Klarna Group Plc (KLAR.N): Transaction Margin Improvement Should Continue

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Klarna Group Plc (KLAR.N): Transaction Margin Improvement Should Continue

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22 Jul 2026 22:23:02 ET │ 18 pages

Klarna Group Plc (KLAR.N)

Transaction Margin Improvement Should Continue

CITI'S TAKE

We expect KLAR’s 2Q26 results to reinforce that slower growth from Fair

Financing should drive improving transaction margins through FY26 and

into FY27. We anticipate 2Q GMV and revenue growth and Transaction Buy / High Risk

Margin Dollars (TMD) and adj. operating profit to come in toward the mid- Price (22 Jul 26 16:00) US$17.85

to-high-end of guidance. Incremental commentary on stable credit,

Target price US$25.00stronger Klarna Card engagement and expanding PSP distribution supports

the longer-term growth and margin framework, driving improved investor Expected share price return 40.1%

confidence and multiple expansion, in our view. We believe a solid 2Q26 Expected dividend yield 0.0%

result should strengthen confidence in KLAR’s FY26 outlook, but still expect

Expected total return 40.1%management to reiterate its “at least” guidance given the greater 2H

weighting and the business’s retail-driven seasonal variability. We maintain Market Cap US$6,749M

Buy/High Risk and our $25 TP.

n Transaction Margin Progress Should Continue, Though the Path Will Remain

Price Performance Non-Linear. KLAR’s 1Q26 results materially improved the transaction margin

(RIC: KLAR.N, BB: KLAR US) dollars debate, with TMD increasing +44% Y/Y to $389M (vs. $300M-$400M

guidance). In addition to the TMD outperformance, adj. operating income

reached $68M (vs. guidance at $5M-$35M) and adj. operating expenses rose

just 3% Y/Y. We believe 1Q results provided clearer evidence that KLAR’s

profitability objectives are beginning to shine through as the recent rapid Fair