Klarna has posted its first net profit since listing on the New York Stock Exchange, as revenue passed $1 billion and the payments firm pushed further into AI-led shopping through a new Google tie-up.

The Swedish digital bank and flexible payments provider reported $1 million in net income for the first quarter of 2026, compared with a $99 million loss a year earlier. Operating income also turned positive at $17 million, reversing a $90 million loss in Q1 2025.

Klarna’s gross merchandise volume reached $33.7 billion in Q1, up 33% year-on-year, while revenue rose 44% to $1.0 billion. Transaction margin dollars increased 44% to $389 million, and adjusted operating profit reached $68 million, up from $3 million a year earlier.

Revenue climbs past $1 billion

Klarna’s gross merchandise volume reached $33.7 billion in Q1, up 33% year-on-year, while revenue rose 44% to $1.0 billion. Transaction margin dollars increased 44% to $389 million, and adjusted operating profit reached $68 million, up from $3 million a year earlier.

“Klarna is spend-centric, not lend-centric,” Sebastian Siemiatkowski, CEO and co-founder of Klarna, said in the company’s shareholder letter. “Same three products. Bigger network. Deeper engagement.”

That bigger network now spans 119 million active consumers, up 21% year-on-year, and more than one million merchants, an increase of 49%. Growth was stronger in the US, where GMV rose 39%, while GMV outside the US increased 31%.

Klarna also pointed to higher productivity across the business. Revenue per employee reached nearly $1.4 million, four times the 2022 level, while Q1 revenue growth continued to outpace operating expenses.

Beyond buy now, pay later

Klarna remains closely associated with buy now, pay later, but its latest results show the company stretching further across consumer spending.

Its three-product model now covers Pay in Full for everyday purchases, Pay Later for medium-sized spending with short repayment terms, and POS instalments, known as Fair Financing, for larger transactions.

“The vast majority of the POS installment borrowers come to us with an established Pay Later repayment history, which is the foundation of how we underwrite them, allowing us to deepen engagement with our existing consumer base and lift revenue per user,” Siemiatkowski said in the shareholder letter.

Fair Financing was one of the fastest-growing areas in the quarter, with GMV up 138% year-on-year. The product now accounts for 12% of total GMV. Pay Later grew 29% and represented 77% of GMV, while Pay in Full grew 4% and accounted for 10%.

The Klarna Card has reached five million active users across 16 countries, taking the brand further into everyday spending beyond online checkout. Klarna also launched peer-to-peer payments across 13 European countries in January, adding another account-style service to its consumer offer.

Google adds the AI shopping angle

The results landed days after Klarna announced that its flexible payment options will be available through Google Search and the Gemini app within Google Pay in the US.

The integration will put a Klarna button at checkout for Google Pay users shopping through Google’s search and AI surfaces. Shoppers will be able to access four interest-free instalments and longer-term financing for larger purchases, with the checkout experience built within Google Pay on Google surfaces powered by the Universal Commerce Protocol.

“As shopping moves into conversational and AI-driven environments, flexible payments become essential infrastructure for how people buy,” said David Sykes, chief commercial officer at Klarna. “Our partnership with Google brings Klarna directly into these moments of decision, giving consumers more control over how they pay.”

Ashish Gupta, VP/GM of merchant shopping at Google, added: “As agentic commerce scales, how people pay needs to keep pace with how they shop. By making Klarna’s flexible payment options available at checkout in the Gemini app and Search via Google Pay, we’re giving shoppers more flexibility, so they can make more confident, considered purchases with less friction.”

Distribution remains the growth lever

Klarna’s reach is also widening through major payment service provider partnerships. Stripe and Nexi are already live as default PSP partners, while JPMorgan Payments and Worldpay are expected to go live during 2026.

Recent merchant partnerships span eyewear, furniture, gaming, car parts, flights and hotels, including Quay, Article, Mindfactory, B-Parts, Lufthansa, Qatar Airways and Aven Hospitality.

The strategy: appear alongside card payments through larger distribution partners, making Klarna more visible at checkout without relying only on one-by-one merchant integrations.

Credit losses stay steady

As Klarna expands larger-ticket financing, credit performance remains an important part of the story.

Provisions for credit losses stood at 0.55% of GMV in Q1, compared with 0.54% a year earlier. Its shareholder materials describe a short-duration lending model, with an average consumer balance of $124 and an average duration of 39 days.

“Being spend-centric means our book turns more than 10 times a year and our average balance per consumer is $124, against roughly $6,900 for a typical credit card. We re-underwrite essentially every transaction,” Siemiatkowski said in the shareholder letter.

Klarna also issued expectations for the second quarter. For Q2, it expects GMV of $35.5 billion to $36.5 billion, revenue of $960 million to $1.0 billion, transaction margin dollars of $375 million to $395 million and adjusted operating profit of $30 million to $50 million.