Affirm delivered its tenth consecutive quarter of greater than 30% gross merchandise volume growth in FQ3'26 (the three months ended March 31, 2026), with revenue rising 33% year over year to $1,038.8 million and gross merchandise volume, the total dollar value of transactions processed on the platform, expanding 35% to $11.6 billion. The thesis underlying the print is straightforward: the consumer-credit franchise is no longer a story of growth-versus-profitability trade-offs. Adjusted operating margin, a non-GAAP measure that excludes stock-based compensation, depreciation, and warrant expenses, expanded by roughly five percentage points year over year to 27.0% of revenue, and revenue less transaction costs grew 41% to $498.2 million, with more than 70% of the incremental dollar flow converting into adjusted operating income, meaning that for every additional dollar of contribution, seventy cents dropped to the operating-income line. Net income of $102.9 million was a 37-fold increase from the prior-year quarter's $2.8 million, and free-cash generation turned decisively positive with operating cash flow of $386.5 million against capital expenditures of $61.4 million.
The mechanism, in our view, is a four-way flywheel that the market is still under-pricing. First, the 0% APR (annual percentage rate, the headline interest rate on a loan) product mix, which now represents 29% of gross merchandise volume when Pay-in-X (short-term installment products, often four biweekly payments) is included, drives the highest attach rates even though it carries a lower revenue yield. Second, gain-on-sale economics (the spread Affirm captures when it sells a loan to a third-party investor) improved 42 basis points, where one basis point equals 0.01 percentage points, because Affirm held firm pricing power when loans were placed with the 20 institutional buyers in its forward-flow program. Third, the average annualized cost of funds, the all-in interest rate Affirm pays on the warehouse and securitization debt that funds its loan portfolio, dropped to 5.8%, the lowest reading in three and a half years, and Affirm priced its third consecutive revolving asset-backed security under a 5% blended yield. Fourth, the Affirm Card now has 4.4 million active cardholders, generating $2.1 billion in card gross merchandise volume at 146% year-over-year growth, with an attach rate of approximately 17% of the active-consumer base.
The single load-bearing risk, in our view, is a normalization in 30-plus-day delinquencies on the ex-Peloton monthly installment book, which the company reported at 2.8% in FQ3'26, up 29 basis points year over year and 7 basis points sequentially. Roughly half of the increase was attributed to a reduced-denominator effect from stronger tax-refund seasonality, but the absolute level is now at the FQ4'25 peak. Allowance for credit losses at 6.0% of loans held for investment is the highest reading on the disclosure, and a continued creep here would compress the revenue-less-transaction-costs margin that drove the operating-leverage story. The market is pricing, in our reading, a continued re-acceleration of the top line paired with benign credit; the falsifiable clock is the FQ4'26 print (period ending June 30, 2026) due in late August 2026, with the gross merchandise volume guidance midpoint of $13.30 billion (+36% year over year at the midpoint) and the operating-margin guide of 9.5% to 11.5% as the load-bearing bar.