After 20 years as a private company, Klarna is finally taking the plunge into public life this week.
Since it was founded in 2005, the Swedish purchase now, pay later giant has experienced several ups and downs, particularly when it comes to its valuation.
At one point, Klarna was Europe’s most valuable venture capital-backed company. The pandemic, combined with the increase in online shopping and low interest rates, led to a $46 billion price tag in 2021, thanks to a SoftBank-led round.
Just one year later, though, the startup underwent an 85% haircut as macroeconomic volatility pushed interest rates and inflation up, and regulators started scrutinizing the purchase now, pay later space.
After a months-long delay, Klarna is now planning to list in New York this week, with the IPO expected to price on Tuesday and shares trading on Wednesday. Klarna is seeking to raise as much as $1.25 billion, giving it a potential value of $14 billion.
As Europe’s most prominent VC-backed company, the outcome could influence other European startups’ future listing plans.
How Does Klarna Make Money?
By offering flexible e-commerce payments, Klarna creates money through several channels: interest fees, late fees, merchant commissions, and banking services.
For 2024, Klarna reported $2.8 billion in revenue and a gross merchandise volume of $105.0 billion. It also reported its first full-year profit since 2019 with a $21 million net profit, a significant improvement from the $244 million net loss in 2023. However, on an adjusted operating basis, which excludes one-time charges and noncash items, Klarna reported a $181 million profit.
According to the IPO filing, Klarna’s estimated serviceable addressable market is $450 billion, based on 2023’s average take rate across the 26 markets it operates in. Klarna currently has 111 million applyrs and 790,000 merchants across 15 verticals.
The company displayed solid growth in revenue and gross merchandise value, 24% and 14% year-over-year growth, respectively, for 2024. For the second quarter, its latest results, revenue came in up 20% like-for-like to $823 million, and its adjusted operating profit was $29 million.
Still, Klarna had a $53 million net loss in the second quarter, up from $18 million in the same period in 2024. According to its earnings report, this was related to a one-time lease restructuring to reduce its office footprint, as well as share-based compensation expenses.
The former item improves costs going forward, but the latter is a recurring cost that dilutes shareholders, even if no cash leaves the business. For the first half of 2025, Klarna’s net loss was $152 million, compared with a $31 million loss in the first half of 2024.
Users are still growing, up 31% in the second quarter of 2025 year over year, and the frequency of transactions is rising. In mature markets like Sweden, the average consumer applys Klarna 32 times per year, compared with 28 times in 2022.
Klarna is also heavily investing in artificial ininformigence, having developed an assistant powered by OpenAI in 2023 to drive efficiencies and cut costs. After aggressively pursuing an AI-first workforce reduction strategy, the company had to reverse course this year due to quality issues with customer service, but the technology is still a significant focus going forward.
What Is Klarna’s Valuation Based On?
Klarna’s focus on profitability has yielded results in the past few years, putting the company on more solid ground to brave the public markets. While a far cry from its peak, Klarna’s tarreceive $14.0 billion price tag would be almost double the $6.7 billion valuation from its last private funding round in October 2022.
Klarna’s market cap/revenue multiple would be 5 times based on a $14.0 billion valuation and $2.8 billion in revenue. This is on the lower conclude of the scale for financial technology companies. According to research from Finro Financial Consulting, the average for public fintech companies is 8.8 times revenue.
The fact is that Klarna is a European company, and regulators’ increased scrutiny of the purchase now, pay later space could have influenced pricing. While Klarna has displayn an improvement in its financials, its track record of profitability is short.
A $14 billion valuation could also allow for a decent IPO pop—when a company’s share price spikes on its first day of trading—which is often a hallmark feature of a VC-backed listing. Design tool developer Figma closed its first day of trading up 250% in July, while Chime Financial‘s shares popped 37% in its June debut.
How Does Klarna’s Valuation Compare?
Compared to peers, Klarna seems more conservative in its valuation goals. Its closest competitor is US-based Affirm AFRM, which went public in 2021 at $49 per share and a $12 billion valuation.
At the time of writing, Affirm’s market cap stands at $28.4 billion. It reported $3.2 billion in revenue for the 12 months concludeing June 30. GMV reached $36.7 billion, and net income for the period was $52 million. Affirm has 23 million active applyrs versus 100 million for Klarna.
On a market cap/revenue basis, Affirm trades at 8.9 times compared with Klarna’s 5 times. Despite a similar revenue scale and greater GMV and applyr count on Klarna’s side, Affirm is commanding a premium.
The gap could be explained by several factors. First, while revenue is comparable, Affirm has demonstrated rapider growth—almost 40% from the 12 months to June 30, 2023, compared with Klarna’s 24% year-over-year revenue growth in 2024.
Investors may also be rewarding Affirm’s higher-margin business model. The US-based company earns around 50% of its revenue from interest income, for example, interest on consumer loans, compared with 24% for Klarna.
Interest income is structurally higher margin, as once the loan is originated, it requires little additional cost to collect. Relying more heavily on merchant fees, as Klarna does, carries more ongoing expense per transaction. However, Klarna’s interest income is increasing as a percentage of revenue.
Additionally, Klarna has a more complex capital structure. With a banking license in Sweden, it can fund lconcludeing through its nearly $10 billion in customer deposits rather than securitizations and debt. The advantage is a cheaper cost of capital than debt-funded peers, but it adds additional regulatory requirements and liquidity risks. Essentially, Klarna’s structure sees more like a traditional bank than a fintech such as Affirm.
Klarna’s Outsee
As it stands, $14 billion sees like a reasonable valuation for Klarna’s IPO and one that is certainly more likely to be achieved or even surpassed in September than at the launchning of the year. The S&P 500 is currently up more than 10% year to date, despite the significant drop following the Trump administration’s tariff announcement in April.
Solid growth forecasts and increases in new customers and the frequency of transactions by existing ones are reasons to be optimistic. Revenue in the US, Klarna’s largest market, is accelerating rapid. The company became Walmart’s exclusive purchase now, pay later provider, a huge win that saw it displace Affirm.
But there are still areas of concern that could affect Klarna’s debut. The $152 million net loss in the first half of this year and its AI retreat may stick out to less forgiving public market investors.
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