Klarna’s shares tumbled 17.1% in pre-market trading on Tuesday after the buy-now-pay-later company reported second-quarter results that fell short of expectations and trimmed its profit outlook.
The stock was last indicated at $16.17, well below its $40 initial public offering price in September 2025. Klarna’s guidance for second-quarter revenue of $960 million to $1 billion lagged the $1.01 billion reported for the first quarter, underscoring a sequential slowdown in growth.
Management attributed part of the softness to seasonality and foreign exchange effects, but the results also reflected rising credit risks tied to its expanding longer-duration lending product, Fair Financing. Credit-loss provisions surged 37% in the first quarter to $186 million, with provisions booked upfront under the new lending line.
For the first half of 2026, Klarna guided adjusted operating profit to $30 million to $50 million, below some analyst expectations. The company’s profitability outlook has softened despite maintaining a majority of Buy ratings among 22 covering analysts, with 13 recommending Buy or higher and nine at Hold.
Morgan Stanley raised its price target on Klarna to $21 from $18 ahead of the report but retained an Equal Weight rating. Options markets had priced in a roughly 15% move around the earnings release, though the stock has historically exceeded implied volatility to the downside.
The broader market backdrop weighed on sentiment, with the S&P 500 down 0.4% and the Nasdaq off 1.1% in early trading. Affirm, a larger U.S.-listed buy-now-pay-later competitor, also declined alongside Klarna.
