Klarna trims revenue forecast as European sales soften

Klarna announced on Tuesday that it will target revenue of between $4.08bn and $4.16bn for the current financial year, down from a previous outlook of more than $4.34bn. The company also reduced its gross merchandise volume (GMV) projection to $149bn, a cut from $151bn and well below the earlier ambition of over $155bn.

Revised outlook and market reaction

The downgrade reflects a combination of unfavourable currency movements and a slowdown in European consumer spending. Swedish fintech unicorn said the outlook for the second half of the year is more cautious, especially in discretionary retail categories.

We have taken a more measured view of European volumes in the second half… and pronounced in certain discretionary retail categories,

Shares of the firm fell almost 19 per cent in early trading, slipping below $16. The drop underscores investor sensitivity to any sign of weakening demand in the markets that drive the bulk of Klarna’s transaction flow.

Underlying drivers

Germany, Klarna’s largest market by transaction value, posted retail sales growth of less than one per cent, prompting the firm to label the outlook for the country as “soft through the second half rather than recovering”. United Kingdom remains the third‑largest market, with more than 11m active customers and partnerships with roughly 60,000 retailers. The company attributed about $600m of the GMV shortfall to currency movement that hit both European volumes and the UK.

Despite the revenue cut, Klarna nudged up its transaction‑margin target to a range of $1.62bn‑$1.65bn, up from $1.61bn. The improvement stems from higher‑margin income streams, including a surge in subscription revenue that grew 600 per cent after the firm expanded its paying‑member base to two million.

Future steps

The fintech posted a $27m profit for the second quarter, a turnaround from a $46m loss in the same period last year, marking its second profitable quarter since the September IPO. Revenue topped $1bn for the third straight quarter as GMV rose 18 per cent year‑on‑year to $36.6bn. Active consumers reached 120m, an eight per cent annual increase.

In July, Klarna filed an application for a United States banking licence, a move it says will let the firm serve its 30m US customers across spending, saving and payments with lower costs and better service.

Analysts will watch whether the US licence materialises and whether the firm can sustain its margin gains as European retail conditions evolve. A softer European backdrop could keep pressure on growth, while a successful US expansion may offset some of the regional slowdown.