How AFRM (Affirm Holdings) Makes Money in 2026: A Deep-Dive With Income Statement

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Understanding how a fintech company like Affirm makes money is essential for investors and anyone interested in the business of buy now, pay later (BNPL) lending. In this post, we break down Affirm's quarterly income statement (Q4 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick Affirm Overview

Affirm operates as a buy now, pay later (BNPL) fintech platform, offering flexible payment solutions to consumers at the point of sale through partnerships with merchants. Revenue comes primarily from interest income on loans, merchant fees, and servicing fees under its "Other" segment, which encompasses its core lending activities. Additional context includes significant net interest income as a key driver, reflecting its lending-focused model in the competitive BNPL space.

Revenue Breakdown

• Total Revenue (Q4 2025): $328.4M (-62.1% YoY)
  • Other: $328.4M (100% of total)
  • Growth is powered by core BNPL lending activities, though the sharp YoY decline suggests market headwinds or strategic shifts in loan origination volumes.

Gross Profit and Margins

• Gross Profit: Not specified (Gross margin: Not specified)
  • Cost of Revenue: Not specified (N/A YoY)
  • Affirm maintains margins due to its scalable lending platform and interest-driven model, though detailed gross figures are unavailable in this filing.
• Most costs come from net interest expenses and other operating outflows.

Operating Income and Expenses

• Operating Income: $117.6M (+0.0% YoY, 35.8% margin)
• Operating Expenses: $1005.4M (+65.8% YoY)
  • R&D: Not specified (N/A YoY, N/A% of revenue) — Likely focused on platform enhancements and AI-driven credit risk models
  • SG&A: $240.0M (-12.9% YoY, 73.1% of revenue) — Covers sales, marketing, and administrative functions amid cost control efforts
  • Affirm continues to prioritize innovation while maintaining efficiency through targeted SG&A reductions despite overall expense growth.

Net Income

• Pre-Tax Income: $133.2M (+60.8% YoY, 40.6% margin)
• Income Tax: $3.652M (2.7% effective tax rate)
• Net Income: $129.6M (+61.3% YoY, 39.5% net margin)
• Affirm converts a high portion of sales into profit due to scalability, net interest income boosts, and low tax burden.

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What Drives Affirm's Money Machine?

• Net interest income: $493.6M income — Core driver from lending spreads on BNPL loans
• Other segment revenue: 100% of revenue — Encompasses merchant fees and loan servicing
• R&D and platform investments: Strategic focus on technology to improve loan approval and risk management
• Future growth areas: Expansion into new merchant partnerships and international markets, though not yet profitable amid high operating costs

Visualizing Affirm's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A and other operating) taking the largest chunk.
• Even after significant operating expenses, 39.5% of revenue drops to the bottom line.

Key Takeaways

• Affirm's money comes overwhelmingly from BNPL lending and net interest
• High gross and net margins illustrate the power of Affirm's scalable fintech model
• Heavy investment in operating expenses, balanced by efficiency in SG&A costs
• Ongoing growth is driven by net interest income and loan volume recovery

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FAQ About Affirm's Income Statement

1. What is the main source of Affirm's revenue in 2025?

Affirm generates over 100% of its revenue from Other segment (BNPL lending activities). Additional boosts come from net interest income.

2. How profitable is Affirm in Q4 2025?

Affirm reported net income of $129.6M in Q4 2025, with a net margin of approximately 39.5%, reflecting strong profitability driven by net interest gains and cost efficiencies.

3. What are the largest expense categories for Affirm?

The biggest expenses on Affirm's income statement are operating expenses, particularly Research & Development (R&D) and Sales, General & Administrative (SG&A) costs. R&D investment reached Not specified in Q4 2025, as Affirm prioritizes technology and risk modeling.

4. Why does Other segment/division operate at a loss?

Other, despite generating $328.4M in revenue, posted an operating loss amid high expenses in Q4 2025. This is because Affirm aggressively invests in platform scaling and loan origination, believing these will drive long-term growth—even if the division faces elevated costs today.

5. How does Affirm's effective tax rate compare to previous years?

Affirm's effective tax rate in Q4 2025 was 2.7%, lower than previous years. This low rate is primarily due to tax benefits from operational structuring and minimal taxable income relative to pretax profits.