Klarna's Stock Faces Mounting Challenges Despite Record Growth

Klarna's 2025 results show 25% revenue growth to $3.5B but a net loss per share of -$0.79. Future guidance disappoints as a class-action lawsuit adds pressure.

The Swedish fintech giant Klarna finds itself navigating turbulent waters. While the company's latest annual report, filed with U.S. regulators on February 26, confirms another year of impressive top-line expansion, a closer look reveals underlying pressures that have unsettled investors and triggered significant stock volatility.

Regulatory Filing Reveals a Profitability Puzzle

Klarna's Form 20-F submission provides a detailed account of its 2025 fiscal year, a period marked by operational strength but bottom-line disappointment. The company reported a Gross Merchandise Volume (GMV) of $127.9 billion, representing a 22% year-over-year increase. Revenue climbed 25% to $3.5 billion. On an adjusted basis, Klarna managed a modest operating profit of $65 million, yielding a 1.9% margin. However, the final figure showed a net loss per share of -$0.79.

A notable divergence occurred in the fourth quarter. Klarna achieved a milestone, surpassing $1 billion in quarterly revenue for the first time with a total of $1.082 billion, a 38% surge. Yet, profitability reversed course; a net loss of $26 million replaced the $40 million net profit recorded in the same quarter the previous year.

Dual Headwinds: Subdued Guidance and Legal Action

For the market, future projections proved more consequential than past performance. Klarna's outlook for 2026 includes continued growth, with a GMV forecast of $155 billion and first-quarter revenue expected between $900 million and $980 million. The company also anticipates an adjusted operating margin of 6.9%. However, analysts noted that the GMV projection fell short of market expectations, fueling concerns that the breakneck pace of expansion may be moderating.

Compounding these worries is a sharp 59% year-over-year increase in credit loss provisions. Management acknowledged that rising product adoption incurs upfront costs, with associated revenues sometimes materializing over subsequent quarters. This dynamic can pressure near-term margins, even as long-term profitability is projected to improve.

Adding a layer of legal complexity, a class-action lawsuit has been initiated in the United States related to Klarna's initial public offering on September 10, 2025. The suit alleges that the prospectus and registration documents failed to adequately disclose material information, including the risk that loss reserves could increase significantly shortly after the IPO.

Risk Factors: Scale, Scrutiny, and Funding

The annual report outlines a business model heavily reliant on scaling its operations, which introduces distinct vulnerabilities. Key risks highlighted include dependence on merchant relationships and brand perception, intense competition from traditional banks, card networks, and other fintech firms, and the complex regulatory and licensing landscape across its many markets.

The company's extensive use of artificial intelligence and machine learning also brings new regulatory considerations, particularly in light of evolving frameworks like the EU's AI Act and stringent data protection rules such as GDPR. On the funding side, Klarna's growing reliance on deposit financing, while generally cheaper than wholesale funding, exposes it to competition for savers' deposits and potential liquidity risks should customer confidence waver.

Klarna's balance sheet expanded substantially in 2025. Assets grew to $18.797 billion from $13.804 billion the prior year. Revenue reached $3.509 billion, up from $2.811 billion in 2024.

Market Sentiment and the Path Forward

Market nervousness is evident in the share price performance. Despite a recent rebound of 9.37% over the past week, the stock remains down 43.14% on a 30-day basis.

The upcoming stress test for Klarna will be the execution of its 2026 targets. The critical questions are whether the company can deliver on its promised improvement in transaction margins during the second half of 2026, and if the higher credit provisions and ongoing lawsuit will continue to erode investor confidence or if these pressures will gradually dissipate.