Klarna Revives IPO Despite Wider Losses

Klarna has reported a wider quarterly loss as the Swedish fintech gears up for a second attempt to list in New York, hoping to ride a wave of renewed investor appetite for technology and financial stocks.

The buy now, pay later company said on Thursday it made a net loss of $53mn in the three months to June, compared with a $18mn loss in the same period last year. The result comes as Klarna continues to push into the US and reshape itself as more than just a retail credit provider.

Revenues climb despite losses

Klarna’s revenues rose 21 per cent to $823mn year on year, underscoring continued demand for its services despite the headline loss. The growth was driven by the company’s aggressive expansion in the US, where it has focused on building partnerships with retailers and positioning itself as a mainstream consumer finance brand.

Chief executive Sebastian Siemiatkowski said a record number of transactions were repaid on time or early in the second quarter. He highlighted a fall in global delinquency rates on its buy now, pay later loans to 0.89 per cent, down from 1.03 per cent a year earlier, and a small decline in realised credit losses to 0.45 per cent of volume.

“Credit performance remains strong,” he said, pointing to the combination of growth in users and low default rates as evidence that Klarna’s model is sustainable.

Cost pressures remain

The quarterly loss included a $24mn charge linked to downsizing office space as part of a broader cost-cutting strategy. Klarna has been reducing headcount and rolling out artificial intelligence tools to improve efficiency. Management said the measures were beginning to deliver savings but acknowledged that one-off restructuring costs continued to weigh on earnings.

The company also increased its provisions for potential credit losses to $174mn, up from $106mn a year earlier. Executives said this reflected both rapid growth in lending and a deliberate shift towards longer-term, interest-bearing products that carry different risk profiles from its traditional instalment loans.

Pivot to neobank model

Klarna built its reputation on interest-free instalment plans at online and physical checkouts, becoming one of the best-known names in the buy now, pay later sector. But it is now moving towards a broader financial services model, with debit cards, bank accounts and interest-bearing loans.

The newer loan book more than doubled year on year and now accounts for 8 per cent of Klarna’s total volume. Executives believe this will help the company secure recurring revenues and reduce reliance on retail partnerships alone.

This pivot is also designed to strengthen Klarna’s appeal in the US, where competition among buy now, pay later providers has intensified and regulators are scrutinising the sector. By presenting itself as a diversified neobank, Klarna hopes to convince investors it has a path to sustainable profitability.

IPO plans revived

Klarna had intended to go public earlier this year but paused those plans in April as markets were unsettled by US President Donald Trump’s sweeping tariffs. The company now plans to revisit its listing in the autumn, encouraged by strong demand for recent technology IPOs.

The float of design software developer Figma last month, which more than doubled in value after pricing, and the successful debut of crypto company Bullish have signalled renewed investor appetite for growth stocks. Klarna hopes to capture similar momentum as it positions itself among the most prominent fintech names to reach the public markets in 2025.

Bankers say the company is likely to pursue a valuation well above the $15bn figure discussed last year, though far below the $45bn peak it achieved in 2021. Even so, a successful listing would mark a sharp recovery from its 2022 low of $6.7bn, when higher interest rates and regulatory concerns drove down valuations across the sector.

Balancing optimism with risk

Investor reaction to Klarna’s quarterly numbers will be important in setting the tone for its IPO. While revenues are growing and losses remain modest relative to the scale of the business, some analysts warn that expansion into interest-bearing lending carries higher credit risk.

The provision build-up this quarter reflects that concern, though management argues that the low delinquency rates show it is managing the transition carefully. AI-driven tools, including credit scoring and fraud detection, are expected to play a bigger role in mitigating risk as the business scales.

Siemiatkowski said AI integration was already improving risk assessment and customer experience. The company sees automation as a way to lower costs and protect margins even as it grows rapidly in the US and other markets.

The US push

America remains the central focus of Klarna’s growth strategy. The company has added merchants and expanded marketing in the US, where competition includes Affirm and PayPal’s instalment products as well as traditional credit card providers. Klarna’s management sees the country as both its biggest opportunity and its toughest battleground.

With more than 90m global active users, Klarna believes its brand recognition and partnerships give it an edge. The expansion into debit cards and broader banking services is designed to build deeper relationships with those customers, moving beyond one-off transactions to ongoing financial management.

Market context

The broader buy now, pay later market continues to expand, though at a slower pace than during the pandemic. Analysts estimate the sector could reach $3.9tn globally by 2030. But growth is likely to come with tighter regulation, particularly in the US and Europe, where concerns about consumer debt have led to calls for stricter oversight.

Klarna’s strategy is to stay ahead of those developments by diversifying its model. By offering both instalment loans and traditional credit products, and by focusing on technology-driven risk management, it hopes to demonstrate to regulators and investors that it can operate responsibly at scale.

Outlook

The second-quarter results show both the potential and the challenges facing Klarna as it prepares for its IPO. Revenues are rising strongly and credit performance remains stable, but losses have widened and costs remain a concern.

The company’s bet is that investors will look beyond the latest quarterly deficit and focus on its scale, growth trajectory and pivot towards a diversified neobank. If market conditions hold and demand for technology stocks remains robust, Klarna’s long-awaited listing could be one of the most closely watched IPOs of the year.

For Siemiatkowski and his team, the coming months will be critical. They must convince sceptics that Klarna can achieve profitability while maintaining growth, and persuade investors that it can compete in the crowded US market. The $53mn loss reported this quarter is a reminder that the balance between expansion and discipline is delicate. But for now, Klarna believes the timing is right to try again in New York.