Klarna (NYSE:KLAR | KLAR Price Prediction) stock is sliding 5% to $13.94 in Thursday trading, extending a difficult stretch for the buy now, pay later (BNPL) provider. Affirm (NASDAQ:AFRM) stock is also slipping 3% to $74.94, while PayPal (NASDAQ:PYPL) stock is rising 1.4% to $62.12, creating an unusually clear divergence among major BNPL names. Interestingly, though, the Financial Select Sector SPDR Fund (NYSE ARCA:XLF) is only down slightly today.
Klarna’s weakness follows Tuesday’s sharp reaction to its second-quarter report and reduced full-year outlook, even though the company posted revenue growth of 27% and a $9 million profit. Klarna now expects 2026 revenue of $4.08 billion to $4.16 billion, down from its previous $4.34 billion forecast, as weaker German consumer spending weighs on its outlook. All of this is occurring, mind you, during a challenging time for U.S. consumers.
Klarna’s Guidance Cut Is Still Casting A Shadow
Klarna’s second-quarter results contained plenty of positives, including $1.04 billion of revenue, $36.6 billion of gross merchandise volume and a 42% increase in transaction margin dollars. Yet Klarna’s decision to reduce its full-year volume and revenue forecasts has shifted attention toward whether slower European spending could persist longer than expected.
Klarna stock has now fallen sharply from its recent levels, making interest-rate anxiety another potential headwind for the shares. Higher rates can make investors less comfortable with growth-oriented financial stocks whose valuations depend on future expansion, while higher borrowing costs can also complicate the economics of consumer lending.
Affirm Looks More Resilient Than Klarna
Affirm stock is holding up better than Klarna stock despite falling 3% Thursday, and the difference could reflect the companies’ somewhat different geographic and product exposures. Affirm’s larger-ticket installment financing remains an important part of its business, while Affirm’s next earnings report on August 27 could provide a fresh test of whether consumer demand remains healthy.
Affirm could also benefit if Klarna’s reduced growth ambitions create a less aggressive competitive environment in the U.S. BNPL market. However, Affirm stock isn’t immune to concerns about interest rates, credit quality or consumer spending, so the relative strength doesn’t necessarily mean the broader BNPL trade has completely turned.
PayPal Is Telling A Different Story
PayPal stock is providing the most notable contrast, with PayPal stock rising 1.4% to $62.12 Thursday even as Klarna stock and Affirm stock are falling. PayPal’s second-quarter results showed total payment volume increasing 10% to $486.4 billion, while PayPal raised its full-year non-GAAP earnings guidance to approximately $5.38 a share.
PayPal’s broader payments business gives PayPal a different earnings profile from pure-play BNPL providers, which could help explain why PYPL stock is showing relative strength. PayPal also continues to offer BNPL products, meaning investors can gain exposure to the trend without relying on BNPL to drive the entire business.
XLF Highlights A Broader Financial Sector Question
The XLF financials-sector ETF is slipping 0.5% to $57.22 Thursday, suggesting the weakness isn’t simply a broad financial-sector selloff. XLF also provides useful context because its diversified holdings include established banks, insurers and financial-services companies that generally have more direct exposure to current earnings and interest-rate conditions.
The bullish case for BNPL stocks is that consumer demand can remain durable while companies expand transaction volumes and improve lending economics. The bearish case is that elevated rates, softer discretionary spending and credit losses could make investors favor established financial businesses over higher-growth fintech names, potentially keeping pressure on KLAR and AFRM stock.
Klarna stock, Affirm stock and PayPal stock are showing enough divergence to suggest investors may be distinguishing between individual business models rather than abandoning BNPL altogether. Investors can watch for whether KLAR stock stabilizes after the guidance reset, whether Affirm delivers a solid August 27 report and whether PayPal stock can maintain its relative strength.
A sustained rotation toward established financial companies could leave Klarna and Affirm with more work to do before their stocks regain momentum. Investors who remain interested in BNPL exposure should consider keeping their KLAR and AFRM position sizes moderate, while recognizing that PayPal’s broader business provides a somewhat different risk profile.
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