20-F: Klarna Reports 2025 Net Loss Amid Strong GMV Growth & AI Efficiency

Klarna Group plc reported a net loss of $273 million for 2025, despite a 25% revenue increase and significant growth in Gross Merchandise Volume, driven by strategic expansion and AI integration.

Summary

• Klarna Group plc reported a net loss of $273 million for the fiscal year ended December 31, 2025, compared to a net profit of $21 million in 2024 and a net loss of $244 million in 2023.
• Total revenue increased by 25% year-over-year to $3,509 million in 2025 (24% on a like-for-like basis), driven by a 21% increase in Gross Merchandise Volume (GMV) to $128 billion (20% like-for-like).
• Interest income surged by 39% to $937 million in 2025, primarily due to accelerated growth in Fair Financing products (123% year-over-year GMV increase, reaching 165% in Q4 2025).
• Operating expenses increased by 28% to $3,739 million in 2025, largely due to higher processing and servicing costs (up 36%), and a 60% increase in provision for credit losses.
• Provision for credit losses rose to $794 million in 2025, representing 0.63% of GMV, up from 0.47% in 2024, mainly due to the product mix shift towards Fair Financing which has higher upfront provisions.
• Funding costs increased by 33% to $667 million in 2025, or 0.52% of GMV, up from 0.48% in 2024, driven by fair value adjustments on loans sold and higher other funding costs.
• Adjusted operating profit decreased to $65 million in 2025 from $181 million in 2024, with the adjusted operating margin falling to 1.9% from 6.4%.
• The company's AI assistant handled 80% of customer service chats in 2025, achieving human-level satisfaction, reducing repeat inquiries by 25%, and resolving queries in two minutes, leading to estimated cost savings of $59 million in 2025.
• Klarna's average annual revenue per employee increased from $344,000 in 2022 to $1,240,000 in 2025, attributed to AI-driven efficiency.
• The number of active Klarna consumers reached 118 million in 2025, a 27% year-over-year increase, partly due to the transition of Stocard customers into the network.
• The Klarna Card completed its U.S. rollout in 2025, now boasting over 4.2 million active consumers globally, with GMV growth increasing from 92% in Q3 2025 to 209% in Q4 2025.
• The company entered into new forward flow and whole-loan sale programs in Q4 2025, including the sale of $800 million of existing U.S. Fair Financing term loans and ongoing sales up to $6.5 billion of originations.
• A material weakness in internal control over financial reporting related to IT general controls, identified previously, was remediated as of December 31, 2025.
• Klarna Group plc completed its initial public offering (IPO) on September 10, 2025, raising net proceeds of $169 million, which were applied towards general corporate purposes.
• The company's capital structure includes ordinary shares (one vote), Class B shares (ten votes, no economic rights, non-transferable, convert to deferred shares upon certain transfers), and potential Class C shares (ten votes, half economic rights of ordinary shares, restricted issuance/transfer).
• The company's board of directors is divided into three staggered classes, with terms expiring at subsequent annual general meetings.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed but leaning negative report. While strong revenue and GMV growth, coupled with impressive AI-driven efficiencies, demonstrate operational strength and market penetration, the return to a significant net loss and increased credit provisions raise concerns about near-term profitability and the impact of product mix shifts.

Positives

• Total revenue increased by 25% to $3,509 million in 2025, demonstrating strong top-line growth.
• Gross Merchandise Volume (GMV) grew by 21% to $128 billion in 2025, indicating expanding network usage.
• Interest income saw a significant 39% increase to $937 million, driven by the acceleration of Fair Financing products.
• The AI assistant handled 80% of customer service chats in 2025 with no drop in customer satisfaction, resolving queries in two minutes (compared to 12 minutes for human agents), leading to $59 million in cost savings in 2025.
• Average annual revenue per employee increased substantially from $344,000 in 2022 to $1,240,000 in 2025, reflecting AI-driven productivity gains.
• Active Klarna consumers grew by 27% to 118 million in 2025, expanding the customer base.
• The Klarna Card completed its U.S. rollout and now has over 4.2 million active global users, with GMV growth accelerating to 209% in Q4 2025.
• The company's underwriting process resulted in credit losses of 0.63% of GMV in 2025, which is lower than the industry average charge-off rate of 2.89% for commercial bank consumer loans in Q3 2025.
• The Gini score for the U.S. underwriting model improved from 0.36 in 2019 to 0.78 in Q4 2025, indicating significantly enhanced predictive accuracy for default.
• The company's funding model is stable and low-cost, with 90% of lending activities funded by $13 billion in consumer deposits in 2025.
• Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) were 892% and 193% respectively as of December 31, 2025, significantly above regulatory requirements.
• The previously identified material weakness in internal control over financial reporting was remediated as of December 31, 2025.
• The company successfully completed its initial public offering (IPO) on September 10, 2025, raising $169 million in net proceeds.

Negatives

• Klarna Group plc reported a net loss of $273 million in 2025, a significant decline from the $21 million net profit in 2024.
• Operating expenses increased by 28% to $3,739 million in 2025, outpacing revenue growth.
• Provision for credit losses increased by 60% to $794 million in 2025, primarily due to a shift in product mix towards Fair Financing, which carries higher upfront provisions.
• Funding costs increased by 33% to $667 million in 2025, impacting profitability.
• Adjusted operating profit decreased by $116 million year-over-year to $65 million in 2025, and the adjusted operating margin declined from 6.4% to 1.9%.
• Transaction margin dollars remained stable at $1,238 million in 2025, despite 22% GMV growth, reflecting near-term margin pressure from Fair Financing provisioning.
• ARPAC (Average Revenue per Active Consumer) decreased by 3% in 2025, partly due to the integration of Stocard users, which increased the active consumer base over a short period.
• The company's operating loss was $230 million in 2025, worsening from a $121 million loss in 2024.
• The divestment of KCO in October 2024 resulted in revenue and growth figures for 2025 appearing lower on a comparative basis.
• The company incurred a tax expense of $32 million in 2025, compared to a tax benefit of $60 million in 2023.

Risks

• Failure to attract and retain additional merchants, or grow relationships with existing merchants, could adversely affect GMV and revenue.
• Inability to grow the consumer base and retain/grow relationships with existing consumers could negatively impact GMV and revenue.
• Operating without necessary licenses or regulatory authorizations, or failing to comply with existing ones, could lead to significant legal and financial consequences, including fines, enforcement actions, or cessation of operations.
• Inability to maintain or expand arrangements with card networks, payment service providers (PSPs), and other payments ecosystem participants, or termination of existing arrangements, could disrupt operations.
• Failure to promote, protect, and maintain the brand, including consistently high consumer service, could lead to loss of merchants and consumers.
• Recent history of incurring losses and potential failure to balance growth and profitability in the future, with no assurance of sustainable growth or profitability.
• Operating in an industry with substantial and increasingly intense competition, potentially leading to inability to compete successfully.
• Failure to attract and retain highly skilled employees, particularly engineers and data scientists, due to intense competition and less favorable share-based compensation tax treatment in some jurisdictions.
• Inability to keep up with rapid technological developments and continuously innovate, potentially leading to decreased demand for products and services.
• Use and provision of AI-powered solutions could lead to operational/reputational damage, competitive harm, legal/regulatory risk, and additional costs due to design flaws, biased data, or unforeseen defects.
• Inability to maintain the funding model based on consumer deposits or renew/replace other funding arrangements, especially during market volatility or regulatory changes.
• Failure of the underwriting process to accurately price consumer credit risk, leading to greater than expected credit losses.
• Ineffective or unsuccessful collection efforts on loans, leading to higher than anticipated loan losses.
• Loans facilitated through the network are not secured, guaranteed, insured, or backed by any governmental authority, increasing financial risk.
• Failure to successfully implement, maintain, and improve risk management policies, procedures, and methods, especially for economic, market, credit, operational, funding, liquidity, interest rate, and currency risks.
• Dependence on prominent presentation, integration, and support of the network by merchants; failure could adversely affect business.
• Merchants failing to fulfill obligations to consumers or comply with laws could lead to increased costs, disputes, and reputational damage.
• Reliance on third parties and their systems for various services; failure to perform adequately could disrupt business.
• Inability of counterparties to meet financial obligations or inability to enforce rights against them could adversely affect results.
• Arrangements with partner banks may be terminated or not renewed on favorable terms, requiring alternative arrangements or additional licenses.
• Operating results may fluctuate significantly due to seasonality, strategic transactions (e.g., KCO divestment), and other corporate actions.
• Changes in market and general economic conditions could decrease demand for solutions and affect merchant financial performance.
• Acquisitions, partnerships, joint ventures, dispositions, or other strategic transactions could disrupt and harm the business.
• Expansion efforts into new geographies or product offerings may not be successful or may subject the company to increased risks.
• Interest rate volatility, other interest rate changes, or discontinuation of interest rate benchmarks may adversely affect the company.
• Exposure to exchange rate fluctuations in international markets can impact financial performance.
• Failure to accurately detect and prevent fraud, leading to losses, regulatory investigations, or reputational damage.
• Reliance on proper functioning of IT systems and networks; failures could disrupt business and impair service provision.
• Dependence on cloud computing networks, third-party data centers, and internet hosting providers; disruptions could adversely affect the network.
• Use of email and other messaging services may be subject to restrictions or fail to timely deliver communications.
• Failure to integrate solutions with a variety of operating systems, software applications, networks, and hardware developed by third parties, making products less marketable or obsolete.
• Loss of services of the Co-Founder and Chief Executive Officer, Sebastian Siemiatkowski, could severely disrupt operations.
• Adverse negative publicity about the company, its management, or the industry could harm reputation and brand.
• Increased scrutiny on ESG or sustainability responsibilities could result in additional costs, risks, and reputational damage.
• Exposure to natural and man-made events (e.g., natural disasters, cyberattacks, pandemics) that may unexpectedly disrupt operations.
• Quantitative models or assumptions used to understand and predict consumer behavior may prove incorrect, leading to miscalculations and unexpected losses.
• Estimates of market opportunity, total addressable market, and forecasts of market growth may prove inaccurate.
• Determining the allowance for credit losses requires many assumptions and complex analyses; incorrect estimates could lead to excess net charge-offs or increased provisions.
• As a holding company, liquidity is dependent on payments from subsidiaries, many of which are subject to regulatory restrictions on dividend payments.
• Potential for additional tax liabilities due to changes in tax laws, tax audits, or business growth.
• Inability to utilize loss carryforwards, deferred interest deductions, and other tax attributes.
• Fluctuations in social security payroll taxes tied to external share price, potentially increasing costs.
• Need for additional capital in the future, which may not be available on acceptable terms or at all, leading to dilution or restrictive debt covenants.
• Involvement in legal proceedings and disputes, potentially resulting in substantial costs, diversion of management resources, and reputational harm.
• Misconduct of employees, consultants, or third-party service providers could harm the company through legal liability and reputational damage.
• Insurance policies may not be sufficient to cover all claims, leading to substantial financial losses.
• Subject to extensive, complex, and changing laws and regulations and related supervision, inquiries, and examination.
• Changes to capital adequacy, liquidity, and similar regulatory requirements may adversely affect the company.
• Subject to various consumer protection laws, with potential for fines, class action lawsuits, or operational changes.
• Required to comply with AML/CFT laws and regulations; failure could result in enforcement actions, fines, or license suspension.
• Subject to regulatory requirements to facilitate orderly resolution of large financial institutions (e.g., BRRD), potentially leading to write-down or conversion of debt securities.
• Originating bank partner model in the U.S. could be challenged, leading to violations of licensing, interest rate limits, or lending laws.
• Loans extended under licenses may violate applicable interest rate limits or other lending laws.
• Relationships with bank partners in the U.S. may subject the company and partners to additional regulatory scrutiny.
• Use of vendors and other third-party relationships is subject to increasing regulatory requirements and attention.
• Regulatory focus on potential discrimination from ML and black-box algorithms could require changes to underwriting processes.
• Failure to comply with obligations under license and technology agreements, potentially leading to legal disputes or loss of critical technologies.
• Reliance on open source software, which could lead to legal actions or require public release of proprietary software.
• Inability to sufficiently obtain, maintain, protect, or enforce intellectual property and other proprietary rights.
• Third parties may claim infringement, misappropriation, or other violation of their intellectual property rights.
• Subject to complex and evolving laws, regulations, rules, standards, contractual obligations, and other requirements regarding data privacy and cybersecurity.
• Failure to protect confidential information and/or experience data breaches and other cybersecurity incidents.
• An active trading market for ordinary shares may not be sustained, leading to difficulty selling shares.
• Market price of ordinary shares may be volatile due to various factors, including operating results, competition, and economic conditions.
• Multi-class structure of share capital concentrates voting control with pre-IPO shareholders, limiting influence of other shareholders and potentially affecting share value.
• As a foreign private issuer, subject to different U.S. securities laws and rules, potentially limiting publicly available information.
• Subject to various change-in-control or similar regimes, requiring regulatory approvals for significant shareholding changes.
• Loss of foreign private issuer status would require compliance with the Exchange Act's domestic reporting regime, incurring additional expenses.
• Rights of shareholders may differ from those typically offered to shareholders of a U.S. corporation.
• Certain capital structure decisions require shareholder approval under English law, limiting flexibility.
• Forum selection provisions in articles of association could limit investors' ability to obtain a favorable judicial forum.
• Difficulty obtaining or enforcing judgments or bringing original actions against the company or directors in the United States.
• Substantial future sales of ordinary shares in the public market could cause the trading price to fall.
• Issuance of additional equity securities, including Class C shares, may dilute ownership and adversely affect market price.
• May not pay any cash dividends in the foreseeable future.
• Requirements associated with being a public company in the United States will require significant resources and management attention.
• Multi-class structure of share capital may adversely affect the trading market for ordinary shares due to exclusion from certain stock indices.
• If securities and industry analysts do not publish research or publish inaccurate/unfavorable research, price and trading volume could decline.
• Potential to be a passive foreign investment company (PFIC) for U.S. federal income tax purposes, leading to adverse tax consequences for U.S. investors.
• If ordinary shares are not eligible for deposit and clearing within DTC facilities, transactions may be disrupted.
• Transfers of ordinary shares outside DTC may be subject to stamp duty or SDRT in the U.K., increasing dealing costs.

Future Outlook

Klarna expects continued growth in its GMV and active consumer base, driven by expanding merchant partnerships, increased Klarna Card adoption, and the introduction of new digital financial services. The company anticipates the relative contribution of Fair Financing products to increase, which will impact transaction margins in the near term due to upfront provisioning, but is expected to drive long-term profitability as interest income is recognized. Klarna will continue to leverage AI for efficiency and innovation, aiming to further embed itself as an everyday spending and saving partner for consumers and to expand into new market opportunities like P2P transfers and bill payments. The company expects the number of employees to continue to decrease in future periods due to AI-driven efficiencies.

Management Comments

• Our mission is to reimagine how consumers spend and save in their daily lives. We help people save time, money and put them in control of their finances through AI-powered, transparent and flexible financial services.
• Our vision is a world where Klarna empowers everyone, everywhere, through seamless commerce experiences—as a personalized, trusted AI-enabled assistant making financial empowerment effortless.
• We believe that our credit underwriting capabilities, enabled by our proprietary data from approximately 3.4 million transactions made on average per day on our network from 118 million active Klarna consumers in the year ended December 31, 2025, differentiate us from other networks.
• In the year ended December 31, 2025, 97% of transactions conducted on our network were interest-free. This results in lower fees, which we believe drives consumers and, in turn, our merchants, to shift more of their commerce activity onto our network, aligning the financial success of our consumers and merchants with our long-term ambition of durable growth.
• Our AI assistant has handled 80% of customer service chats in the year ended December 31, 2025, with no drop in consumer satisfaction levels since its introduction, and delivered $59 million in cost savings in 2025.
• We believe that our existing cash and cash equivalent balances, projected cash inflows from operations, including from consumer deposits and repayment of consumer loans and loan sale arrangements, will be sufficient to meet our future liquidity needs for at least the next 12 months.
• We believe that these actions appropriately address the issues observed by the SFSA or self-identified by us in connection with the SFSA investigation.

Industry Context

StockSavvy.ai notes that Klarna operates in the highly competitive and rapidly evolving fintech and digital payments landscape. The company's emphasis on AI-powered solutions and a diversified revenue model, moving beyond traditional BNPL into broader commerce and digital banking, positions it to capitalize on secular trends like the shift to digital payments and younger generations' aversion to traditional credit card debt. Its strong brand recognition and network effects are critical advantages against both established financial incumbents (e.g., J.P. Morgan Chase, Visa, Mastercard) and emerging fintech players (e.g., Affirm, PayPal, Revolut). The expansion of Fair Financing and the Klarna Card, alongside advertising solutions, indicates a strategy to increase Average Revenue Per Active Consumer (ARPAC) and wallet share, mirroring efforts by other payment platforms to become central to consumers' financial lives. The company's lower credit loss rates compared to commercial banks highlight its differentiated underwriting model, a key competitive factor in the consumer credit space.

Comparison to Industry Standards

• Klarna's global NPS of 73 in September 2024 is significantly higher than the average NPS of 44 for the finance industry in its top eight markets as of March 2023 (CustomerGauge).
• Klarna's global brand awareness of 40% as of December 2024 is higher than the average of its main competitors (28%).
• Klarna's provision for credit losses represented 0.63% of GMV in 2025, which is substantially lower than the charge-off rate on consumer loans issued by all commercial banks, which reached 2.89% in Q3 2025 (Federal Reserve Bank of St. Louis).
• The average balance per active Klarna consumer was $124 in 2025, significantly lower than the average credit card balance of approximately $6,961 in the United States in 2025 (Experian).
• Klarna's weighted average life (WAL) for loans was approximately 39 days in 2025 (27 days for Pay Later, 109 days for Fair Financing), compared to a typical loan duration of more than five years at a typical Nordic bank in 2024 and an average of 2.5 years for a typical U.S. personal bank loan in Q1 2025 (TransUnion).
• Klarna's U.S. underwriting model Gini score improved to 0.78 in Q4 2025, representing a significant advantage over models used by credit bureaus like VantageScore 4.0 (0.43 in Q4 2025).
• Klarna's LCR of 892% and NSFR of 193% as of December 31, 2025, are many times higher than those of major Nordic banks, indicating strong liquidity and funding stability.
• Merchant and consumer combined fees using credit cards were 1.2 times higher in Western Europe and 1.5 times higher in the United States than with Klarna in 2025 (Market Opportunity Study).
• The average credit card annual percentage rate in the United States reached 24% in December 2025 (Lending Tree), while Klarna's interest-free transactions accounted for 97% of all transactions in 2025.
• Commerce media, where Klarna has exposure, is projected to grow by a 19% CAGR through 2027, compared to the projected 9% growth for the broader digital advertising market (Market Opportunity Study).

Management Changes

Corporate Governance

Legal Proceedings

• The company is involved in various legal, arbitration, and administrative proceedings arising in the ordinary course of business, but none are currently expected to have a material adverse effect.
• In December 2024, the company was fined SEK 500 million (approximately $47 million) by the Swedish Financial Supervisory Authority (SFSA) for insufficient AML/CFT methods and thresholds, risk classification, and model risk management. The company has implemented remediation measures.
• In 2025, the company received 33 reprimands from the Swedish Data Protection Authority for failing to handle data subject rights requests and ensure personal data security under EU GDPR.
• The company is currently subject to two ongoing investigations by the Swedish Data Protection Authority regarding identity verification processes for data subject access requests and the use of tracking technologies for pre-filling forms.

Related Party Transactions

• Klarna paid Milkywire AB, founded and majority-owned by Nina Siemiatkowski (spouse of CEO Sebastian Siemiatkowski), $0.9 million in 2025, $0.7 million in 2024, and $0.9 million in 2023 for sustainability-related services.
• Klarna transferred an additional $0.5 million in 2025 and $1.0 million in 2024 to Milkywire for carbon credit purchases on Klarna's behalf, with Milkywire retaining no margin.
• The company contributed $2.3 million in 2025, $3.8 million in 2024, and $5.5 million in 2023 through the WRLD Foundation, a nonprofit where Nina Siemiatkowski is a board member, for planet health initiatives.
• Directors and officers and their immediate family members use Klarna's payment options (Pay Later and Fair Financing) in the ordinary course of business, under the same conditions as other consumers, with average outstanding balances not materially exceeding the overall average.
• On September 11, 2025, the company entered into a registration rights agreement with certain principal shareholders, granting demand, short-form, and piggyback registration rights.

Stakeholder Impact

• **Shareholders:** Experience dilution from the IPO and potential future equity issuances. Voting power is concentrated with pre-IPO shareholders due to the multi-class structure. The net loss in 2025 may negatively impact investor sentiment, but strong GMV growth and AI efficiencies could be seen as long-term positives. The release of lock-up shares on March 9, 2026, could increase market volatility.
• **Consumers:** Benefit from expanded payment options (Klarna Card, Fair Financing), AI-powered customer service, and personalized shopping experiences. The company's focus on interest-free transactions and transparent pricing aims to promote financial well-being. However, increased credit losses and regulatory scrutiny on consumer protection could impact trust.
• **Merchants:** Benefit from increased GMV, higher conversion rates, new customer acquisition, and advertising solutions. The expansion of Klarna's network and payment methods (e.g., Apple Pay, Google Pay integration) provides broader reach. However, increased processing fees in some markets could impact their costs.
• **Employees:** The company is undergoing a strategic reduction in headcount due to AI-driven operational efficiency, which may lead to job losses. However, remaining employees benefit from AI upskilling and a focus on internal talent development. Equity compensation programs aim to align interests with company success.
• **Regulators:** Increased scrutiny from various authorities (SFSA, CFPB, BaFin, FCA) regarding banking, consumer protection, AML/CFT, data privacy, and AI usage. Non-compliance can lead to fines and operational restrictions. The company's remediation of a material weakness in internal controls is a positive step for regulatory confidence.

Next Steps

• Continue to grow the number of merchants on the network and enable their success.
• Deepen partnerships with Payment Service Providers (PSPs) to make Klarna a default payment method.
• Expand into new verticals with higher transaction frequency, such as Travel, Local Services, and Subscription Payments.
• Partner with digital wallets like Apple Pay and Google Pay for seamless integration and broader consumer access.
• Enter new geographical markets, leveraging the proven strategy from the U.S. expansion.
• Envision Klarna becoming the default payment method for active and future consumers, particularly through the Klarna Card.
• Continue to develop next-generation digital financial services, including instant refunds, cashback, real-time debit, and order/return tracking.
• Expand into personalized financial services and premium features through subscription tiers.
• Continue to leverage AI to drive scale efficiencies, reduce external vendor expenses, increase internal productivity, and better manage global compliance and banking operations.
• Monitor and adapt to new and changing regulations and licensing requirements in all markets.
• Continue to assess the future impact of new tax laws, such as the OECD's Pillar Two and the U.S. OBBBA.

Key Dates

Recommendation

Klarna's 2025 results present a mixed picture, warranting a 'hold' recommendation. While the company demonstrates impressive growth in GMV and active users, alongside significant AI-driven operational efficiencies, the return to a substantial net loss and increased credit loss provisions are concerning. The strategic shift towards Fair Financing, while driving interest income, creates near-term margin pressure due to upfront provisioning. The multi-class share structure and ongoing regulatory scrutiny, particularly regarding AI and consumer protection, introduce governance and operational risks. Investors should monitor the company's ability to translate its strong network effects and AI investments into sustainable profitability, especially as the Fair Financing portfolio matures and credit loss provisioning normalizes. The upcoming lock-up expiry in March 2026 could also introduce share price volatility.

Keywords

Fintech, Payments, Buy Now Pay Later, BNPL, Digital Banking, E-commerce, AI, Financial Services, Credit Underwriting, Consumer Finance, Online Shopping, Merchant Solutions, Advertising Solutions, Klarna Card, Fair Financing, Regulatory Compliance, SEC Filing, Annual Report, Form 20-F