce? Superior data and machine learning to price risk and approve credit better than peers.
• Scale & Distribution: Exclusive partnerships with Amazon and Shopify, along with new integration into Apple Pay, position Affirm as a leading BNPL provider across major digital ecosystems.

The moat is real, but still being dug. It's not unbreachable.

3. Owner-Led, Long-Term Aligned Management

Founder Max Levchin (ex-PayPal Mafia) owns a significant stake and hasn't sold a single share since IPO. He's the visionary, and Affirm's culture mirrors his owner-operator mindset. After a turbulent FY2023, Levchin refocused the business on profitability over pure growth. Layoffs were made, spending tightened, and the company delivered its first GAAP profit in Q2 FY2025.

That internal discipline has started to reflect externally. While Baillie Gifford (Trades, Portfolio) has been trimming its stake likely part of its broader rotation out of fintech other heavyweight investors are leaning in. Joel Greenblatt (Trades, Portfolio)'s Gotham Asset Management has been adding to its position, alongside Jefferies and Renaissance Technologies (Trades, Portfolio). That's notable. Greenblatt, known for his disciplined, fundamentals-based approach, tends to pick stocks when value disconnects from business quality. Renaissance, one of the most sophisticated quant hedge funds in the world, also upped its bet suggesting Affirm's signals look strong across both discretionary and systematic lenses.

In other words: insiders are holding, and smart money is circling.

The company's capital allocation is rational:

• Repurchased convertible debt at deep discounts.
• Raised $750M in long-term notes while planning up to $300M in equity buybacks.
• Avoided reckless M&A, exiting non-core Returnly.

4. Financials Improving, and the TAM Is Still Massive

Affirm grew revenue 4.5 in four years, from over $500 million in 2020 to $2.32B in 2024. FY2025 guidance is $3.17B a 36% YoY growth rate. RLTC margin remains healthy, and operating income is turning positive. The path to GAAP operating profitability looks real.

The global BNPL market is still in its early innings and Affirm is positioned right in the middle of it. According to recent projections, global BNPL payments are expected to grow 13.7% year-over-year to reach $560.1 billion in 2025. From 2021 to 2024, the sector grew at a blistering 21.7% CAGR and while the pace moderates, the expansion doesn't stop. Analysts now forecast a 10.2% CAGR through 2030, which would bring the market from $492.8 billion in 2024 to $911.8 billion by the end of the decade.

That's a near-doubling in six years without factoring in additional digital payment tailwinds.

So the runway is still long. Affirm has 21.9 million active users solid, but modest compared to Klarna's 150 million and PayPal's 436 million. It doesn't need to catch up to win even modest share gains in point-of-sale credit or U.S. consumer spending could drive billions in incremental GMV.

Affirm is also riding a generational shift. Gen Z and millennials are ditching revolving debt in favor of budgeting tools and installment plans. Affirm's transparency, zero late fees, and set payoff terms align perfectly. And now, with Apple Pay integration, its top-of-funnel reach just expanded dramatically.

Still, it's early days. Net income was still negative in FY2024 (-$518M), though Q2 FY25 showed $80M in profit. If margins stabilize and revenue grows 20% annually in the next ten years, its total revenue could reach $19.6 billion. With a 10% net margin, Affirm could hit nearly $2 billion in net income by 2035. Free cash flow will follow if they continue selling off loans via partners (vs. holding on balance sheet). Their Sixth Street $4B facility is key it proves capital markets trust Affirm's underwriting.

Balance sheet? Reasonable. ~$2.87B equity on $10.4B assets, and most liabilities fund loans. Risk is concentrated in credit quality, not leverage.

5. Valuation: Where's the Margin of Safety?

Affirm is currently valued at nearly $20 billion market capitalization. That's ~5 sales and >31 forward earnings.

Affirm might just be the most mispriced growth story in fintech right now. The company trades at 31 forward earnings, which isn't cheapuntil you factor in earnings growth. With EPS expected to surge 101%, its PEG ratio drops to just 0.31. That level of valuation relative to growth is uncommon in today's market. Especially in a market that's starting to reward profitable growth again. For context, anything under 1 is considered undervalued. Under 0.5? You're likely staring at an asymmetric bet that the market hasn't woken up to yet.