Klarna reduces Q1 net loss and expects to achieve profitability this year

Klarna Bank AB has significantly improved its Q1 financial performance by halving its net loss for the period compared to last year. For the first quarter of this year, the Swedish fintech giant reported a net deficit of 1.3 billion Swedish krona ($120.7 million), which is 50% less than its loss from the same period last year. Klarna is now looking forward to achieving profitability, after posting a loss of 2.6 billion krona in Q1 2022.

Klarna’s improvement in Q1 was also reflected in its total net operating income, which increased by 22% year-over-year to 5 billion Swedish krona. In a statement, Klarna’s CEO Sebastian Siemiatkowski hinted at a positive outlook for the second half of 2023. He also reflected on the company’s commendable Q1 performance, stating:

“This quarter, we’ve impressively managed to grow GMV and revenue, at the same time as we cut costs and credit losses and also investing ambitiously in AI-driven products. We are on track to achieve profitability this year, all while revolutionizing shopping and payments through our AI-powered approach.”

Last November, Siemiatkowski had announced that Klarna would become profitable again in 2023.

Klarna Improved Q1 Net Loss Attributable to Several Business Decisions, Including Extensive Partnerships & AI Push

Klarna attributed its substantially reduced Q1 net loss to declining customer defaults and its income diversification strategy. In addition to its core Buy Now Pay Later (BNPL) services, Klarna has tapped into other revenue sources, such as marketing and partnerships. Klarna’s adoption of artificial intelligence (AI) throughout its operations also helped the company surpass e-commerce trends in Q1 2023. Furthermore, the company secured several notable partnerships with globally recognized companies such as Airbnb Inc (NASDAQ: ABNB).

Klarna’s recent partnership with Airbnb offers seamless, flexible, and sustainable payment solutions to global guests of the San Francisco-based lodging company. The collaboration between both companies promises to be lucrative, with Airbnb anticipating over 300 million guest arrivals this year.

In Q1 2023, Klarna also established new retail partnerships with Samsung, Uniqlo, and Boden. Additionally, the online financial services provider strengthened existing ties with Nike (NYSE: NKE), Etsy (NASDAQ: ETSY), and Tod’s.

Klarna’s AI push has led to a partnership with ChatGPT creator OpenAI to deploy the generative technology for improved efficiency and consumer outcomes. The OpenAI partnership is the first for a European tech platform and underscores Klarna’s goal to help merchants target customers more effectively.

In April 2023, Klarna earned a credit rating of BBB/A-3 with a stable outlook from S&P Global. At the time, the rating agency said its assessment reflected the Swedish fintech’s ability to reclaim profitability and remain competitive in key markets.

2022 Downsizing & Growing Pains

Klarna, which currently boasts over 150 million customers, hired aggressively between 2020 and 2021 to leverage pandemic-induced growth. However, the company downsized in May 2022 under investor pressure to trim operations. In H1 2022, Klarna lost over $580 million, burning through cash to support expansions into the US and the UK.