Klarna joins the tracked set today, eleven days after it reported the June quarter on 18 August. Its Rule of 40 card reads +0.8 for that quarter. One quarter earlier it read -50.5, and the quarter before that -243.0. Revenue growth over the same three quarters went 38.5%, 44.4%, 26.6%. Almost none of that 375-point swing came from the business.
Klarna says so itself, in the Q1 2026 release, immediately under its own cash-flow statement:
As a bank, cash flows from operating activities primarily represent the net flows of money coming in and going out from the bank's consumer lending and retail deposit activities. It's not a reflection of the bank's net operating result for the period.
That is the disclaimer, and it is correct. Klarna holds a full EEA banking licence granted in 2017 and funds its loan book with $13.0 billion of consumer deposits. When Germans move savings in or out of a Klarna account, it lands in operating cash flow, which is the numerator of half of the Rule of 40.
What actually happened in the December quarter
| Quarter | Revenue | YoY | FCF | FCF margin | R40 |
|---|---|---|---|---|---|
| 2025 Q1 | $701M | +9.0% | +$600M | +85.6% | +94.6 |
| 2025 Q2 | $823M | +20.7% | +$920M | +111.8% | +132.5 |
| 2025 Q3 | $903M | +27.9% | +$464M | +51.4% | +79.3 |
| 2025 Q4 | $1,082M | +38.5% | -$3,046M | -281.5% | -243.0 |
| 2026 Q1 | $1,012M | +44.4% | -$960M | -94.9% | -50.5 |
| 2026 Q2 | $1,042M | +26.6% | -$269M | -25.8% | +0.8 |
The December quarter's $3.0 billion outflow is three balance-sheet movements, all derivable from Klarna's own cumulative cash-flow statements. Consumer deposits fell $1.04 billion in the quarter, after rising $3.19 billion over the first nine months of 2025. Consumer receivables grew $825 million — Klarna's is a holiday-quarter business, and Q4 2025 did $38.7 billion of GMV. And Klarna repaid $1.30 billion of notes payable and other borrowings, having drawn $1.27 billion of them over the prior nine months. Cash and equivalents went from $6,795 million to $3,803 million.
Not one of those is an operating result. Capital expenditure across the whole six-quarter run above never exceeded $8 million a quarter, which is what free cash flow would be measuring if Klarna were a software company.
The line that does describe the business
Klarna's own headline metric is transaction margin dollars: total revenue less processing and servicing costs, credit provisions and funding costs. It is the closest thing the company has to a gross margin, and it is what we store in the gross-margin series.
| Quarter | Revenue | Transaction margin | % of revenue | Adj. operating income |
|---|---|---|---|---|
| 2025 Q1 | $701M | $271M | 38.7% | $3M |
| 2025 Q2 | $823M | $315M | 38.3% | $29M |
| 2025 Q3 | $903M | $280M | 31.0% | -$15M |
| 2025 Q4 | $1,082M | $372M | 34.4% | $47M |
| 2026 Q1 | $1,012M | $389M | 38.4% | $68M |
| 2026 Q2 | $1,042M | $446M | 42.8% | $91M |
That column recovered 11.8 points from the Q3 2025 trough, and adjusted operating income went from a $15 million loss to $91 million over the same three quarters. Net profit followed: $1 million in Q1 2026 and $9 million in Q2, or $0.01 of diluted earnings per share — Klarna's first back-to-back profitable quarters since 2024.
And the stock is down 64% from the IPO anyway
Klarna listed on the NYSE on 10 September 2025 at $40.00 a share. It closed at $14.20 on 28 August 2026, a market capitalisation of about $5.4 billion against roughly $15 billion at listing.
The reason is one line in the August release. Klarna guided Q3 2026 revenue to $940–980 million, below the $1,042 million it had just reported. Sequential decline, guided. JPMorgan cut to Neutral the next day and took its second-half adjusted operating income estimate down about 40%, citing European consumer weakness centred on Germany; Wolfe Research went to Peer Perform on 25 August; KBW and Morgan Stanley held their ratings and cut targets to $21 and $17. The published targets now run from $14 to $38.30 — a spread that says coverage has not settled on what this company is.
What we are storing, and what we are not
Klarna is a foreign private issuer. It files a 20-F annually and 6-Ks in between, so there is no quarterly XBRL to reconcile against and every figure above was parsed out of the filed exhibits.
Revenue and the transaction-margin series run ten quarters, from Q1 2024, because Klarna's Q2 2026 supplementary-metrics exhibit restates that whole span in US dollars. The 2024 quarters tie to the 20-F's $2,811 million full year; the 2025 quarters tie to $3,509 million.
Free cash flow runs only six quarters, because Klarna files cash-flow statements for three-month, six-month, nine-month and full-year periods, and the quarterly figures above are differences between consecutive ones. The December 2025 quarter is a residual of the full year less the first nine months.
Earnings per share runs six points and has two gaps, at Q4 2024 and Q4 2025. Klarna's fourth-quarter releases carry annual income statements only, so no quarterly EPS was ever filed for those two periods, and we would rather show a gap than a subtraction we invented.
There is no P/E series. Trailing twelve-month earnings are negative.
