Profit and Provisions: Klarna’s Q1 Report Sends Mixed Signals to Investors

Buy-now-pay-later lender Klarna swings to $1M profit, revenue surges 44% to $1.01B, but Q2 guidance misses estimates and loan loss provisions jump 37%, dampening investor sentiment.

Klarna notched its first quarterly profit since going public, but the market’s attention quickly shifted to a steep rise in credit provisions and a downbeat revenue forecast for the current quarter. The buy-now-pay-later giant’s stock gave back some of its initial gains as investors weighed the conflicting signals.

The Swedish payments company reported net income of $1 million for the first quarter of 2026, swinging from a substantial loss a year earlier. Revenue surged 44% to $1.01 billion, comfortably above the $945.1 million consensus estimate. Growth was driven by a 49% expansion in the merchant network to over 1.07 million partners and a user base that now stands at 119 million active consumers. Interest income jumped 56% to $284 million, underscoring improved monetization across the platform.

Yet the positive headline numbers were overshadowed by the cost of lending. Klarna set aside $186 million in loan loss provisions during the quarter, up 37% from $136 million a year ago. While the provision rate relative to gross merchandise value held nearly steady at 0.55% versus 0.54% in the prior year, the absolute increase raised eyebrows. In the US financing business, delinquency rates improved by 36 basis points from their peak, but the overall trajectory of provisions remains a key concern for a business model that depends on managing credit risk.

The cautious tone from management on the outlook further weighed on sentiment. For the second quarter, Klarna guided revenue between $960 million and $1 billion, well below the $1.065 billion analysts had been expecting. Executives cited normal seasonality and unfavorable exchange rates. The company reaffirmed its full-year target for gross merchandise volume above $155 billion, but that did little to offset the disappointment in the near-term forecast. Adjusted operating profit is expected in the range of $30 million to $50 million, and management highlighted several new partnerships with major payment processors and airlines that are set to go live in the coming months.

The stock reflected the mixed picture. After jumping as much as 20% on Thursday following the earnings release, Klarna shares retreated on Friday. In European trading, the stock closed at €13.06, a decline of 3.55% on the day. Nonetheless, the weekly performance still showed a gain of 5.66%. The year-to-date picture remains bleak, with the shares down roughly 46%.

Technically, the stock is trading above its short-term moving average near €12.44 but remains below the medium-term trend. In US trading, the $15 level is viewed as a near-term support zone. Analysts are split on the outlook. BMO Capital raised its price target to $17 from $16 and maintained a “Market Perform” rating, while Wells Fargo trimmed its target to $26 from $32 but kept an “Overweight” stance. TD Cowen initiated coverage with a “Hold” and a $16 target, and Needham also stuck with a “Hold” rating, though it noted improving default trends and stricter cost control.

The average analyst price target across 18 analysts now stands at $21.22, implying roughly 29% upside from the recent US closing price, and the consensus rating remains “Buy.” The next major check point will come with the third-quarter update, when investors will scrutinize whether Klarna can hit its revenue corridor and solidify its profitability trajectory.