Story Stocks^®

Klarna Group (KLAR) is trading lower after its Q3 results this morning, its first report since going public in September. The company beat revenue expectations, which increased 28% yr/yr to a record $903 mln, but operating loss widened to $(83) mln compared to $13 mln in the year-ago period. Management also expects further momentum in Q4, issuing upside revenue guidance of $1.065-1.080 bln, while GMV is expected to reach $37.5-38.5 bln.

• Like-for-like GMV accelerated from Q2, rising 23% to $32.7 bln, driven by U.S. GMV up 43% LfL, Southern Europe up 73% LfL, and Sweden up 18% LfL. U.S. revenue increased 51% yr/yr.
• The Klarna Card launched in July and has continued to surge, with GMV up 92% yr/yr, more than 4 mln sign-ups, and accounting for 15% of global transactions, reflecting strong consumer appetite for debit-first flexibility and KLAR's scalability.
• Fair Financing, its longer-term installment product, posted rapid adoption with U.S. GMV up 244% yr/yr and global GMV up 139%. It is now available at 18% of merchants, up from 10% two years ago.
• KLAR noted that credit quality remains strong. Realized losses fell 1 bps to 0.44% of GMV, and Fair Financing delinquencies improved 5% yr/yr. The increase in provisions to 0.72% of GMV (0.56% in Q2) reflects the accelerating Fair Financing portfolio.
• Transaction margin dollars, which represent total revenue minus total transaction costs, fell yr/yr to $281 mln from $316 mln. KLAR said this lag was expected given product mix shifts, including the longer-term nature of Fair Financing. Even so, it is guiding TMD in Q4 to $390-400 mln as compounding revenue begins to flow through.

Briefing.com Analyst Insight

KLAR's debut report is drawing a negative market reaction largely because profitability moved in the wrong direction despite strong top-line momentum. Growth metrics were undeniably robust, with accelerating GMV, rapid adoption of Klarna Card and Fair Financing, and stable credit performance. The increase in credit provisions is tied to product mix and growth rather than worsening quality, which should help ease investor concern. TMD weakness may appear like a red flag at first glance, but management's Q4 outlook suggests this will begin reversing as Fair Financing revenue flows through. Ultimately, KLAR's challenge remains convincing investors that its scaling model and AI-driven efficiency gains can translate into sustainable profitability in a competitive BNPL landscape.