Revenue has steadily increased from $669 million in Q1 2025 to over $1 billion in recent quarters, reflecting growing transaction volumes and adoption. However, profitability has been erratic with operating income turning positive only recently after significant losses in prior quarters and years. The firm continues to incur substantial operating and interest expenses, weighing on net income and resulting in negative EPS for most of the trailing periods.

Growth in revenue is driven by expanded consumer usage of BNPL services and merchant acquisition, with Q1 and Q2 2026 revenues just surpassing $1 billion each. The gross margin improved in Q2 2026 to about 60% compared to prior quarters below 60%, indicating better cost of revenue management possibly from scaled efficiencies and optimized credit portfolios.

Gross margins have fluctuated between 54% and 75% over recent years but trended downward in early 2026. Despite this, operating margins improved from negative double digits to marginally positive (around 2.6%) in Q2 2026, helped by cost controls. EBITDA margins remain modest at roughly 5% in the latest quarter, illustrating ongoing expense pressures.

Earnings quality is currently weak with net income margin near 0.9% most recently, but this is a marked improvement from significant losses. High and volatile operating expenses, driven by marketing, R&D, and other SG&A costs, alongside significant interest expenses, have historically diluted earnings relevance. The recent positive EPS surprise may reflect non-recurring components or improving operational efficiency.

Year-over-year revenue growth shows strong momentum, with 2026 Q2 revenues at $1.042 billion up approximately 63% from the $642 million reported in Q2 2024. The growth rate demonstrates acceleration since 2024, evidenced by revenue expanding from $2.67 billion in 2024 to an expected over $3.5 billion in 2025.

Earnings remain volatile with multiple quarters of negative EPS, but Q2 2026 EPS turned marginally positive at $0.01 versus consensus estimates of -$0.05. This reflects a nascent earnings recovery phase after deep losses recorded throughout 2023 and 2024, driven by improving operational leverage and revenue scale.

Key growth drivers include increasing adoption of Klarna’s BNPL services globally, merchant partnerships expansion, and platform enhancements facilitating higher transaction volumes. Consumer demand for flexible credit options in online retail remains robust, representing ongoing tailwinds.

Growth is largely organic and driven by core product offerings; however, the company has experienced some operating expense volatility and negative net earnings, highlighting challenges in scaling profitably. Sustainability of growth depends on continued market penetration and improved expense management.

Gross margin has averaged 54-77% with some compression recently but remains healthy for the sector. Operating margins have trended from negative territory in 2024 towards positive in mid-2026, almost reaching 2.6% in Q2. Net margins continue to be thin and mostly negative due to high interest and other expenses.

ROE and ROA data are unavailable, but net income margins below 1% imply returns on equity/assets are still under pressure. Recent positive operating income suggests improving returns in coming periods if trends continue.

Sustainability of margin improvements depends on managing operating expenses, especially SG&A and interest costs, as well as credit losses. If revenue growth slows or expenses reaccelerate, margin pressure may recur.