Klarna Delivers Record $1 Billion Quarter as Revenue Soars 38%
Swedish fintech giant Klarna unveiled its fourth-quarter earnings for 2025 on Thursday, revealing a landmark financial performance overshadowed by significant challenges in shareholder returns. The buy now, pay later powerhouse achieved just over $1 billion in revenue, marking a substantial 38 percent increase compared to the same period last year. This impressive growth was fueled by a 25 percent expansion in its active customer base, which now stands at a formidable 118 million users worldwide.
Expansion into Banking Drives Growth and Losses
Klarna's strategic pivot toward becoming a full-service bank has yielded remarkable results in certain segments, with customers in its banking division more than doubling over the past twelve months to reach 15.8 million. This aggressive expansion strategy has come at a considerable cost, however, contributing to a net loss of $26 million for the final quarter and a substantial $273 million loss for the entire year of 2025.
The company's gross merchandise volume (GMV), which represents the total sales value processed through its platform before any deductions, climbed an impressive 32 percent to reach $38.7 billion. This performance met the upper range of the company's guidance, demonstrating strong underlying business momentum despite the financial losses.
Shareholder Returns Take Significant Hit Post-IPO
Klarna's public market debut has proven challenging for investors, with the company's stock value plummeting by more than 55 percent since its initial public offering in September 2025. This dramatic decline has effectively halved the firm's market valuation, creating substantial headwinds for shareholder returns during what should have been a celebratory period following the successful listing.
For the full fiscal year ending December 31, 2025, Klarna reported a net loss per share of $0.79. This represents a stark reversal from the previous year's marginal profitability of $0.01 per share and exceeds the $0.69 per share loss recorded in 2023. The annual results were further impacted by one-time expenses associated with the company's public listing process.
Financing Product Growth Creates Margin Pressures
In his communication to shareholders, co-founder and Chief Executive Sebastian Siemiatkowski addressed the financial challenges head-on, attributing the margin pressures to the company's rapidly expanding fair financing product. This particular offering experienced explosive growth, with GMV increasing by 165 percent year-over-year, but requires substantial cash reserves for potential credit losses from the very first day of issuing new banking loans.
"When growth outpaces expectations, those day-one provisions temporarily weigh on margins, even when credit quality remains strong and lifetime economics are attractive," Siemiatkowski explained. "This is value creation that is deferred."
The financial data supports this explanation, with Klarna allocating $250 million for credit loss provisions during the fourth quarter alone. While provisions as a percentage of GMV decreased slightly to 0.65 percent from 0.72 percent, this remains elevated compared to the $156 million recorded at the end of 2024, which represented just 0.53 percent of GMV.
Operational Costs Surge Amid Expansion
Klarna's banking ambitions have generated significant increases in operational expenses across multiple categories:
- Costs associated with processing and servicing loans jumped 56 percent to $250 million during the fourth quarter
- The cost of capital rose 43 percent to $210 million, influenced by seasonal volume fluctuations and prevailing interest rate environments
- Interest revenue from banking loans accrues over extended periods of months or years, creating timing mismatches with upfront provisioning requirements
The company's journey from fintech unicorn to publicly-traded banking contender continues to present both extraordinary opportunities and significant financial challenges as it navigates the complex transition between rapid growth and sustainable profitability.
