Fight Now, Pay Later: Will Klarna's IPO Turn Up the Heat On Affirm?

The buy now, pay later (BNPL) arena is getting a lot more interesting as Klarna, the Swedish payments firm, is heading for Wall Street with a U.S. IPO that could value it around $14 billion. For Affirm Holdings, Inc. AFRM, the American trailblazer in installment payments, this move raises an obvious question: how much damage can Klarna inflict?

In the near term, investors are already showing nerves. Affirm’s shares, fresh off a strong fiscal fourth-quarter jump, slipped once Klarna’s IPO reports hit the wires — mirroring the wobble earlier this year when Walmart swapped Affirm for a Klarna-exclusive deal. The signal is clear: Klarna is not sneaking in; it is entering with muscle.

At June quarter-end, Klarna had 790,000 merchants and 111 million active consumers, driving $31.2 billion in gross merchandise value (GMV). Affirm, by contrast, had 377,000 merchants, 23 million active users and generated $10.4 billion in GMV, which was still a robust 43% year-over-year increase. With upbeat guidance and loyal customers, Affirm’s footing remains solid. In such a fragmented, regulation-sensitive space, no one player can easily dominate.

Klarna will undoubtedly press harder into AFRM’s U.S. turf, but Affirm is not standing still. It is pushing deeper into Europe, leveraging its Shopify partnership and U.K. expansion success. While Klarna is likely to defend its stronghold across the continent, Affirm’s international ambitions give it plenty of runway. In other words, this is less about one winner and more about an intensifying global duel.

How Are Other BNPL Providers Faring?

AFRM’s peers like PayPal Holdings Inc. PYPL and Block, Inc. XYZ are also increasing their BNPL footprints throughout North America and globally, trying to capture more market share.

In the second quarter, PayPal’s total payment volume grew 6% to $443.5 billion. Its active accounts increased 2% during this time to a massive 438 million. PayPal’s transaction revenues gained 4% year over year in the second quarter.

Meanwhile, Block’s BNPL platform’s GMV reached $9.11 billion during the quarter, a 17% year-over-year jump. It witnessed the BNPL gross profit jump 22% to $268 million. Block’s post-purchase BNPL options are expected to boost Cash App Card figures.

Affirm’s Price Performance, Valuation and Estimates

Shares of Affirm have gained 43.4% year to date, outperforming the broader industry and the S&P 500 Index.

Affirm’sYTD Price Performance

From a valuation standpoint, Affirm trades at a forward price-to-sales ratio of 6.89X, up from the industry average of 5.74. AFRM carries a Value Score of F.

The Zacks Consensus Estimate for Affirm’s fiscal 2026 earnings implies a 473.3% surge year over year, followed by a significant jump next year.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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