IPO raised $1.37 billion, but pre-IPO stockholders sold THEIR stock for $1.36 billion ... hmmmmm ... sounds like the pre-IPO stock holders don’t see any upside in the stock post-IPO ...
and no wonder:
While Klarna achieved its first-ever annual net profit in 2024, its path to sustained profitability is complex, with its performance shifting back to net losses in 2025. The company’s financial results show a pattern of reporting operational profits while still incurring a net loss after all costs are factored in.
Klarna’s shifting profitability
Profitable year (2024): Klarna reported a net profit of $21 million in 2024, its first profitable year. However, this was largely attributed to a one-time gain of $171 million from selling its Klarna Checkout (KCO) business.
Return to net losses (2025): The company returned to a net loss in 2025. In the first half of 2025, the net loss was $152 million, a significant increase from $31 million in the first half of 2024. The second quarter of 2025 saw a net loss of $53 million.
Operational vs. net profit:
Klarna frequently reports positive “adjusted operating profit,” which has been positive for several consecutive quarters.
However, this metric excludes significant expenses like one-off restructuring costs and share-based compensation, which contribute to the final net loss.
Factors affecting profitability
Positive factors:
Strong revenue growth: Klarna continues to see solid revenue growth, driven by expansion in markets like the U.S. and increased transaction frequency.
Growing network: The company’s expanding network of merchants and active consumers boosts its gross merchandise volume (GMV) and revenue potential.
Reduced credit losses: Improvements in credit loss rates show that Klarna is effectively managing the risk associated with its lending.
AI for efficiency: Klarna is leveraging AI to lower costs, particularly in customer service, which has reportedly boosted revenue per employee.
Negative and risk factors:
Reliance on one-off gains:
The 2024 net profit was inflated by a one-time sale, meaning it wasn’t indicative of sustainable core business profitability.
Competition:
The buy-now-pay-later (BNPL) market is highly competitive, with rivals like Affirm, PayPal, and Afterpay all vying for market share.
Recurring costs: Share-based compensation is a persistent cost that negatively affects net profit, even if it’s excluded from adjusted operating figures.
Credit loss risks: While recent trends are positive, managing credit losses is an ongoing challenge for a lending-based business.
Summary
Klarna’s profitability is improving on an operational level, but it is not yet consistently profitable on a net basis when all expenses are considered. While the company’s 2024 net profit was a notable milestone, it was not driven by core business performance. Klarna’s future profitability will depend on its ability to sustain revenue growth and manage costs, especially in the face of strong competition and its planned initial public offering (IPO).
A very fine examination of what surely seems like picking a pocket or two.