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Klarna, the loss-making Swedish buy now, pay later company, plans to expand artificial intelligence-driven job cuts and lay off almost half its staff as it prepares for a stock market IPO.
Chief Executive Officer Sebastian Simiatkowski extolled the benefits of AI on Tuesday at Klarna's second-quarter earnings, which showed a sharp narrowing of net losses to 10 million Swedish kronor from 854 million Swedish kronor ($84 million) a year earlier.
The Swedish fintech company has reduced its workforce from 5,000 to 3,800 over the past year, and Simiatkowski told the Financial Times that Klarna could potentially reduce its workforce to as few as 2,000 over the next few years as it uses AI for tasks like customer service and marketing.
“Not only can we do more with less people, but we can do more with fewer people. Internally, we are talking in the direction of 2,000 (employees). We're not going to set a specific deadline,” he added.
Klarna has frozen hiring for non-engineering employees and is using attrition rather than firing to cut staff. Mr. Siemiatkowski has become one of the most outspoken European tech executives on the benefits of AI, even if it leads to job losses, and argues that it's an issue that governments should be concerned about.
The Stockholm-based group is snapping up financial advisers for its long-awaited initial public offering (IPO), expected as early as the first half of next year, with Morgan Stanley, JPMorgan Chase and Goldman Sachs in prime position to fill top posts, people familiar with the matter previously told the Financial Times.
Simiatkowski declined to comment on reports about the IPO plans or possible future share sales by existing investors. “Nothing has been decided yet. Decisions will be made in due course,” he added.
He said Klarna has increased its average annual revenue per employee from about $400,000 a year 12 months ago to $700,000 now through headcount reductions and AI-driven cost savings.
The AI advantages are likely to be a key selling point for Klarna's IPO. The Swedish group, which became a European tech darling in 2021 with a $46 billion valuation, saw its valuation plummet to $6.7 billion a year later due to rising interest rates and falling share prices.
Klarna's bankers and investors believe the company could achieve a valuation of $15 billion to $20 billion when it goes public.
Klarna's second-quarter credit losses rose 22 percent year-on-year to SEK 1.1 billion, but revenue rose 25 percent to SEK 6.9 billion.
Klarna was consistently profitable since its founding in 2005 until 2019, when its rapid expansion in the United States led to big losses.
The company posted its first quarterly net profit in more than four years last year, and Mr. Simiatkowski said the company won't be in the red again, citing AI as it boosts gross margins.
“If we can increase revenue per employee, we can pay top salaries to the talented people who are now researching and learning about AI in depth. Our strong message to our employees is to reduce total labor costs and increase cost per employee. We are very pleased to see this paying off,” said Simiatkowski.
Video: AI: Blessing or curse for humanity? | FT Tech
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