Swedish fintech Klarna, known for its buy now, pay later services (BNPL), has reduced its net loss by 50% in Q1 2023, substantially improving its financial performance following significant cost-cutting efforts. The company reported a net loss of 1.3 billion Swedish krona ($120.7 million), down from the 2.6 billion krona loss in the same period the previous year. Klarna‘s total net operating income increased by 22% year-over-year, reaching 5 billion Swedish krona.

Klarna CEO, Sebastian Siemiatkowski, expressed satisfaction with the company’s achievements in the quarter. He highlighted their ability to grow gross merchandise value (GMV) and revenue while simultaneously reducing costs, credit losses, and making ambitious investments in AI-driven products. Siemiatkowski stated that Klarna remains committed to achieving profitability in 2023.

The company attributes the reduction in losses to improved underwriting practices, resulting in a decline in customer defaults and diversification into additional revenue sources like marketing.

Klarna‘s results indicate steady progress toward profitability on a monthly basis, marking significant strides for the company. Klarna currently boasts over 150 million customers and recently received a credit rating of BBB/A-3 with a stable outlook from S&P Global in April, which reflects its strong position in e-commerce markets, efforts to rebuild profitability, and maintenance of a robust capital buffer.

Klarna‘s recent cost-cutting measures are proving effective, as the company had to scale down its operations by approximately 10% in May 2022 to address investor concerns and regain stability. Despite this, Klarna faced challenges in the market, experiencing an 85% decline in market value during a funding round last summer.

Klarna‘s experiences align with other buy now, pay later firms that have faced difficulties due to the broader negative investor sentiment toward technology and the worsening macroeconomic environment.

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