Klarna stock plunge 21% as weak outlook overshadows surprise profit

Klarna KLAR delivered a stronger-than-expected second quarter, but investors looked beyond the Swedish buy now, pay later company's latest results after it issued a significantly weaker outlook for the rest of the year.

Shares fell nearly 21% in premarket trading on Tuesday, adding to a decline of more than 31% so far this year.

The sell-off came despite Klarna reporting its first quarterly profit on the bottom line in the period and revenue that comfortably exceeded Wall Street expectations.

Klarna reported a net profit of USD 9 million (approx. $13.1 million) for the April-June quarter, compared with a loss of USD 53 million (approx. $77.2 million) a year earlier.

Analysts had expected a net loss of USD 17.4 million (approx. $25.4 million).

Revenue increased 27% year over year to USD 1 billion (approx. $1.5 billion), beating the USD 993.8 million (approx. $1.4 billion) consensus estimate.

Adjusted operating income more than tripled to USD 91 million (approx. $132.6 million) from USD 29 million (approx. $42.3 million).

The results nevertheless failed to reassure investors because of the company's expectations for the coming quarter and full year.

Third-quarter guidance raises concerns

Klarna expects third-quarter revenue of between USD 940 million (approx. $1.4 billion) and USD 980 million (approx. $1.4 billion), with the midpoint of USD 960 million (approx. $1.4 billion) significantly below the USD 1.1 billion (approx. $1.6 billion) consensus compiled by Visible Alpha.

The company's adjusted operating income forecast of USD 5 million (approx. $7.3 million) to USD 15 million (approx. $21.9 million), with a midpoint of USD 10 million (approx. $14.6 million), was also well below the USD 85.2 million (approx. $124.2 million) Visible Alpha consensus.

Klarna expects third-quarter gross merchandise volume, or GMV, of USD 35 billion (approx. $51 billion) to USD 36 billion (approx. $52.5 billion), compared with the USD 39 billion (approx. $56.8 billion) analyst consensus.

Transaction margin dollars are expected to come in between USD 340 million (approx. $495.5 million) and USD 360 million (approx. $524.6 million).

The guidance points to a sharp sequential slowdown and suggests the company faces a more difficult second half than investors had anticipated.

Morgan Stanley had raised its Klarna price target to $21 from $18 while retaining an Equal Weight rating ahead of the results.

But the cautious stance offered little support after the company lowered its forecasts.

Options markets had implied a roughly 15% move around the earnings release.

Klarna has exceeded that expected range during each of its previous two earnings announcements, with the stock falling more than anticipated on both occasions.

Currency and Germany weigh on 2026 outlook

Klarna also reduced its full-year revenue forecast to between USD 4.1 billion (approx. $5.9 billion) and USD 4.2 billion (approx. $6.1 billion).

The midpoint of USD 4.1 billion (approx. $6 billion) was well below the USD 4.4 billion (approx. $6.4 billion) analyst consensus.

The company cited approximately USD 600 million (approx. $874.4 million) in currency translation headwinds as one of the factors behind the weaker outlook.

Klarna also took a more cautious view of volumes in Germany, its largest market by volume.

That prompted the company to reduce its full-year GMV forecast to USD 149 billion (approx. $217.1 billion) to USD 151 billion (approx. $220.1 billion), from its previous expectation of more than USD 155 billion (approx. $225.9 billion).

The downgrade highlights the challenge Klarna faces in balancing rapid growth in the US with softer trends in some of its more established markets.

US remains a key growth engine

The US business continued to provide a bright spot during the quarter.

Klarna's total GMV rose 18% year over year to USD 36.6 billion (approx. $53.3 billion), while US GMV increased 27%.

The company also reported a 42% increase in transaction margin dollars to USD 446 million (approx. $650 million), a key metric that management uses to measure the economics of its business.

Transaction margin dollars represented 42.8% of revenue, allowing Klarna to grow the measure considerably faster than both revenue and GMV.

The company raised its full-year transaction margin dollar guidance to between USD 1.6 billion (approx. $2.4 billion) and USD 1.7 billion (approx. $2.4 billion), equivalent to approximately 1.09% of GMV, from its previous expectation of more than 1.04%.

Full-year adjusted operating income guidance remained largely unchanged at USD 280 million (approx. $408 million) to USD 300 million (approx. $437.2 million).

"Over 120 million consumers now use Klarna, and each is using it for more of their everyday spend — revenue per active consumer grew 24%," CEO and co-founder Sebastian Siemiatkowski said.

"That deepening engagement is why transaction margin dollars grew 42%, well ahead of revenue and volume."

Investors had expected more from the stock

Klarna's shares had shown some signs of recovery before Tuesday's sell-off.

The stock closed at $19.51 on Monday and had gained about 4% over the previous month.

Analysts had also become somewhat more optimistic about the company. Goldman Sachs, UBS and JPMorgan had raised their price targets to $25, $23 and $22, respectively, in recent weeks.

But the lower guidance has put that optimism under pressure.

Klarna made its Wall Street debut in 2025 at a valuation of roughly USD 15 billion (approx. $21.9 billion), joining a wave of technology and fintech listings.

Since then, investors have had to assess whether the company can convert its expanding customer and merchant base into consistently stronger profits.

Merchant growth and leadership changes

Klarna's merchant base continued to expand rapidly, rising 54% year over year to more than 1.2 million.

The company is also preparing for changes in its senior leadership.

Chief Financial Officer Niclas Neglén and Chief Marketing Officer David Sandström are expected to transition out of their current roles in early 2027 after six and nine years at Klarna, respectively.

Klarna has begun searching for a New York-based CFO, while Neglén will continue leading the finance organization and investor engagement through the transition.