Klarna stock plunged 20% in early trading on Tuesday after the buy-now-pay-later firm cut its full-year revenue and volume guidance, citing weaker retail sales in Germany. The move overshadowed a second-quarter profit beat, and rivals Affirm and PayPal rose, signaling investors see the slump as specific to Klarna rather than the wider BNPL sector.
Klarna's stock plunged 20% in early trading after the Swedish firm's earnings release disappointed Wall Street. The reaction centered on guidance, not results.
Germany drags down the full-year outlook
Klarna trimmed its 2026 gross merchandise volume forecast to a range of $149 billion to $151 billion, down from a prior view above $155 billion. It now expects revenue between $4.08 billion and $4.16 billion, down from a prior view above $4.34 billion, with $600 million of the reduction tied to currency.
The company pointed to slower retail sales and softer consumer sentiment in Germany, its largest market by volume, where retail sales grew less than 1% in real terms in the first half. According to Klarna CFO Niclas Neglén: "Our guidance simply assumes Germany stays softer rather than recovering." Neglén is departing the company after six years.
A profit beat gets overshadowed
The guidance cut came despite a clean quarter. Klarna posted earnings per share of $0.01, topping consensus estimates for a $0.06 loss, and revenue rose 27% year over year to $1.04 billion, above estimates of $996 million. Klarna also raised its transaction margin dollar guidance to $1.62 billion-$1.65 billion, equal to 1.09% of volume, up from a prior view above 1.04%.
Consumers over 30 days delinquent on their loans decreased by more than 20 basis points quarter-to-quarter, a potential sign of improving consumer health among lower-income borrowers Klarna serves.
Rivals shrug off the German slump
The market treated the move as company-specific. Through Monday's close, Klarna stock was down 33% year to date, while Affirm sat roughly flat and Sezzle was up sharply for the year. On Tuesday, Affirm stock rose 0.5% to $74.9 and PayPal rose 2% to $61.41, while Sezzle slipped 0.6%.
Truist analyst Brian Finneran said the results make for a more rational competitive backdrop for Affirm as Klarna prioritizes economics over growth. Klarna also flagged the planned 2027 departures of both its CFO and CMO, adding an executive transition to the German-led guidance reset.
Sources: Yahoo Finance, 24/7 Wall St., Investor's Business Daily
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