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MERCADOLIBRE INC (MELI)·Q2 2025 Earnings Summary

Executive Summary

  • Net revenues & financial income rose 34% YoY to $6.79B; operating income hit a record $825M (12.2% margin), while net income was $523M (7.7% margin) .
  • Revenue beat Wall Street consensus ($6.79B vs $6.66B*) but EPS missed ($10.31 vs $11.75*); EPS shortfall was driven by doubled FX losses ($117M) from April’s ARS devaluation and a normalized higher effective tax rate .
  • Management leaned into growth investments in Brazil (expanded free shipping threshold to R$19 and seller shipping fee reductions) and brand/fintech campaigns, compressing YoY operating margin by 210 bps; initial demand KPIs in Brazil and Mexico accelerated .
  • Fintech momentum remained strong: credit card NIMAL breakeven in Brazil and portfolio growth of 91% YoY to $9.3B, with 15–90 day NPL improving to 6.7% .
  • S&P upgraded MELI to BBB- investment grade in July, reinforcing balance sheet strength and funding flexibility, a medium-term catalyst for cost of capital and credit growth .

Values retrieved from S&P Global for consensus estimates (*).

What Went Well and What Went Wrong

What Went Well

  • Brazil demand re-accelerated post change: “items sold growth in Brazil accelerating to 34% YoY in June,” with Brazil GMV +29% FX-neutral in Q2 and eight consecutive quarters ~30% YoY FXN growth in GMV .
  • Mexico delivered its “fastest pace in nearly two years” on items sold (+36% YoY) with FX-neutral GMV +32% YoY; fulfillment penetration >75% and same/next-day deliveries improved sequentially .
  • Ads inflected: revenue +38% YoY (+59% FXN), Display & Video “almost doubled” YoY; integration with Google Ad Manager/AdMob launched in April, enhancing off-platform reach .
    • “We launched our integration with Google Ad Manager and AdMob… Display & Video revenue almost doubled YoY” .

What Went Wrong

  • EPS missed consensus as FX losses doubled ($117M) due to April ARS devaluation and a normalized higher tax rate; net income declined slightly YoY despite revenue beat .
  • Operating margin compressed 210 bps YoY, primarily from forgone revenue on free shipping expansion and seller shipping discounts, negative 1P mix, and higher marketing for campaigns .
  • Credit mix (faster credit card growth) pressured NIMAL vs prior year; while asset quality improved short-term, >90-day NPL saw a slight uptick, and NIMAL contracted YoY with mix/upmarket effects .

Financial Results

Headline Financials vs prior periods and vs estimates

MetricQ4 2024Q1 2025Q2 2025
Net revenues & financial income ($USD Billions)$6.059 $5.935 $6.790
Income from operations ($USD Millions)$820 $763 $825
Operating margin (%)13.5% 12.9% 12.2%
Net income ($USD Millions)$639 $494 $523
Net income margin (%)10.5% 8.3% 7.7%
Diluted EPS ($USD)$12.61 $9.74 $10.31
Consensus vs ActualQ4 2024Q1 2025Q2 2025
Revenue Consensus Mean ($USD Billions)$5.941*$5.521*$6.664*
Revenue Actual ($USD Billions)$6.059 $5.935 $6.790
Primary EPS Consensus Mean ($USD)$7.61*$7.99*$11.75*
EPS Actual ($USD)$12.61 $9.74 $10.31

Values retrieved from S&P Global for consensus estimates (*).

Segment Breakdown (Net revenues & financial income)

Geography ($USD Millions)Q2 2024Q2 2025
Brazil$2,786 $3,473
Mexico$1,201 $1,506
Argentina$863 $1,527
Other Countries$223 $284
Total$5,073 $6,790

KPIs and Operating Metrics

KPIQ4 2024Q1 2025Q2 2025
Fintech MAUs (Millions)61 64 68
Unique active buyers (Millions)67 67 71
GMV ($USD Billions)$14.548 $13.330 $15.258
Items sold (Millions)525 492 550
TPV ($USD Billions)$58.914 $58.303 $64.602
Acquiring TPV ($USD Billions)$41.833 $40.317 $44.365
NIMAL (%)27.6% 22.7% 23.0%
Capital expenditures ($USD Millions)$305 $256 $287
Depreciation & amortization ($USD Millions)$152 $172 $199

Non-GAAP

  • Adjusted EBITDA: $1,024M (Q2 2025) vs $880M (Q2 2024) .

Guidance Changes

  • The company did not provide formal quantitative guidance ranges; management commentary emphasized continued investment in free shipping, marketing, and fintech scaling, alongside maintaining profitable growth .
Metric/TopicPeriodPrevious GuidanceCurrent CommentaryChange
Free shipping in Brazil2H 2025N/AThreshold lowered to R$19 for all buyers; seller shipping charges reduced in R$79–200 band; expect unit costs to fall over time as slow network scales Raised investment
Sales & marketing2H 2025N/AHigher spend from Mercado Pago celebrity campaigns and free shipping launch; short-term margin pressure, positive user growth/downloads Raised investment
Credit card NIMAL2H 2025N/ABreakeven in Brazil; cohorts 2023+ turning NIMAL-positive; Mexico not yet at breakeven; Argentina to start negative initially Improving (Brazil)
Tax rateQ2 2025 onwardN/AEffective tax rate higher YoY due to lack of 2024 inflation adjustment deductions in Argentina Higher vs FY2024

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
AI/TechnologyEarly progress scaling Display/Video; strong first-party data Launched Mercado Play app on TVs; ads +50% FXN; broader inventory AI-powered search with infinite scroll; Verdi AI integrated into CRM/support; AI for ad creatives and seller onboarding Expanding AI use cases and ad stack
Logistics/free shippingFastest network; record fulfillment penetration; slow methods increased engagement Fulfillment cost per order down YoY, enabling free shipping investment Brazil free shipping threshold cut to R$19; seller fee cuts; strong demand response More aggressive shipping value prop
Regional trendsBrazil/Mexico FXN GMV +32%/+28%; Argentina stabilizing Brazil FXN revenue +41%; Mexico +51%; Argentina +184% FXN Brazil items +34% YoY June; Mexico items +36% YoY; Argentina FXN GMV +75% YoY Broad-based acceleration
AdvertisingAds 2.1% of GMV; Display/Video scaling Ads +50% FXN; Display share up ~10ppts Ads +38% YoY (+59% FXN); Display/Video almost doubled; Google Ad Manager/AdMob live Strong momentum; off-platform reach
Fintech creditCard cohorts >2yrs NIMAL-positive; portfolio $6.6B; NIMAL 27.6% Portfolio $7.8B; 15–90 day NPL 8.2%; NIMAL 22.7% Portfolio $9.3B; card NIMAL breakeven in Brazil; 15–90 day NPL 6.7% Scaling with improving quality (short-term)
Funding/capitalFitch IG upgrade; leverage <1x Strong CFO; reinvest for growth S&P BBB- upgrade July; adjusted FCF $454M Q2 Lower cost of capital; ample runway

Management Commentary

  • “Revenues growing over 30% year on year and record income from operations of $825,000,000… we continue to invest with discipline to advance our long term ambitions in commerce, fintech and advertising.” — CFO prepared remarks .
  • “We significantly strengthened our value proposition in June by expanding our free shipping offer in Brazil to include millions of items from R$19… We also reduced shipping charges for sellers in the R$79-200 range.” .
  • “Advertising revenue growth accelerated to 38% YoY and 59% on an FX-neutral basis… Display & Video revenue almost doubled YoY.” .
  • “Our entire 2023 [Brazil credit card] cohort is now NIMAL positive… Credit card achieved NIMAL breakeven in Q2’25.” .

Q&A Highlights

  • Shipping investments: Reducing the “cliff edge” in seller take rates around R$79 leads to lower prices and more selection; Brazil items sold +34% YoY in June, with GMV also accelerating; early KPIs in traffic and conversion are positive .
  • Marketing spend: Elevated due to high-profile Mercado Pago campaigns and free-shipping launch; expected positive ROI on downloads and user growth; some elements one-off, others ongoing acquisition .
  • AI: Using AI to generate multiple creative variants, optimize ad bidding/onboarding, and improve marketing efficiency; broad testing across marketing and ads stacks .
  • Credit quality and NIMAL: 15–90 day NPL improved to 6.7%; NIMAL pressured by credit card mix and Argentina inflation normalization; Brazil credit card now NIMAL breakeven; funding mix for credit card to shift more to third-party over time, which will affect NIMAL accounting .
  • Argentina credit and yields: Portfolio expanding from a low base with strong principality; regulatory change in MMF reserves likely reduces user yield by ~2 percentage points (e.g., ~27% to ~25%) .

Estimates Context

  • Q2 2025: Revenue beat ($6.79B vs $6.66B*), EPS missed ($10.31 vs $11.75*). Drivers: FX losses doubled to $117M from ARS devaluation and higher effective tax rate; operating margin compressed 210 bps YoY due to free shipping/seller fee changes and higher marketing .
  • Prior quarters: Q1 2025 beat on both revenue ($5.94B vs $5.52B*) and EPS ($9.74 vs $7.99*); Q4 2024 beat on revenue ($6.06B vs $5.94B*) and EPS ($12.61 vs $7.61*).
  • Implications: Street may raise revenue estimates on demand traction (Brazil/Mexico) and ads momentum, but EPS estimates may be trimmed near-term to reflect investment cadence, FX sensitivity (Argentina), and mix effects from 1P and credit card.

Values retrieved from S&P Global for consensus estimates (*).

Key Takeaways for Investors

  • Near-term trade: Revenue momentum intact with broad-based demand, ads acceleration, and strong fintech KPIs; offset by deliberate margin investments and FX volatility. Expect the market to reward top-line resilience but scrutinize EPS trajectory and margin path .
  • Brazil shipping policy is a structural catalyst: Lower threshold/free shipping plus seller fee smoothing should expand selection, engagement, and frequency; early KPIs support the strategy .
  • Ads optionality: Off-platform integration and Display/Video scaling unlocks incremental monetization; ads-to-GMV mix rising, a potential multi-year rerate driver .
  • Fintech scaling with improving quality: Brazil credit card NIMAL breakeven and cohort profitability reduce dilutive impact; portfolio growth remains robust with prudent risk management .
  • FX and tax are key EPS swing factors: Argentina-driven FX losses and normalized tax rate can whipsaw GAAP EPS; hedge positioning and sensitivity analysis warranted .
  • Investment grade status (S&P BBB-) lowers funding costs and broadens capacity to scale credit and logistics; supportive for medium-term margin normalization as growth investments mature .
  • Watch mix: 1P expansion and credit card growth can pressure margins/NIMAL in the short run but strengthen ecosystem share and monetization over time .