A smartphone displays a Klarna logo in this illustration
Reuters

Swedish fintech giant Klarna is walking a financial tightrope. Despite strong revenue growth in Q1 2025, the company is seeing sharp losses from unpaid consumer loans—particularly in the United States—raising fresh concerns about the financial health of its user base. The company's revenue boom is being undermined by rising defaults, a troubling sign as Klarna recently paused its planned US IPO in April, citing fears over the economic fallout of President Donald Trump's tariff policies.

Consumer Credit Losses Are Soaring

According to Klarna's Q1 2025 financial results, the company posted a net loss of $99 million (£73.72 million) for the first three months of the year—more than double the $47 million (£35 million) loss it recorded in the same period last year.

The real concern, however, is its spike in credit losses. Klarna reported $136 million (£101.27 million) in unpaid loans, a 17% increase year-on-year.

Still, Klarna claims that the short-term nature of its lending—83% of its loan portfolio turns over within three months—gives it flexibility to adapt. The company's credit loss rate remains relatively low at 0.54%, only slightly up from 0.51% last year.

Klarna's Q1 Highlights: Strong Revenue, Growing Merchant Base

Despite the losses, Klarna's top-line performance was solid. Total income rose 15% year-on-year to $701 million (£521.97 million). The US led the charge with a 33% revenue jump, making it Klarna's largest market.

Merchant acquisition also surged by 27%, bringing Klarna's total to 724,000 partners. Notably, the company added 150,000 new retail clients this quarter—more than twice what it onboarded in the previous one.

This growth was fuelled in part by Klarna's integration with Stripe, with new partnerships on the horizon with JPMorgan Payments, Worldpay, and Nexi. Klarna also improved its revenue take rate, up to 2.77% from 2.71% a year earlier. Transaction margin dollars climbed 6% to $271 million (£201.79 million), reflecting growing scale and operational leverage.

Betting Big on AI

Klarna is also investing heavily in artificial intelligence to improve efficiency and reduce costs. Since 2022, the firm has cut headcount by around 40% while increasing the proportion of tech-focused employees from 36% to 52%.

Currently, 96% of Klarna employees use AI tools daily, helping drive a 152% increase in revenue per employee since Q1 2023. The company is now on track to hit $1 million (£744.6 thousand) in revenue per employee.

AI-driven improvements have led to a 40% drop in customer service transaction costs year-on-year, all while maintaining high levels of customer satisfaction.

Klarna Hits Pause on US IPO

Klarna had filed for a US IPO in March 2025, aiming to raise over $1 billion (£744.6 million) at a valuation of more than $15 billion (£11.17 billion). But market volatility stemming from Trump's April tariff announcements—paired with a 1,600-point plunge in the Dow Jones—prompted Klarna to put those plans on ice.

The company cited the economic uncertainty and risk of a broader trade war as key reasons for postponing the offering.

Juggling Growth and Risk

Klarna's latest results reveal a fintech trying to scale fast while navigating a complex and shifting economic environment. The company is seeing strong revenue growth, particularly in the US, and expanding its merchant base rapidly. But ballooning credit losses and delayed profitability point to real risks.

With its IPO shelved for now, Klarna is doubling down on AI, partnerships, and short-term lending strategies to stay agile. Whether that's enough to offset rising default rates and investor unease remains to be seen—but for now, the Swedish fintech appears focused on shoring up its foundation before stepping back into the public spotlight.

Writer's pick