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Klarna shares slumped by a quarter on Thursday after the buy now, pay later group reported a $273mn net loss for 2025 and increased its provisions for loans it expects customers will be unable to repay.
The stock had already halved since the Swedish group secured a $15bn valuation in a New York listing in September. Thursday’s decline brought the post-IPO slide to 66 per cent and cut its market value to $5.3bn.
The company said on Thursday that it had set aside $250mn for credit losses in the fourth quarter — up almost 60 per cent on the same period in 2024.
The increase in provisions was partly due to the growth of its “fair financing” product — a longer-term interest-bearing scheme that requires provisions to be booked upfront even though revenues are generated throughout the life of the loan.
Klarna primarily offers interest-free consumer loans for retail purchases and provides an opportunity to pay in several instalments.
It has been trying to pivot away from its buy now, pay later services towards becoming a neobank that offers products including debit cards and interest-bearing loans.
The soaring provisions meant the group posted a net quarterly loss of $26mn, compared with a net profit of $40mn in the same period a year earlier.
The annual loss was also a reversal of the $21mn net profit for 2024.
The loss overshadowed increased revenues of almost $1.1bn for the last three months of 2025, up 38 per cent from the same period a year earlier.
Klarna’s chief executive and co-founder Sebastian Siemiatkowski said on an analyst call that the increase in provisions for bad loans was a consequence of his company’s push to grow.
“The more we grow in these [fair financing loans] the more profit we’re generating for the future. So the real question is simply: Do we want to make more money, even if it means slightly less today, to make significantly more tomorrow?”
Despite soaring provisions, Niclas Neglén, Klarna’s chief financial officer, said consumers were not in a more precarious state. “From a credit perspective, what we’re seeing is actually stability, not a deterioration. Provision for credit losses actually declined in Q4 versus Q3,” he said.
The company said it now had 4.2mn active users of its debit card and the FT previously reported that the company was considering applying for a US banking licence.
Siemiatkowski said: “We’ve been executing on a clear plan: acquire customers through seamless payments, then deepen those relationships into banking.”
The company now has 118mn active users, a 28 per cent increase on last year. Klarna makes about $107 in annual revenue per banking customer, compared with $30 for its average consumer.
Klarna has been vocal about using AI technology to keep a lid on costs. Siemiatkowski has claimed that the technology has allowed Klarna to halve its workforce in recent years by not replacing staff who leave. An AI chatbot handles two-thirds of customer service inquiries.
Siemiatkowski has been a champion of AI and personally invested in companies including OpenAI and xAI through his family office at Flat Capital.
Klarna is due to publish its full annual results on February 26.
