Buy Now, Pay Later Firms’ Earnings Are In. Now They’re Looking for Holiday Growth

Buy now, pay later (BNPL) providers‘ shares reversed their months-long climbs Friday, sliding ahead of a close to the year seen as vital to expanding their businesses.

Stock prices for Affirm Holdings (AFRM) and Afterpay parent company Block (SQ), fell after both fintech companies reported earnings Thursday that largely met or exceeded expectations. Shares of both companies, particularly Affirm’s, have generally risen since August.

Affirm reported $698 million in revenue — a 41% increase year-over-year — and $100 million in losses in the first-quarter of its fiscal year. Wall Street expected $663.9 million in revenue and net losses of $107.5 million, according to analysts polled by Visible Alpha.

Block reported $5.98 billion in revenue, less than the $6.18 billion consensus estimate provided by Visible Alpha. But Block beat Visible Alpha’s $240 million net income forecast, reporting $283.7 million in net income and $2.25 billion in profit across Afterpay; Cash App, a consumer financial service provider; and Square, a merchant point-of-sale service.

Affirm shares were recently down about 11%, roughly in line with their year-to-date decline. Block was off about 4% today, leaving it down 7% in 2024.

BNPL users generally use short-term loans to break up a purchase into fixed allotments. The fintech companies behind these services make money by charging merchants for facilitating these loans and may collect interest, and fees from delinquent borrowers.

Both companies have an eye on expanding this holiday season, a busy time for consumers and merchants. Affirm and AfterPay reported their highest quarterly revenue figures in the last quarter of 2023, according to Visible Alpha data.

Affirm is optimistic about attracting more users with interest-free options during the holidays, executives said. Merchants looking to ramp up sales volume may subsidize deals for shoppers who would otherwise qualify for loans with interest.

“We are seeing really great excitement from the merchants as we head into the holidays,” CEO Max Levchin told analysts, according to a transcript made available by AlphaSense.

Block is also looking to bolster Afterpay use. Afterpay will become available to 24 million people who have a debit card affiliated with Cash App in “the next short term,” CEO Jack Dorsey said during Block’s earnings call.