Klarna, a leading Swedish fintech, is poised to make significant workforce cuts as it prepares for a stock market flotation. This decision comes as the company increasingly incorporates Artificial Intelligence (AI) to optimise operations.
Chief executive Sebastian Siemiatkowski highlighted the transformative impact of AI in Klarna’s second-quarter results, which saw the company’s net loss dramatically decrease from SKr854m (£63.6m) the previous year to SKr10m (£0.74m). Klarna’s workforce has already been reduced from around 7,000 employees to about 3,800 since 2022, with approximately 1,200 jobs cut in the last year alone.
Siemiatkowski indicated that the company might further decrease its employee count to around 2,000 in the coming years. He stated, ‘Not only can we do more with less, but we can do much more with less. Internally, we speak directionally about 2,000 [employees]. We don’t want to put a specific deadline on that.’ The current strategy involves a hiring freeze on all positions except for engineers, with a focus on achieving this reduction through natural attrition rather than layoffs.
Having become an outspoken advocate for AI, Siemiatkowski emphasised that any resulting lower employment levels are a government concern. Klarna is currently organising financial advisers for its long-awaited initial public offering (IPO), potentially scheduled for the first half of next year. Reports suggest that Morgan Stanley, JPMorgan Chase, and Goldman Sachs are being considered for leading roles, though Siemiatkowski refrained from commenting further on the IPO.
The latest results also demonstrated a surge in the company’s average annual revenue per employee, from approximately $400,000 a year ago to $700,000 now. This boost is attributed to workforce reductions and cost savings facilitated by AI. Klarna, which provides 150 million active users with options to delay or spread out payments, saw a 17 per cent rise in the value of these purchases last year. Concurrently, credit losses fell by 32 per cent despite inflationary pressures, reflecting the company’s robust performance.
Klarna’s financial trajectory has been noteworthy. While it recorded a net loss of 2.5bn kronor (£191m) last year, this was a significant improvement from the 10.4bn kronor (£794m) loss in 2022. Additionally, the company’s revenue for the full year increased by 22 per cent, reaching 23.5bn kronor (£1.8bn). At its peak in 2021, Klarna was valued at $46bn. However, due to rising interest rates and declining stock prices, its valuation plummeted to $6.7bn a year later. Bankers and investors anticipate that the company’s valuation could be between $15bn and $20bn upon its eventual listing.
Klarna’s strategic integration of AI and subsequent workforce reduction underscore its efforts to streamline operations and enhance profitability. As the company prepares for its anticipated IPO, it remains committed to leveraging technology to drive growth and efficiency.