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Klarna aims to extend artificial intelligence-driven cuts to its workforce with plans to axe almost half of its staff, as the lossmaking Swedish buy now, pay later company gears up for a stock market flotation.
Chief executive Sebastian Siemiatkowski heralded the benefits of AI in Klarna’s second-quarter results on Tuesday, which showed a significant narrowing of its net loss from SKr854mn ($84mn) a year earlier to SKr10mn.
The Swedish fintech has already cut its workforce from 5,000 to 3,800 in the past year. Siemiatkowski told the Financial Times that Klarna could employ as few as 2,000 employees in the coming years as it uses AI in tasks such as customer service and marketing.
“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,” he added.
Klarna has imposed a hiring freeze on workers apart from engineers and is using natural attrition rather than lay-offs to shrink its workforce. Siemiatkowski has become one of the most outspoken European tech bosses about the benefits of AI, even if it leads to lower employment, arguing that is an issue for governments to worry about.
The Stockholm-based group is lining up financial advisers for its long-anticipated initial public offering — due as early as the first half of next year — with Morgan Stanley, JPMorgan Chase and Goldman Sachs in lead positions to secure top roles, people familiar with the matter have previously told the FT.
Siemiatkowski declined to comment on IPO plans or reports of a potential forthcoming sale of shares by existing investors. “We have not yet taken any decisions. It will happen in due course,” he added.
He said that Klarna had boosted its average annual revenue per employee from about $400,000 a year 12 months ago to $700,000 now, due to cutting its workforce and reducing expenses through AI.
The benefits of AI are likely to be a key selling point for any Klarna IPO. Once the darling of the European tech scene valued at $46bn in 2021, the Swedish group saw its valuation crash to $6.7bn a year later because of rising interest rates and falling stock prices.
Bankers and investors in Klarna believe it may be able to achieve a valuation of between $15bn and $20bn when it lists.
Credit losses at Klarna increased 22 per cent to SKr1.1bn in the second quarter compared with a year earlier, but revenues increased 25 per cent to SKr6.9bn.
Klarna was consistently profitable from its founding in 2005 until 2019 when its rapid expansion in the US caused it to make large losses.
Last year, it made its first quarterly net profit in more than four years, and Siemiatkowski said it would not go back to making losses, arguing that AI was boosting its gross margins.
“If I can get to a superior revenue per employee that will allow us to pay top class for the best talent, the people who are currently deep-diving and learning AI . . . The very strong message to our employees is: less total labour cost, higher cost per individual. I’m very happy about seeing that this is paying off,” Siemiatkowski said.
