The price correction and the Apple deal
Klarna shares closed at $18.94 on July 31, 2026, after dropping from a post-IPO high of $45.48. This price stays well below the $40 per share IPO price from September 2025. I view the current valuation as a massive correction. The July 28 launch of the Apple Upgrade program, where Klarna acts as the lessor for iPhone and Mac leases, moves the company away from being a simple payments app and closer to a credit utility. Goldman Sachs raised its target for KLAR to $25 in July despite the volatility. This target ignores the fact that the stock still trades at a fraction of its $45.6 billion peak from 2021. Apple Upgrade replaces the old iPhone Upgrade Program and places the underwriting responsibility for hardware leases on Klarna. The September 2025 IPO raised $1.37 billion through the sale of 34.3 million shares. This offering was oversubscribed by more than 20 times. On its opening day, the stock opened at $52, which was 30% above the $40 offering price. This debut gave the company a market valuation of $17 billion at the time. Sequoia Capital, which holds 21% of Klarna’s voting shares, saw its total returns reach approximately $2.65 billion after its cumulative $500 million investment. I find the volatility in this stock typical for fintechs, yet the drop from $45.48 to $18.94 is extreme.
Improving earnings and consumer engagement
The August 18, 2026, earnings report shows a sustained profitability turnaround. Revenue reached $1.042 billion in the second quarter, a 27% increase over the same period last year. Adjusted operating income hit $91 million, which is a 214% rise from the previous year. Net income grew to $9 million, overcoming the $53 million loss reported in the second quarter of 2025. Transaction margin dollars grew 42% to $446 million. I see these numbers as proof that the pivot to high-frequency products, like Klarna Memberships which reached 2 million paying subscribers, works. The company has 120 million active consumers, which adds 9 million users compared to the previous year. Merchant numbers also climbed 54% year-over-year to 1.2 million. Most recently, J.P. Morgan Payments went live, allowing its massive merchant base to offer the full Klarna suite. The company also updated its full-year 2026 guidance, lowering its GMV target to between $149 billion and $151 billion due to currency translation and lower German volumes. This adjustment follows a trend in the German retail market. Credit quality remains a focus, with provisions for credit losses at 0.52% of GMV. This exceeds the 0.56% reported in the second quarter of 2025. The Klarna Card also reached 6.5 million active users.
Assessing the bull and bear cases
Investors face a divide between a $12 bear case and a $25 bull case. I find the $12 floor plausible if the Apple relationship fails or if consumer credit losses rise. The company faces a €500 million Dutch claim regarding pay-later loans, which creates significant regulatory risk. You should note the difference in scale between Klarna and its US rival Affirm.
| Metric | Klarna (Q2 2026) | Affirm (FY Q4 2025) |
|---|---|---|
| Revenue | $1.042 billion | $876 million |
| GMV/Loan Sales | $36.6 billion | $10.4 billion |
| Revenue/Sales % | 2.85% | 8.42% |
Klarna’s revenue is 2.85% of its $36.6 billion GMV, while Affirm’s revenue is 8.42% of its $10.4 billion loan product sales. Affirm reported a 33% revenue jump in fiscal Q4 2025 and a 43% rise in GMV. Its revenue reached $876 million, while its loan product sales totaled $10.4 billion. I would skip the optimism if the company cannot stabilize its earnings against rising credit losses. Does the heavy reliance on Apple’s hardware cycles create a ceiling for long-term growth?
