Affirm Holdings, Inc.

15. Income Taxes

The quarterly provision for income taxes is based on the current estimate of the annual effective income tax rate and the tax effect of discrete items occurring during the quarter. Our quarterly provision and the estimate of the annual effective tax rate are subject to significant variation due to several factors, including variability in the pre-tax jurisdictional mix of earnings and the impact of discrete items.

For the three months ended September 30, 2026 and 2025, income tax expense was $40.9 million and $2.3 million, resulting in effective tax rates of 20.0% and 2.8%, respectively. The increase in the effective tax rate was primarily due to the release of a significant portion of our domestic valuation allowance in fiscal year 2026, which had offset most of the income tax expense on domestic earnings for the three months ended September 30, 2025. For the three months ended September 30, 2026, the effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes, research and development tax credits, nondeductible stock compensation, valuation allowances in certain foreign jurisdictions, and a net discrete tax benefit primarily related to stock-based compensation.

We continue to maintain a valuation allowance against certain foreign net deferred tax assets and certain domestic capital loss deferred tax assets for which it is not more likely than not that the related tax benefits will be realized.