Buy now, pay later (BNPL) is in another record run, with total payment volume across top providers climbing more than 20% year-over-year (YoY). PayPal (PYPL), Affirm (AFRM), and Klarna (KLAR) are driving that growth, and Klarna’s move into public markets in September stood out. The Swedish fintech company delivered 2025’s largest IPO, raising about $1.37 billion at $40 per share. The stock opened at $52 and rose 15% on the first day. That debut put Klarna at the center of the BNPL growth story, where flexible credit meets AI-powered personalization across retail and online payments.
The new momentum has not been missed by big institutions. Just last week, Cathie Wood’s ARK Invest added 76,000 more shares of KLAR to its ARK Fintech Innovation ETF (ARKF), extending a buying streak that shows strong conviction in emerging fintech names. Klarna is now among the most watched new listings on Wall Street, with Q3 revenue guidance between $870 million and $920 million, pointing to a path toward steady profitability.
With Klarna’s valuation stabilizing near $27 billion and the company gaining over one million U.S. card sign‑ups in its first month, are investors like Wood seeing something in Klarna that the market has not yet priced in? Let’s take a closer look.
Klarna, the Swedish fintech company, has grown from a basic “buy now, pay later” service into a full digital bank and payments provider. Its business now includes flexible payment options, consumer banking, and partnerships with merchants.
Despite that progress, Klarna’s stock has had a rough month, down 20.7%, including a 7.2% drop over the past five days.
Even with the recent weakness, Klarna’s financials continue to show improvement. The company reported Q2 2025 revenue of $823 million, up 20% from last year, slightly below analysts’ $840 million estimate. It posted a net loss of $53 million, but that’s a clear improvement from the deeper losses of a year ago, with earnings per share coming in at $0.14.
Klarna also achieved its fifth consecutive quarter of operational profitability, recording an adjusted operating profit of $29 million, showing real progress on its path to sustained profits. Gross merchandise volume rose 19% YoY, supported by strong growth in the U.S., where revenue jumped 38% as Klarna expanded collaborations with major partners like Walmart (WMT), eBay (EBAY), and Stripe. Free cash flow reached $787 million, helped by tight expense control and proceeds from earlier asset sales.
Cathie Wood’s decision to add 76,000 more Klarna shares looks like a carefully planned bet on long-term growth. Klarna’s new partnership with Qatar Airways is a clear step in that direction, putting the company deeper into the travel market and allowing customers in 17 European countries to use Klarna’s flexible payment options when booking flights. The deal, made possible through Worldpay integration, increases Klarna’s presence with premium global brands and high-value merchants, adding scale and more cross-border transactions to its network.
Equally important is Klarna’s growing partnership with Google (GOOG) (GOOGL). The two companies have formed an AI-driven collaboration using Google Cloud’s full technology stack to accelerate development and improve customer experiences. Klarna plans to use these tools to build more personal and engaging shopping experiences for its 114 million users, turning its data capabilities into a key strength.
The relationship has also expanded with Klarna’s backing of Google’s Agent Payments Protocol (AP2), an open standard meant to make digital payments more secure and flexible. This move highlights Klarna’s focus on future payment frameworks while staying closely aligned with Google’s ecosystem, including Google Pay, Chrome’s autofill, Google Store, and Google Play.
Klarna’s launch of its flexible debit card and digital wallet in the UK takes that progress a step further, moving beyond the BNPL model into everyday banking. The card allows customers to make debit payments, withdraw funds, and earn cashback rewards, bringing Klarna closer to becoming a full digital bank. Powered by Visa’s Flexible Credential, the card works at 150 million merchant locations worldwide, showing how Klarna is evolving from a payment innovator to a widely adopted financial technology provider.
For the next few quarters, Klarna expects Q3 2025 revenue to come in between $870 million and $920 million, which would be a steady rise from Q2’s $823 million. Analysts project average earnings per share (EPS) of -0.33 for the current quarter ending September 2025 and -0.04 for the next quarter ending December 2025. That suggests short-term pressure before a stronger rebound in fiscal 2026, where earnings are expected to turn positive at 0.46 EPS, marking about a 173% YoY growth rate.
Citi analysts began coverage with a “Buy” rating and a $50 price target, which points to around 37% upside from Klarna’s current $36.40 share price. They noted that margins are temporarily tightening as the company boosts loan loss provisions but expect improvement as Klarna continues to grow in the U.S. and Europe.
KBW issued an “Outperform” rating with a $52 target, or roughly a 43% upside, crediting Klarna’s strong global brand and large network of merchants for driving market growth and efficiency. Goldman Sachs joined the bullish camp with a “Buy” and a $55 target, around a 51% upside, citing Klarna’s increasing U.S. presence and potential from higher-value financing volumes fueled by new partnerships.
Altogether, the 17 analysts covering the stock have given Klarna a “Moderate Buy” consensus rating, with an average price target of $49.73, which points to about 40% potential upside from current levels.
At the end of the day, Cathie Wood’s Klarna play looks less like blind optimism and more like a calculated shot at a fintech that’s still early in its public life but already showing strong operational muscle. Klarna’s fundamentals, brand partnerships, and AI-driven expansion give it solid footing for future growth, even as short-term market jitters pull its stock lower. With analysts projecting around 37% upside and steady revenue acceleration into 2026, shares look more poised for recovery than retreat. If execution holds, KLAR could easily reward patient investors following Wood’s conviction.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com