Affirm (AFRM) Slipped After Klarna Cut Guidance. Category Warning or Share-Gain Opportunity?

Affirm (AFRM) Slipped After Klarna Cut Guidance. Category Warning or Share-Gain Opportunity?

Tue, August 25, 2026 at 5:25 PM GMT+3 4 min read

• AFRM +1.55%
• KLAR +0.85%

Shares of Affirm Holdings, Inc. (NASDAQ:AFRM) fell 1.3% on August 18 as Klarna plunged more than 22% after reducing its 2026 volume and revenue forecasts. Klarna now expects full-year gross merchandise volume of $149 billion-$151 billion, down from more than $155 billion, and revenue of $4.08 billion-$4.16 billion, down from $4.34 billion. Yet the warning was not cleanly industrywide. Klarna's second-quarter revenue increased 27%, overall volume rose 18%, and U.S. volume grew 27%. Management tied the weaker outlook primarily to soft German retail conditions, while currency translation reduced projected volume by approximately $600 million. Affirm shares rebounded 5.1% the next session. For Affirm Holdings, Inc. (NASDAQ:AFRM), the August 27 earnings report must show whether the initial decline reflected a broader consumer-credit warning or an opportunity to capture share from a slowing competitor.

Affirm Holdings, Inc. (NASDAQ:AFRM) enters the report with stronger momentum than Klarna's guidance might suggest. Fiscal third-quarter gross merchandise volume increased 35% to $11.6 billion, while revenue rose 33% to $1.04 billion. Active consumers grew 22% to 26.8 million, and active merchants increased 44% to 515,000.

Bull Case: Card Growth Is Expanding Affirm's Reach

The strongest argument for Affirm Holdings, Inc. (NASDAQ:AFRM) is that its growth is spreading beyond the online checkout button. Affirm Card volume jumped 146% to $2.1 billion, while active cardholders more than doubled to 4.4 million. Direct-to-consumer volume increased 48%, and wallet and software partnerships helped expand the merchant network.

Affirm Holdings, Inc. (NASDAQ:AFRM) also has substantial funding capacity to support further share gains. Capacity reached $28.2 billion in March, up from $23.3 billion a year earlier, while the average annualized cost of funds declined 126 basis points to 5.8%. The company estimated that its funding arrangements could support more than $65 billion of annual volume. If Klarna prioritizes profitability over aggressive near-term growth, as some analysts inferred, the slower volume outlook could create room for Affirm without requiring the company to strain its balance sheet.

Bear Case: Credit Trends Still Matter More Than Market Share

Affirm Holdings, Inc. (NASDAQ:AFRM) remains exposed to the same consumer and financing pressures affecting the broader BNPL category. The 30-plus-day delinquency rate on monthly installment loans, excluding Peloton and Pay in X, increased 29 basis points year over year to 2.8%. The allowance for credit losses rose to 6.0% of loans held for investment from 5.7% a year earlier.

The mix is also shifting toward smaller and shorter transactions. Affirm Holdings, Inc. (NASDAQ:AFRM) increased total transactions 45%, but average order value declined 7% as Pay in X expanded. Revenue as a percentage of volume slipped 17 basis points to 9.0%. Faster activity is encouraging, but it must continue producing adequate revenue after credit, processing and funding costs.

Insider Monkey's Hedge Fund Data

Insider Monkey's hedge fund database shows that 61 hedge funds held positions in Affirm Holdings, Inc. (NASDAQ:AFRM) at the end of the first quarter of 2026, compared with 63 funds at the end of the preceding quarter. These figures reflect holdings as of March 31 and do not capture trades made after that date or investors' reactions to Klarna's revised outlook.

Conclusion

The sympathy decline in Affirm Holdings, Inc. (NASDAQ:AFRM) appears excessive if Klarna's weaker outlook remains primarily Germany- and currency-driven. However, the August 27 report must confirm that fourth-quarter volume reached the company's $13.15 billion-$13.45 billion target while credit performance and funding economics remained controlled. Strong card and merchant growth would support the share-gain argument. Higher delinquencies or weaker unit economics would turn Klarna's warning into a category signal.

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Disclosure: None. This article is originally published at Insider Monkey.