Klarna Group (NYSE:KLAR) reported what management described as an accelerating adoption of its expanded set of “banking services” in Q4 2025, including the Klarna Card, deposit accounts, and “fair financing,” alongside its core buy now, pay later (BNPL) offering. On the company’s earnings call, CEO Sebastian Siemiatkowski said growth in these products outpaced internal expectations during the quarter, while the company also emphasized that rapid lending growth can pressure near-term reported profitability due to upfront provisioning mechanics.
Q4 growth metrics and guidance beats
Siemiatkowski said active consumers reached 180 million, up 28% year-over-year, and merchants grew to 966,000, up 42%. Gross merchandise volume (GMV) was $38.7 billion, which management said was above the top end of guidance. Revenue grew 38% to over $1 billion, which also beat guidance.
Transaction margin and the impact of upfront provisioning
Klarna highlighted growth in transaction margin dollars before and after provisions, while acknowledging that one profitability metric fell short of its guidance. Siemiatkowski said transaction margin dollars before provisions grew 31% year-over-year to $622 million. After provisions, transaction margin dollars were $372 million, up 17% year-over-year and up 28% sequentially from Q3.
However, Siemiatkowski said Q4’s transaction margin dollars “did not land where we guided,” attributing that primarily to the acceleration in lending growth and the accounting timing effect of booking expected credit losses upfront while recognizing revenue over time.
To illustrate, management walked through a simplified cohort example in which a loan cohort may generate lifetime profit, but the first quarter shows a drag because provisions are recognized immediately while revenue accrues over subsequent quarters. Siemiatkowski gave a specific Klarna example for the quarter: on $2.5 billion of U.S. BNPL financing portfolio originated in Q4 2025, the company booked $80 million in provisions upfront and recognized $40 million in revenue, which he described as a near-term headwind. He also said there was $180 million of interest income still to come on that cohort while the expected credit losses had already been provisioned.
Management linked the Q4 timing pressure to stronger-than-expected adoption of banking products, including fair financing, which Siemiatkowski said was growing at 165% annually on a GMV basis.
Loan sales and forward flow programs
To support growth in a “capital-efficient manner,” Klarna said it ramped loan sales and initiated its first fair financing forward flow during Q4 2025, with $73 million of gain on sales recognized in the quarter. CFO Niclas Neglén later said Klarna sold about $1.6 billion in Q4 and expected a Q1 transaction that would be “slightly smaller,” adding that the company would execute additional sales “as and when it makes sense,” without committing to a specific percentage of production sold.
In response to an investor question about delinquency trends following elevated provisions cited in Q3 2025, Neglén said credit performance was stable rather than deteriorating. He said provisions for credit losses declined in Q4 versus Q3 from 0.72% of GMV to 0.65%, attributing that to stable delinquency trends and the impact of increased loan sales.
Partnerships, merchant expansion, and product ubiquity
Management emphasized distribution partnerships as a driver of merchant growth and wider product availability at checkout. Siemiatkowski said Klarna added 285,000 merchants over the year and continued scaling its default relationship with Stripe, began a default rollout with Nexi through Paytrail, and expanded Apple Pay and Google Pay into additional markets. He also cited new partnerships with Emirates, LEGO, Vinted, and StockX, along with deepened relationships with Walmart, Lufthansa, and Etsy.
Siemiatkowski said the company doubled the number of merchants where fair financing is available and expanded its pay-in-full product to nearly half of its total merchant base. He framed the approach as ensuring relevant payment options—pay now, pay later, and fair financing—are available across more checkout experiences, including through partners such as Stripe and Adyen.
Banking customer adoption, card usage, and efficiency focus
Klarna pointed to rapid adoption of its card and deposit offerings. Siemiatkowski said active card users grew to 4.2 million, up 288% year-over-year. Consumer deposits reached $13 billion, up 37%, and “banking customers” reached 15.8 million, growing 101% year-over-year.
Management contrasted engagement and monetization between the broader consumer base and banking customers:
- Overall consumers (180 million) transact about 10x per year with an average revenue per user (ARPU) of about $30.
- Banking customers (15.8 million) transact about 28.5x per year with ARPU of $107.
- Average deposits increase from $64 for “paying customers” to $475 for banking customers, while credit balances were described as “modest.”
On credit, Siemiatkowski said Klarna does not issue revolving credit and underwrites every transaction, citing stable 3%–4% charge-off rates for its U.S. fair financing product. He also described Klarna’s operating model as technology-driven and headcount-efficient, noting revenue per employee reached $1.24 million in 2025 and was up 3.6x since 2022. He said revenue has grown 104% since 2022 while adjusted operating expenses declined 8%.
On the Klarna Card, Siemiatkowski said early usage showed a “healthy proportion” of debit, day-to-day spending—rather than being used only for pay later or financing transactions—across both the U.S. and Europe. Neglén added that the card was supporting growth even in established markets such as Sweden, which he said has roughly 80% population penetration.
Looking ahead, management discussed 2026 guidance at a high level, indicating it expects GMV and revenue growth in line with 2025, transaction margin dollars as a percentage of GMV broadly consistent with Q4 2025 amid continued scaling, and an acceleration in transaction margin growth into the second half as cohorts mature. Executives also said they were focused on improving processing and servicing costs over time, including by driving more transactions through Klarna’s own rails as balances and refunds increasingly flow through its accounts.
About Klarna Group (NYSE:KLAR)
Klarna Group is a global payments provider specializing in “buy now, pay later” (BNPL) solutions for online and in-store shoppers. The company partners with merchants to offer flexible payment options, including interest-free installments and deferred payments, aiming to enhance conversion rates and customer loyalty. Klarna’s platform integrates risk assessment, fraud prevention, and a one-click checkout experience to streamline transactions for both retailers and consumers.
Through its digital wallet and mobile app, Klarna enables users to manage purchases, track spending and access exclusive shopping offers from partner merchants.
