Klarna stock plunges 20% on trimmed guidance as German retail sales slow

Klarna's stock experienced a significant drop of 20% following the release of its earnings and revised guidance. The Swedish buy-now, pay-later company lowered its expectations for revenue and gross merchandise volume (GMV), projecting revenue between $4.08 billion and $4.16 billion for the year, down from the previous forecast of $4.34 billion.

Additionally, Klarna now anticipates its 2026 GMV to fall between $149 billion and $151 billion, a decrease from its earlier estimate of $155 billion. The company cited a slowdown in retail sales and depressed consumer sentiment in Germany as the primary reasons for the downsized outlook. Klarna's CFO, Niclas Neglén, who is leaving the company after six years, stated that the revised guidance assumes Germany's economic situation remains softer rather than recovering.

Despite this guidance change, Klarna reported a profit in the second quarter, with earnings per share reaching $0.01, surpassing Wall Street's predictions of a $0.06 loss. The revenue for the quarter grew by 27% year-over-year to $1.04 billion, also exceeding estimates of $996 million. Notably, the number of consumers who were more than 30 days late on their loans dropped by more than 20 basis points quarter-over-quarter, suggesting a potentially improving consumer health in the economy, as buy-now, pay-later services are often more vulnerable to lower-income consumers.