rewrite this title Klarna tops third-quarter revenue estimates in first earnings report since IPO

Klarna topped Wall Street third-quarter revenue expectations in its first earnings report after debuting on the New York Stock Exchange in September.

Shares dropped 9%.

Here’s how the company performed compared to LSEG estimates

Revenues: $903 million vs. $882 million expected

Revenues grew 26% from $706 million in the year-ago period. The company reported a net loss of $95 million, or 25 cents per share, a drop from a year ago when it had net income of $12 million, or 5 cents a share.

The buy now, pay later firm said it’s getting a boost from outsized U.S. growth, where gross merchandise volume grew 43% from a year ago. Gross merchandise volume, which measures merchandise sold, rose 25% to $32.7 billion from $26.2 billion last year.

The adoption of features such as the Klarna Card and fair financing, which offer longer installment options for bigger purchases, contributed to U.S. gains. The feature offers varying interest rates and saw gross merchandise volume more than triple from a year ago.

Since its July launch, the fintech firm said its Klarna Card has reached more than four million customers and accounted for 15% of transactions by October.

CEO Sebastian Siemiatkowski said fair financing has doubled the number of users from a year ago, but only penetrated about a fifth of merchants. That creates “tons of opportunity” for Klarna, he told CNBC.

“We want to be the one that helps you save time, save money, be in control of your finances and that’s obviously not necessarily what we’ve been associated with,” he said, adding that Klarna will continue working to gain that reputation.

Klarna also said Elliott Investment Management agreed to buy $6.5 billion of its fair financing loans so it can focus on the product’s U.S. growth.

Merchants grew 38% to 850,000 from 616,000 in the year-ago period, but average revenue per active customer declined. Customers totaled $114 million.

For the fourth quarter, Klarna expects gross merchandise volume to range between $37.5 and $38.5 billion and revenues between $1.065 million and $1.08 million. Both topped FactSet estimates.

Transaction margin dollars, a profitability measure for its core business, are forecasted to range between $390 million and $400 million. The figure totaled $281 million in the third quarter.

In a note to clients, Bank of America said the focus on fair financing weighed on Klarna’s expected transaction margin dollars, with the fourth quarter guide in line with the street.

“Based on our conversations, we think investors remain cautious on credit-driven growth,” the bank said.

JPMorgan called fourth-quarter guidance for a “sequential increase” in transaction margins “encouraging.”

Klarna opened on the NYSE about two months ago, after delaying its initial public offering plans in April as President Donald Trump’s aggressive tariff plans rattled financial markets.

In recent weeks, stocks have taken a tumble as concerns mount over a potential AI bubble with stretched valuations. Worries of a slowdown in consumer spending have also grown.

Klarna shares have shed more than one-third in value from their highs.

Siemiatkowski said the company isn’t yet seeing “material differences” in payback or spending habits due to the microenvironment, but is monitoring the AI wave that is slated to impact more white collar careers.

Over the years, Klarna has bet big on artificial intelligence. Siemiatkowski told CNBC in May that the technology, along with attrition, has helped the fintech firm shrink its workforce by 40%.

He said its natural attrition rate is as much as 20%.

Klarna isn’t alone. Palantir, Salesforce and Amazon have all warned that they plan to cut their workforces or slow hiring due to AI adoption.

Siemiatkowski said AI ties into the company’s “customer-obsessed” mentality and has dropped the average amount of time to solve a customer service issue to under two minutes.

Companies that only use AI or robots to deal with customers are making a “big mistake, because you want to have a human connection,” Siemiatkowski said. “There’s this tremendous value.”