Klarna Group Q2 Earnings Call Highlights

Key Points

• Klarna exceeded Q2 guidance, with GMV up 18%, revenue up 27%, transaction margin dollars up 42% and adjusted operating income reaching $91 million; net income turned positive at $9 million.
• The company lowered its full-year GMV forecast because of weaker German consumer spending and currency effects, but raised its transaction margin outlook to SEK 1.62 billion–SEK 1.65 billion as Fair Financing, memberships, the Klarna Card and loan offloading improved unit economics.
• Credit performance continued to improve, while Klarna expanded through partnerships with J.P. Morgan Payments and Apple Upgrade. CFO Niklas Näglén and Chief Marketing Officer David Sandström are expected to transition from their roles in 2027.

Klarna Group NYSE: KLAR reported second-quarter results above its guidance across volume, revenue and transaction margin dollars, while raising its full-year transaction margin outlook despite lowering its volume forecast because of softer consumer spending in Germany and currency effects.

Chief Executive Officer Sebastian Siemiatkowski said gross merchandise volume rose 18% from a year earlier, revenue increased 27%, and transaction margin dollars, the company’s preferred profitability metric, climbed 42%. Adjusted operating income reached $91 million, up $62 million year over year, while net income turned positive at $9 million.

“We delivered above the high end of our guidance on every line for the second consecutive quarter,” Siemiatkowski said. Operating costs increased 16%, slower than revenue and transaction margin dollar growth, which executives said demonstrated operating leverage.

Margin Growth Outpaced Volume

Chief Financial Officer Niklas Näglén said second-quarter revenue totaled $1.042 billion, while transaction costs rose 17% to $596 million. Transaction margin dollars increased to $446 million, above the company’s May guidance range of $375 million to $395 million.

Transaction margin represented 42.8% of revenue, an increase of about 450 basis points from the prior-year period. The company said its U.S. transaction margin rose to 23% of revenue from 14% a year earlier, while the global business excluding the U.S. reached a 54% margin.

Klarna’s U.S. GMV rose 27% to $7.9 billion and represented 22% of total GMV, up 2 percentage points year over year. U.S. revenue increased 37% to $376 million, and U.S. transaction margin dollars rose 126% to $88 million.

Global GMV excluding the U.S. increased 15%, or 12% on a like-for-like basis. Näglén said Germany, Klarna’s largest market by volume, experienced more measured growth amid weaker discretionary retail spending, while the company’s mature Nordic markets accelerated.

Product Expansion and Partnerships

Klarna highlighted growth in its three product areas: Pay in Full for everyday purchases, Pay Later for short-term installments, and Fair Financing for larger-ticket purchases.

• Pay in Full contributed $3.6 billion of volume during the quarter.
• Pay Later grew 13% year over year.
• Fair Financing GMV rose 82% to $4.7 billion and accounted for 13% of total volume.
• Fair Financing was available at 256,000 merchants, up from 151,000 in November.
• Klarna membership reached 2 million paying subscribers, with subscription revenue increasing more than 600%.
• The Klarna Card reached 6.5 million active users across 16 countries, compared with 1.3 million a year earlier.

Siemiatkowski said subscriptions are a high-margin recurring-revenue source that can expand transaction margin dollars without requiring corresponding GMV growth. The company recently introduced membership plans featuring cashback and other benefits.

During the quarter, Klarna launched through J.P. Morgan Payments, enabling merchants on the processor’s platform to offer Klarna’s Pay in 4, Pay Later and fixed-term installment products without a new integration. The company also announced it is the financing partner for Apple Upgrade, a device-leasing program available through Apple.

Näglén said the Apple program is treated as a financing receivable and will be accounted for similarly to Klarna’s Fair Financing product. The company has the option to retain or sell receivables depending on market economics.

Credit Performance and Updated Outlook

The company said consumer credit performance improved again in the quarter. Provisions for credit losses were $192 million, or 0.52% of GMV, down from 0.55% in the first quarter. Klarna said provisions as a percentage of volume have declined in each quarter since its first report as a public company.

For recent U.S. originations, Fair Financing delinquencies 30 or more days past due declined about 20 basis points sequentially, while Pay Later delinquencies improved by about 30 basis points, according to Näglén. He said Klarna continues to underwrite each transaction individually and is willing to limit volume growth to remain within its credit standards.

Klarna reduced its full-year GMV outlook to SEK 149 billion to SEK 151 billion from more than SEK 155 billion previously, implying about 17% growth. About SEK 600 million of the revision reflected currency movements, with the balance tied to a more cautious outlook for European volumes, particularly in Germany.

Executives said the revised outlook assumes that Germany’s softness persists rather than recovering. U.S. volume expectations were unchanged, supported by integrations with J.P. Morgan Payments, Adyen, Worldline, Worldpay, Fiserv’s Clover and the Apple Upgrade program.

Despite the lower GMV forecast, Klarna raised its full-year transaction margin dollar outlook to SEK 1.62 billion to SEK 1.65 billion, or 1.09% of GMV, from 1.04% previously. The company attributed most of the increase to stronger unit economics from Fair Financing, loan offloading programs, the Klarna Card and membership fees.

The company expects adjusted operating income of SEK 280 million to SEK 300 million for the full year. For the third quarter, Klarna forecast GMV of SEK 35 billion to SEK 36 billion, revenue of SEK 940 million to SEK 980 million, transaction margin dollars of SEK 340 million to SEK 360 million, and adjusted operating income of SEK 5 million to SEK 15 million. Management described the third quarter as an investment period ahead of peak-season launches.

Leadership Transitions Planned for 2027

Siemiatkowski also announced that Näglén, who has served as CFO for six years, plans to transition from the role in early 2027. Chief Marketing Officer David Sandström, who has been with Klarna for nine years, is also expected to hand over his responsibilities next year.

Näglén will remain CFO through the transition and continue to lead finance and investor engagement. Klarna has begun a search for a New York-based CFO, with Siemiatkowski citing the company’s U.S. growth, its more than 30 million U.S. consumers and proximity to the investor community.

About Klarna Group (NYSE:KLAR)

Klarna Group is a global payments provider specializing in “buy now, pay later” (BNPL) solutions for online and in-store shoppers. The company partners with merchants to offer flexible payment options, including interest-free installments and deferred payments, aiming to enhance conversion rates and customer loyalty. Klarna’s platform integrates risk assessment, fraud prevention, and a one-click checkout experience to streamline transactions for both retailers and consumers.

Through its digital wallet and mobile app, Klarna enables users to manage purchases, track spending and access exclusive shopping offers from partner merchants.

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