trending
Klarna’s ambitions to evolve beyond its buy now, pay later (BNPL) roots have been dealt a sharp market rebuke.
Klarna shares tumble
Shares in the Swedish fintech fell 27 per cent on Thursday after the company reported a $273mn net loss for 2025, driven largely by a steep rise in provisions for expected credit losses.
The decline leaves the stock almost 68 per cent below its September IPO price, slashing its market capitalisation from $15bn at listing to roughly $5.3bn.
The immediate trigger was a $250mn provision for credit losses in the fourth quarter alone — nearly 60 per cent higher than the same period in 2024.
That pushed Klarna to a quarterly net loss of $26mn, compared with a $40mn profit a year earlier, and reversed a modest $21mn full-year profit achieved in 2024.
Growth Today, Profit Tomorrow?
Management insists the deterioration is structural rather than cyclical.
Chief executive and co-founder Sebastian Siemiatkowski argued that higher provisions are a by-product of expansion, particularly in Klarna’s “fair financing” product — longer-term, interest-bearing loans that require upfront provisioning under accounting rules, even though revenues accrue over time.
In other words, Klarna is absorbing the accounting pain now in anticipation of stronger earnings later.
“The more we grow in these loans, the more profit we’re generating for the future,” Siemiatkowski told analysts, framing the short-term losses as an investment in durable profitability.
Chief financial officer Niclas Neglén sought to calm concerns about consumer stress, noting that provisions declined sequentially in the fourth quarter compared with the third.
From a credit perspective, he said, the data indicates stability rather than deterioration in borrower quality.
Nonetheless, markets appear sceptical.
Rising loan loss provisions in a higher-rate environment tend to sharpen investor scrutiny, particularly for fintech lenders whose valuations rest on growth narratives.
From BNPL to Neobank
Klarna’s strategic pivot is clear. The company is repositioning itself as a digital banking platform rather than a pure-play instalment lender.
It now reports 4.2mn active debit card users and 118mn active customers overall, up 28 per cent year on year.
Crucially, annual revenue per banking customer stands at approximately $107, compared with $30 for the average consumer using its core payments products.
The economics underpin the shift. Deeper banking relationships promise recurring income streams, higher lifetime value and greater resilience than transactional BNPL volumes alone.
Klarna is reportedly considering applying for a US banking licence — a move that would materially deepen its regulatory and competitive footprint.
AI as a Cost Lever
Parallel to revenue expansion, Klarna has leaned heavily on artificial intelligence to manage costs.
The company says it has halved its workforce in recent years by not replacing departing staff, while an AI chatbot now handles two-thirds of customer service queries.
Siemiatkowski has personally invested in leading AI ventures, underscoring his conviction that automation is integral to Klarna’s margin trajectory.
For now, however, investors are focused on credit risk rather than technological efficiency. With full annual results due later this month, the central question is whether Klarna’s bet — sacrificing present earnings to build a broader digital banking franchise — will ultimately vindicate its bruised post-IPO valuation.
Comments