Klarna Group PLC (NYSE:KLAR) shares fell 20.5% on Tuesday after the company released a revenue forecast that did not meet analyst expectations. This overshadowed its second-quarter earnings, which were better than expected. The buy-now-pay-later firm reported second-quarter revenue of $1.04 billion, a 27% increase from last year. This figure exceeded the $994 million that analysts had predicted. Gross merchandise volume (GMV) rose 18% to $36.6 billion, while transaction margin dollars increased 42% to $446 million.
Revised Revenue Targets
For fiscal 2026, Klarna expects revenue between $4.08 billion and $4.16 billion. This is significantly lower than the previous estimate of over $4.34 billion. The company also lowered its GMV outlook to between $149 billion and $151 billion, down from a prior forecast of more than $155 billion. Klarna's guidance for the third quarter also missed expectations. The company projects revenue of $940 million to $980 million compared to the $1.11 billion that analysts had forecasted. Adjusted operating income guidance of $5 million to $15 million was also below the $52.8 million estimate.
Klarna attributed the revenue downgrade to unfavorable currency shifts and a weaker outlook for European volumes. This is especially true in discretionary retail categories. The company noted that German retail sales, its largest market, grew by less than 1%. Klarna's CEO, Sebastian Siemiatkowski, stated, "We have taken a more measured view of European volumes in the second half."
Profitability Despite Challenges
Despite the guidance cuts, Klarna reported a profit of $27 million in the second quarter. This is a recovery from a $46 million loss in the same period last year. This marks the second consecutive quarter of profitability since the company's IPO last September. The firm also slightly raised its transaction margin dollars target from $1.61 billion to between $1.62 billion and $1.65 billion. This reflects improved income streams with lower transaction costs.
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Klarna's stock decline may affect investor sentiment in the fintech sector. This is particularly true for companies that rely on consumer spending and retail performance. The reduced revenue outlook could lead to a reassessment of growth expectations for similar firms in the buy-now-pay-later market. Watch for Klarna's upcoming earnings report, which will provide further insights into its performance and market conditions.
Based on reporting by: proactiveinvestors.co.uk, cityam.com