Affirm’s Levchin does not plan AI layoffs

• Key insights: Affirm CEO Max Levchin told analysts Thursday that the company was not planning any layoffs due to AI even though it was using the technology more for software engineering. 
• What’s at stake: Fintechs have been trimming their headcounts and attributing the cost savings to AI. 
• Expert quote: “We are not planning AI-related layoffs, full stop,” Affirm CEO Max Levchin said. 

Fintechs have been pinning layoffs on artificial intelligence, but Affirm CEO Max Levchin said the buy now, pay later lender had no plans to trim its headcount despite leaning more into AI for software engineering. 

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“We are not planning AI-related layoffs, full stop,” Levchin told analysts during the company’s fiscal third-quarter earnings call on Thursday. 

“I don’t mean to belittle anyone out there making the right or what they believe to be the right decisions for their company,” Levchin said. “Long before AI tools came along, we had tooled ourselves up to be very efficient. These tools are giving us rocket boosters, wings, whatever metaphor you want, and we’re very happy for it. But at least for now and as far as the eye can see anyway, it is just a thing we’re going to keep using to ship more.” 

Block’s CEO Jack Dorsey touted its AI-driven restructuring results on a separate earnings call Thursday with analysts, and Coinbase earlier this week said it was laying off 14% of its staff due to a crypto slump and AI. 

Affirm also brushed off concerns surrounding private credit. Affirm has multiple forward-flow deals to sell its loans wholesale to institutional investors. 

“The funding market broadly remains exceptionally constructive for us. We’re kind of out of adjectives to describe just how great the execution has been,” Chief Operating Officer Michael Linford said during the call with analysts. “I know a lot of ink is being spilled elsewhere about what’s going on in the capital markets. But from our perspective, we see a market that’s very deep. We see it sustained and reducing spreads, and we see deals with significant oversubscription along with forward flow partners who are, if anything, still clamoring for a bigger allocation of our portfolio.” 

Linford told American Banker in an interview Friday that a robust asset-backed securities market is helping keep its other investors engaged. 

“The ABS markets are giving us a resounding vote of confidence,” Linford said. “When that happens, the rest of the ecosystem refers back to it. They look at where the ABS execution is, and they know they have to beat that, because why would I do a deal with them and not just lock up capital and all that, when I can just go to the market and get a better deal?” 

The digital finance industry has been under pressure and will likely remain that way for the foreseeable future, according to William Blair analysts. 

“Our view is that the digital finance space will remain under pressure as the market worries about the consumer and private credit, elevated regulatory risk, and data-driven underwriting for short-term liquidity offerings, including BNPL,” William Blair analysts said in a research note. 

Talk of AI-related layoffs and private credit woes came against the backdrop of yet another quarter of strong returns for Affirm. Revenue came in at $1.04 billion, an increase of 33% year over year. Net income was $102 million, or 30 cents per diluted share. Analysts expected a net income of $60.6 million, or 17 cents per diluted share. 

“At a high level, we do not see any deviations from the company’s story and no changes to our thesis versus three months ago, and management continues to execute against the longer-term vision for the business,” Citizens analysts wrote in a research note.  

Gross merchandise value grew 35% year over year to $11.6 billion, marking the company’s 10th consecutive quarter for 30%-plus growth. Active customers jumped to 26.8 million, and transactions per active customers rose 20%. Active merchants grew 44% to 515,000. 

The Affirm Card, which has been a greenfield for the fintech, saw its active cardholders “more than double” to 4.4 million, with Affirm Card GMV jumping 146% to $2.1 billion. 

Consumers were keeping up with their payments, too. Thirty-plus-day delinquencies landed at 2.8% for the quarter, up slightly due to a higher rate of prepayment, which has lowered the overall balance of the portfolio. 

“When we see things like prepayments, we think that’s a healthy sign of a consumer,” Linford said. “In particular, we see prepayments on 0% APR loans, which is a very healthy sign that consumers are focused on their balance sheet, not their cash flow when they’re doing that.”