Klarna's Record Revenue Overshadowed by Strategic Loan-Driven Losses

Klarna Group Plc (KLAR) reported record third-quarter revenue of $903 million, surpassing Wall Street estimates in its first earnings report as a public company, but posted a net loss due to increased provisions for loan defaults. The Swedish buy-now-pay-later (BNPL) giant, which went public in September 2025, is forecasting revenue to exceed $1 billion in Q4 2025, marking a pivotal moment for the firm as it navigates a competitive fintech landscape.

The company's revenue surged 31.6% year-over-year, driven by a 23% increase in gross merchandise volume (GMV) to $32.7 billion and a 43% jump in U.S. GMV. This growth was fueled by the rapid adoption of its Klarna Card, which attracted 4 million sign-ups since its July launch, accounting for 15% of global transactions in October. The product, described as a "debit-first" offering combining debit and credit features, has become a key differentiator in Klarna's AI-driven digital banking strategy.

Despite the revenue beat, Klarna reported a net loss of $95 million, widening from a $12 million profit in the same period last year. The decline was attributed to higher provisions for credit losses, which rose to 0.72% of GMV from 0.44% a year earlier, as the firm expanded its longer-term "Fair Financing" loan portfolio. These fixed-term loans, which grew 244% in the U.S. and 139% globally, require upfront provisioning under accounting rules, creating a short-term profitability lag. CEO Sebastian Siemiatkowski emphasized that the loan book remains "very stable", with the company strategically investing in market share despite the near-term drag.

Klarna's Q4 guidance projects revenue between $1.065 billion and $1.08 billion, with GMV expected to reach $37.5–38.5 billion. The firm also announced a $1 billion facility with Elliott Investment Management to sell U.S. Fair Financing receivables, providing liquidity to support further expansion. While the stock has slipped 13% from its IPO price, Siemiatkowski remains confident in the long-term trajectory, citing the AI-powered model's scalability and the growing adoption of its membership program, which added one million premium users in the quarter.

The company's focus on AI has also reshaped its operations, reducing customer service resolution times to under two minutes and enabling a 40% workforce reduction through automation. However, Siemiatkowski cautioned that the firm remains vigilant about macroeconomic risks, including AI valuation volatility and consumer spending trends, which have impacted broader tech markets.