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Klarna Group Plc (KLAR)
NYSE:KLAR
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Klarna Group Plc
(NYSE:KLAR)
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Rating:51Neutral
Price Target:
$14.00
▼(-6.35% Downside)
Action:ReiteratedDate:02/25/26
The score is held back primarily by weakened 2025 profitability and a major reversal into heavy cash burn with rising debt, alongside a very bearish technical setup. Earnings-call guidance and operating-leverage/capital-efficiency initiatives provide some offset, but valuation is constrained by ongoing losses.
Positive Factors
Revenue & GMV Growth
Sustained double‑digit revenue and large GMV demonstrate durable demand and platform scale. High transaction flow supports merchant monetization and long‑term network effects, enabling recurring fee income and providing a structural base for future margin expansion as fixed costs scale slower than GMV.
Large Network & Banking Adoption
Broad consumer and merchant footprint creates a self‑reinforcing two‑sided network advantage. Rapid banking product adoption (doubling of banking customers) increases ARPU and deposit balances, anchoring customer relationships and improving cross‑sell potential for higher‑value, recurring revenue streams.
Operating Leverage & Capital‑Efficiency Tools
Deployment of forward‑flow loan sales and other capital‑efficiency levers materially reduces funding intensity per unit of originations. Combined with rising revenue per employee and expense discipline, these tools can sustainably improve adjusted operating margins while supporting capital‑light growth.
Negative Factors
Sharp Cash Burn & Rising Debt
A return to material cash burn in 2025 with higher leverage weakens financial flexibility. Persistent negative operating free cash flow forces reliance on debt or capital markets, raising funding costs and constraining ability to invest or endure prolonged margin pressure without dilutive financing.
Profitability Volatility
Sharp swings between near break‑even and meaningful losses undermine predictability of earnings and ROE. This volatility complicates capacity to self‑fund growth, increases scrutiny on unit economics, and can force conservative capital allocation until profitability shows consistent multi‑period improvement.
Provisioning & Forward‑Flow Uncertainty
Rapid shift into longer‑duration lending creates upfront provisioning that depresses near‑term transaction margins. Uncertainty around the pace of loan offloads (forward flows) adds durable modeling risk for margins and capital needs, making sustained margin recovery contingent on execution and market appetite.
Klarna Group Plc (KLAR) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$9.89B
Dividend YieldN/A
Average Volume (3M)5.66M
Price to Earnings (P/E)―
Beta (1Y)2.39
Revenue GrowthN/A
EPS GrowthN/A
CountryUS
Employees3,778
SectorTechnology
Sector Strength88
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)-0.07
Shares Outstanding377,255,040
10 Day Avg. Volume11,067,301
30 Day Avg. Volume5,659,956
Financial Highlights & Ratios
PEG Ratio<0.01
Price to Book (P/B)4.29
Price to Sales (P/S)3.07
P/FCF Ratio-10.40
Enterprise Value/Market Cap0.32
Enterprise Value/Revenue0.92
Enterprise Value/Gross Profit1.57
Enterprise Value/Ebitda26.86
Forecast
1Y Price Target
$28.73Price Target Upside92.17% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering13
EPS Forecast (FY)-0.01
Revenue Forecast (FY)$4.44B
Klarna Group Plc Business Overview & Revenue Model
Company DescriptionKlarna Group plc operates as a technology-driven payments company in the United Kingdom, the United States, Germany, Sweden, and internationally. The company offers advertising and marketing solutions, consumer services, digital financial services, and personal shopping and money assistance services. In addition, it provides digital retail banking solutions, such as fixed-term deposits, savings, and bank accounts; digital loyalty cards; and customer and merchant support services, as well as manages personal finances. Klarna Group plc was formerly known as Klarna UK II plc and changed its name to Klarna Group plc in December 2023. The company was founded in 2005 and is based in London, United Kingdom.
How the Company Makes MoneyKlarna generates revenue primarily through merchant fees and interest income. The company charges merchants a fee for each transaction processed through its platform, which is a percentage of the sale amount, incentivizing retailers to adopt Klarna's payment solutions to boost their sales conversions. Additionally, Klarna earns interest on the financing it provides to consumers who choose to pay in installments or defer payments. This interest income is a significant revenue source, particularly when consumers opt for longer repayment terms. The company also engages in strategic partnerships with various retailers and financial institutions, enhancing its reach and driving more transactions through its platform, thus further contributing to its earnings.
Klarna Group Plc Earnings Call Summary
Earnings Call Date:Feb 26, 2026
(Q4-2025)
| Next Earnings Date:Nov 24, 2026
Earnings Call Sentiment Positive
The call portrayed robust topline and customer-growth momentum — substantial YoY increases in active consumers (+28%), merchants (+42%), revenue (+38% to >$1B), and banking adoption (banking customers +101%, card users +288%). Management explained that rapid Fair Financing and lending growth create an accounting timing effect (upfront provisioning) that depressed near-term transaction margin dollars despite strong lifetime economics and planned mitigants (loan sales/forward flows, scaling of deposits and internal rails). While funding/processing costs in the U.S., a quarterly TMD miss, and lingering investor concerns about near-term profitability introduce measurable near-term risks and modeling uncertainty, the fundamentals (network growth, higher ARPU among banking customers, operating leverage, and tools to accelerate profitability) are compelling. Overall the positives around scale, product adoption, and long-term economics outweigh the short-term provisioning and cost headwinds.Q4-2025 Updates
Positive Updates
Strong Consumer and Merchant Growth
Active consumers reached 118 million, up 28% year-over-year; merchant count grew to 966,000 (added 285,000 merchants), up 42% year-over-year, demonstrating continued network expansion across 26 markets.
Revenue and GMV Outperformance
Q4 revenue grew 38% year-over-year to over $1 billion and GMV in the quarter was $38.7 billion (above the top end of guidance). Full-year 2025 volume totaled approximately $127 billion.
Accelerating Banking Adoption and High-Value Customers
Klarna banking customers reached 15.8 million, up 101% year-over-year; active card users grew to 4.2 million, up 288% year-over-year; consumer deposits rose to $13 billion, up 37% year-over-year. Banking customers show materially higher engagement (ARPU $107 vs $30 for core base) and higher average deposits ($475 vs $64).
Improving Transaction Margins on a Trajectory
Transaction margin dollars before provisions grew 31% to $622 million (an acceleration of $107 million sequentially). After provisions, transaction margin dollars were $372 million, up 17% year-over-year and up 28% sequentially from Q3.
Capital-Efficient Profitability Tools Deployed
Klarna initiated its first Fair Financing forward flow in Q4 and recognized $73 million of gain on sales, a lever intended to accelerate profitability improvement in 2026 while supporting capital-efficient growth.
Demonstrated Unit and Operating Leverage
Revenue per employee reached $1.24 million in 2025 (a 3.6x increase since 2022). Since 2022, revenue accelerated 104% while adjusted operating expenses declined 8%, indicating strong operating leverage.
Large Originations with Expected Long-Term Yield
Example provided: $2.5 billion of U.S. Fair Financing originated in Q4 — $80 million of provisions were booked upfront and $40 million of revenue recognized in Q4, with an additional ~$180 million of interest income expected over the lifetime of loans, demonstrating deferred lifetime economics.
Partnership and Distribution Expansion
Expanded distribution and product ubiquity via partnerships and integrations (Stripe default relationship, Nexi/Paytrail rollout, Apple Pay, Google Pay) and merchant partnerships including Walmart, Emirates, LEGO, Vinted, StockX, Lufthansa and Etsy — supporting global scale and checkout presence.
Negative Updates
Quarterly Transaction Margin Miss and Upfront Provisioning Drag
Management acknowledged Q4 transaction margin dollars did not meet guidance. Rapid lending growth (Fair Financing) resulted in upfront provisioning that depresses near-term transaction margin dollars (example: $2.5B originations produced a $40 million headwind in the quarter).
Profitability Timing vs. Investor Sentiment
Share price has declined since the IPO and investors expressed dissatisfaction; questions remain about when sustained profitability will be realized given the timing effects of provisioning on fast loan growth.
Mix Shift to Lending Increases Short-Term Costs
Faster-than-expected adoption of Fair Financing (management cited ~165% growth reference for GMV in context of banking products) shifted revenue mix toward lending, increasing upfront provisions and temporarily lowering operating profit despite positive lifetime economics.
Funding and Processing Cost Pressure (U.S. Expansion)
Moving into the U.S. increased payment and funding costs relative to low European costs; processing/servicing line is elevated due to card issuance and U.S. expansion, creating a near-term headwind until internal rails, deposits and efficiencies offset these costs.
Provisioning and Delinquency Concerns (Investor Focus)
Previous sharp increase in credit loss provisions (102% surge in Q3 '25 referenced by investors) has weighed on sentiment. While management reported provisions declined from 0.72% of GMV in Q3 to 0.65% in Q4 and described delinquency trends as stable, newer vintages show slightly steeper early delinquencies, meriting monitoring.
Uncertainty Around Loan Sale/Offloading Pace
Management declined to provide firm targets for percent of production to be sold under forward flow programs, noting commercial discretion and quarter-to-quarter variability (Q4 sales ~ $1.6 billion). This creates near-term modeling uncertainty for investors.
Transaction Margin Guidance vs. Street
Management acknowledged 2026 transaction margin expectations are roughly ~10% below current consensus and Q1 TMD was several points below earlier views, reflecting both mix and timing effects from rapid banking product adoption.
Company Guidance
Klarna said its 2026 guidance assumes continued compounding revenue growth and that revenue will outpace operating costs, with adjusted operating income margin expected to exceed about 6.9% and transaction‑margin dollars (TMD) accelerating into H2 as Fair‑Financing cohorts mature; Q1 TMD is expected to be broadly consistent with Q4‑25 (Q4 TMD after provisions $372M, before provisions $622M). Management plans to keep executing forward‑flow loan sales to improve capital efficiency (first forward flow recognized $73M gain in Q4 and roughly $1.6B of loans were sold in Q4) while growing banking products, and it guided 2026 GMV and revenue growth roughly in line with 2025 (2025 total GMV ≈ $127B; Q4 GMV $38.7B; revenue grew 38% to >$1B in Q4). The outlook incorporates stable credit trends (provisions fell from 0.72% to 0.65% of GMV Q3→Q4), the Q4 Fair‑Financing footprint (≈$2.5B U.S. originations in Q4 with $80M provisions and $40M revenue recognized), and the expectation that mix and forward flows will drive improving TMD and adjusted operating income through the year.Klarna Group Plc Financial Statement Overview
Summary
Strong, accelerating revenue growth and high gross margin are positives, but 2025 saw a return to meaningful losses and a sharp deterioration in operating/free cash flow (significant cash burn) alongside rising debt, increasing near-term financial risk.Income Statement
Revenue growth is strong, accelerating to 46.5% in 2025 versus 21.2% in 2024, with consistently high gross profit (2024 gross margin ~77.7%). However, profitability remains the key issue: 2025 swung back to meaningful losses (net loss of $294M and negative EBIT/EBITDA), after only a near break-even 2024 (net income ~$3M). Overall, the top-line trajectory is attractive, but earnings quality and consistency are weak.54
Neutral
Balance Sheet
The balance sheet shows solid equity support and manageable leverage historically (debt-to-equity ~0.22–0.38 from 2022–2024) with equity of ~$2.5B in 2025. That said, debt increased to ~$1.36B in 2025 (up from ~$0.79B in 2024), and the return on equity has been very low or negative across most years, reflecting limited profitability and raising risk if losses persist.66
Positive
Cash Flow
Cash generation was strong in 2022–2024 (operating cash flow positive, free cash flow positive), supporting the business despite accounting losses in prior years. The picture deteriorated sharply in 2025, with operating cash flow at about -$1.03B and free cash flow about -$1.04B, alongside a steep decline in free cash flow growth (down ~152%). This level of cash burn is a near-term risk and likely explains the higher debt.45
Neutral
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 3.51B | 2.67B | 2.20B | 1.89B | 1.62B |
| Gross Profit | 1.98B | 2.07B | 1.66B | 1.37B | 1.02B |
| EBITDA | -104.00M | 427.00M | 126.00M | -687.00M | -602.26M |
| Net Income | -294.00M | 3.00M | -249.00M | -1.04B | -775.71M |
Balance Sheet | |||||
| Total Assets | 18.80B | 13.80B | 13.75B | 12.01B | 11.81B |
| Cash, Cash Equivalents and Short-Term Investments | 3.80B | 3.59B | 2.39B | 2.57B | 2.83B |
| Total Debt | 1.36B | 791.00M | 472.00M | 637.95M | 1.28B |
| Total Liabilities | 16.11B | 11.55B | 11.55B | 9.69B | 9.10B |
| Stockholders Equity | 2.51B | 2.09B | 2.19B | 2.32B | 2.70B |
Cash Flow | |||||
| Free Cash Flow | -1.03B | 542.00M | 723.00M | 231.00M | -392.56M |
| Operating Cash Flow | -1.03B | 587.00M | 808.00M | 336.00M | -365.47M |
| Investing Cash Flow | -30.00M | 154.00M | -83.00M | -459.00M | -489.40M |
| Financing Cash Flow | 988.00M | 312.00M | -62.00M | 18.00M | 2.14B |
Klarna Group Plc Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $15.09B | 49.12 | 18.64% | ― | 25.76% | ― | |
68 Neutral | $5.17B | 26.93 | 15.52% | ― | 23.16% | 27.38% | |
67 Neutral | $1.79B | 27.62 | 9.79% | ― | 10.58% | -45.52% | |
62 Neutral | $1.83B | -132.65 | -1.51% | ― | 20.11% | -391.61% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
59 Neutral | $15.95B | 59.02 | 8.92% | ― | 37.00% | ― | |
51 Neutral | $9.89B | -19.15 | -12.85% | ― | ― | ― |
* Technology Sector Average
KLAR
Klarna Group Plc
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-65.02%
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MQ
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-28.56%
Klarna Group Plc Corporate Events
Klarna Group Files 2025 Earnings Presentation with U.S. Regulators
Feb 20, 2026
On February 19, 2026, Klarna Group plc released its earnings presentation for the year ended December 31, 2025, and furnished it to the U.S. Securities and Exchange Commission via a Form 6-K filed on February 20. The filing formalizes the disclosure of Klarna’s 2025 financial performance and details its use of non-IFRS measures such as transaction margin and adjusted operating profit, signaling continued focus on scale, credit-loss management and efficiency across mature and new markets.
The presentation also underscores Klarna’s emphasis on like-for-like comparisons that strip out foreign exchange effects and the sale of its KCO unit, aiming to give investors a clearer view of underlying trends. By framing these metrics as central tools for management and investors, the company reinforces its bid to position itself as a leading, data-driven fintech player while navigating a competitive and fast-changing payments landscape.
The most recent analyst rating on (KLAR) stock is a Hold with a $16.00 price target. To see the full list of analyst forecasts on Klarna Group Plc stock, see the KLAR Stock Forecast page.
Klarna Posts First Billion-Dollar Quarter as Fair Financing and Card Push Banking Pivot in Q4 2025
Feb 19, 2026
On February 19, 2026, Klarna reported its fourth-quarter and full-year 2025 results, highlighting the shift from pure payments to a broader digital banking model. In Q4 2025 the group delivered its first billion-dollar revenue quarter at $1.082 billion, up 38% year on year, on gross merchandise volume of $38.7 billion and rapid growth in U.S. revenue of 58%.
Klarna’s Fair Financing and Klarna Card products drove a sharp increase in higher-frequency usage, with Fair Financing GMV up 165% and the Card now accounting for 15% of transactions. Transaction margin dollars rose 17% to $372 million but fell short of guidance as upfront provisions on fast-growing banking products deferred profitability, even as credit metrics improved and cost-efficiency surged through AI-driven headcount reductions.
The company expanded its merchant base by a record 285,000 in the quarter to 966,000, while active banking-focused consumers doubled to 15.8 million and card users reached 4.2 million. Management emphasized that accelerating adoption of longer-duration credit products, supported by distribution partnerships with players such as Stripe, Worldpay, JPMorgan Payments, Clover and Nexi, is reinforcing Klarna’s positioning as a capital-light global digital bank beyond point-of-sale payments.
The most recent analyst rating on (KLAR) stock is a Hold with a $23.00 price target. To see the full list of analyst forecasts on Klarna Group Plc stock, see the KLAR Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.