Stockholm-based Klarna crushed revenue expectations in the final quarter of 2025. The buy-now-pay-later giant pulled in just over $1 billion, up 38% from the year-earlier period. Active customers jumped 25% to 118 million during that time.

Gross merchandise volume rose 32% to $38.7 billion, landing at the high end of company forecasts. That figure tracks the total value of goods sold through the platform before fees. Klarna’s push into banking fueled much of the growth. Customers in that segment more than doubled over the past year to 15.8 million.

Expansion came at a price. The company posted a $26 million net loss for the quarter. Full-year losses reached $273 million. Klarna chief executive Sebastian Siemiatkowski pinned the shortfall on its fast-growing financing products. Those require upfront cash reserves for potential credit losses, according to his shareholder letter.

“When growth outpaces expectations, those day-one provisions temporarily weigh on margins, even when credit quality remains strong and lifetime economics are attractive,” Siemiatkowski wrote. He called it “value creation that is deferred.”

Provisions for credit losses hit $250 million in the quarter, or 0.65% of GMV. That’s down slightly from 0.72% a year earlier but up from 0.53% at the end of 2024. Loan processing and servicing costs surged 56% to $250 million. Cost of capital climbed 43% to $210 million, officials said, citing seasonal volumes and higher interest rates.

Shareholders felt the pain most acutely. Klarna’s market value has halved since its September initial public offering. The stock has shed over 55% of its value. Net loss per share for the full year stood at $0.79, a reversal from a slim $0.01 profit in 2024 and worse than the $0.69 loss in 2023. One-off costs tied to the listing contributed to the annual figure.

The financing arm’s gross merchandise volume soared 165% in the quarter. Interest income from those loans trickles in over months or years, creating short-term margin squeezes. Klarna, once valued at $45 billion in private markets, went public amid high expectations for the buy-now-pay-later sector. Investors now grapple with the costs of its banking ambitions.

Despite the setbacks, revenue growth signals strength. Total full-year revenue isn’t broken out in the report, but the Q4 surge points to momentum. Klarna operates in 45 countries, processing payments for merchants and offering installment plans to shoppers. Its banking license in Europe positions it to challenge traditional lenders.

Siemiatkowski emphasized long-term gains in his letter. Credit quality held steady even as volumes expanded. Provisions as a share of GMV improved year-over-year, a positive sign amid rapid scaling.