A company just reported stronger-than-expected earnings, raised its revenue outlook, and beat Wall Street on every key metric. Then its CEO went on television and delivered a warning about the very customers driving those results.
Affirm Holdings (AFRM) reported fiscal fourth-quarter earnings after the bell on Aug. 27. Revenue came in at $1.17 billion, up 33% year over year and ahead of the $1.11 billion LSEG analyst estimate.
Gross merchandise volume rose 36% to $14.1 billion, topping the $13.39 billion StreetAccount estimate. CEO Max Levchin used the moment to flag something less reassuring, CNBC reported.
What Levchin said about gas prices and the U.S. consumer
“The U.S. consumer undoubtedly sees the higher gas prices, so can’t, can’t ignore that,” Levchin told Squawk Box. “They’re also coming to us to help manage those prices across all the various inflationary points.”
The national average price for regular gasoline was $4.09 a gallon on Aug. 28, according to AAA data cited by CNBC.
That is down from May, when the national average climbed above $4.50 a gallon. But it remains well above pre-Iran-war levels. The last time the national average sat below $3 per gallon was March 2.
Related: Gas Prices are about to defy everything drivers expect
Fuel costs hit working households hardest. Driving to work, transporting children, running deliveries or gig work adds up fast. Money that would go toward discretionary spending, debt repayment or savings gets eaten by the gas pump instead.
Higher gas prices also ripple through the broader economy. Fuel costs affect shipping, transportation and business operations. Those costs flow through to the price of food, goods and services over time, compounding the squeeze on household budgets.
How inflation is driving demand for Affirm’s buy-now, pay-later model
Levchin said inflationary pressure is pushing more consumers toward Affirm’s installment-payment tools.
“In times of inflation, we see more demand because folks are budgeting,” Levchin told CNBC. “They’re more thoughtful about how they want to use the money, and we’re there to help.”
Affirm lets consumers split purchases into scheduled installment payments. The platform has grown rapidly as retailers look for ways to make purchases feel more manageable at checkout.
Stronger demand from Affirm sends two possible signals at the same time.
One reading is that consumers are using a disciplined budgeting tool to manage cash flow. The other is that consumers are under enough financial pressure that they need to delay payment for purchases they previously would have made immediately. Both can be true in the same quarter.
What Affirm’s earnings beat says about the consumer economy
The quarterly results were strong across the board. Revenue beat estimates by about 5%. GMV topped expectations by more than $700 million. Adjusted operating income reached $353 million, a 30% margin.
For fiscal first-quarter 2027, Affirm guided to revenue of $1.19 billion to $1.22 billion, above the $1.16 billion Wall Street expected.
The latest economic data gave a mixed picture. The annual PCE inflation rate, the Federal Reserve’s preferred gauge, was 3.7% in July. The index rose 0.2% for the month, the BEA reported.
Personal income rose 0.4% in July and consumer spending rose 0.2%. Both beat expectations.
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Income growing faster than spending suggests consumers are becoming more cautious even as they maintain access to more cash. That caution shows up in demand for tools like Affirm’s.
Levchin said the consumer is generally healthy but warned that persistently elevated prices are not a stable condition.
“I do think that sustained pressure on prices isn’t great in the long term, and so can’t ignore that either,” he told CNBC.
Affirm shares closed nearly unchanged on Aug. 28 as investors weighed the stronger-than-expected results against Levchin’s cautious read on the consumer environment.
What consumers should know before using buy-now, pay-later
Buy-now, pay-later services can be genuinely useful. Spreading a large purchase over predictable installments helps you budget.
The product works well when the payment schedule fits comfortably within your monthly budget and the purchase is something you planned to make anyway.
The risk comes when installment financing becomes a default response to not having enough money. A $400 purchase split into four $100 payments feels manageable. Four different purchases each split into four payments starts to feel less manageable when they all come due in the same month.
Before using any installment plan, check the total cost of the purchase. Not just the first payment. Confirm the payment dates and how many installments there are. Check whether interest, fees or late penalties apply.
Consider whether the purchase is necessary or discretionary. If it is discretionary, ask whether paying in full, even if that means waiting a pay cycle, would leave you in a better position.
For investors watching Affirm, the more important metric over the next two quarters will be credit quality. Demand rising because consumers are stressed looks the same as demand rising because consumers are confident, until one of those populations starts missing payments.
