21/8/26

Klarna Had a Good Quarter. So Why Did the Stock Fall?

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Klarna went public on the New York Stock Exchange in September 2025, and this week it reported its fourth quarter of earnings as a listed company.

The results were better than expected: revenue beat forecasts, and the company posted its second consecutive profitable quarter. And then its stock fell around 20% in a single day.

That gap between solid results and a strong market reaction tells you something important about how investors think about growth companies, and about what it takes to hold a premium valuation once you're public.

Here's the full story.

First, What Klarna Does

For anyone unfamiliar with how Klarna makes money, it's worth a quick explanation.

Klarna is one of the world's biggest ‘buy now, pay later’ companies. The idea is that instead of paying for something upfront, you split the cost into smaller instalments, typically four payments over six weeks, interest-free.

Klarna makes its money by charging retailers a fee for each transaction, on the basis that giving customers a flexible way to pay increases sales.

The risk in the model is credit. If customers don't repay, Klarna absorbs the loss. So far, those losses have been manageable: credit loss rates came in at 0.51% of total transaction volume this quarter, roughly in line with recent periods. The company processed $36.6 billion in total purchases during the quarter, up 18% year-on-year.

Klarna now has 100 million active consumers globally, up from 85 million a year ago. That's a user base that rivals some of the world's biggest banks.

The Numbers

Revenue grew 27% year-on-year to just over $1 billion in the second quarter, ahead of what analysts had expected.

Net profit came in at $9 million, a big comeback from a $53 million loss in the same period last year.

By most measures, a strong quarter.

The US was the standout. Gross merchandise volume grew 27% in the US, and the Walmart partnership, which makes Klarna their default ‘buy now, pay later’ option, is already moving the needle.

Average revenue per active consumer is also rising, up 24% year-on-year to $33.70, as more customers use Klarna's debit card and traditional loan products alongside its instalments offering.

That's the shift Klarna's CEO Sebastian Siemiatkowski has been pushing toward - fewer one-off transactions, more ongoing financial relationships.

So Why Did the Stock Fall?

The strong numbers weren't the full picture: alongside these results, Klarna cut its full-year guidance. The company now expects full-year revenue of $4.08 billion to $4.16 billion, down from its earlier forecast of $4.34 billion, blaming weaker spending in Germany and unfavorable exchange rates.

The biggest takeaway here is that investors aren't just looking backward at how a company did; they're looking forward at where it's headed.

A guidance cut is a company saying 'we're a little less confident about the rest of the year,' and that kind of statement can spook investors even after a genuinely great quarter.

And AI Plays a Role

Klarna has been vocal about using AI to cut costs, and the results are starting to show up in the numbers. Headcount has fallen from around 5,000 employees to just over 3,400 over the past two years, with AI handling a growing share of customer service interactions. The company says its AI assistant now handles the equivalent workload of 1,000 full-time customer service agents.

The bet is that a smaller, AI-powered team can serve a far larger customer base without costs rising in proportion. If that holds, it could meaningfully change the economics of the business as it scales.

Investors aren't just looking backward at how a company did. They're looking at where it's headed.

But Klarna's own history is a good reminder that this bet doesn't always pay off cleanly. Back in 2024, the company leaned hard into AI-only support and even claimed its chatbot could replace 700 agents, only to admit by mid-2025 that the cost-cutting had gone too far, leading to "lower quality" service and a rehiring push.

So while Klarna's current numbers look encouraging, it's worth watching whether this round of AI-driven efficiency holds up better than the last one - or whether the company ends up walking a similar tightrope between cost savings and service quality.

The Bigger Ambition

The earnings came alongside a significant leadership shake-up. Both the CFO and chief marketing officer are stepping down at the start of next year, and Klarna is hiring a New York-based finance chief to be closer to Wall Street and its investor community.

The move reflects Klarna's broader transformation. The company is trying to become something much bigger: a fully regulated US bank.

Klarna applied for a US banking licence in July and is already regulated as a bank in Europe. The plan is to offer savings accounts, traditional loans, and subscription products alongside its ‘buy now, pay later’ core.

What This Means for Investors

Klarna's stock has roughly halved since it listed last September. That's a painful trajectory for anyone who bought in at the IPO, and reflects a valuation that was already pricing in a lot of optimism. At around 40 times forward earnings, even a strong quarter can disappoint if it doesn't match the story investors paid for.

The longer-term question is whether Klarna's banking ambitions can transform it into something more durable than a payments company. If it succeeds in building a genuine banking relationship with millions of consumers, the revenue potential is substantially larger than buy now, pay later alone. If it doesn't, it's a payments company with a slowing core market and a very expensive US expansion to fund.

The Walmart partnership is the clearest reason for optimism. If Klarna can establish itself as the default payment option across Walmart's enormous customer base, the US revenue trajectory could accelerate significantly.

For now, the market voted with its feet. Whether it was an overreaction or a fair read of the risks ahead is a question the next few quarters will start to answer.

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Cover image: Claudio Bresciani/TT/Ritzau Scanpix