MercadoLibre revenue jumps 50% to $10.2B despite profit decline

MercadoLibre's Q2 revenue rose 50% to $10.2 billion, the fastest growth in four years, while net income fell 11% to $466 million.

"The profit decline, its third consecutive, was hit by increased free shipping in Brazil and provisions tied to credit card expansion," Leandro Cuccioli, senior vice president of investor relations at MercadoLibre, said.

The results beat analyst estimates. Net income of $466 million topped the $433 million expected in an LSEG poll, while revenue surpassed the $9.7 billion forecast. Income from operations fell about 17% to $683 million, above the $658 million consensus, with the EBIT margin narrowing to 6.7% from 12.2% a year earlier and 6.9% in the first quarter.

Shares fell 6.8% after the release as the margin slide overshadowed the revenue surge, according to TS2.tech. The stock closed Friday at $1,877.95, about 26% below its peak of $2,548.50, trading at roughly 50 times trailing earnings.

Gross merchandise volume rose 36% on a forex-neutral basis to about $22 billion, with items sold up 45% to 795 million. Brazil led growth, with FX-neutral GMV up 39% and items sold up 56%, one year after MercadoLibre lowered its free-shipping threshold in its largest market. Mexico posted FX-neutral GMV growth of 26% and Argentina 38%.

Mercado Pago, the fintech arm, surpassed $100 billion in total payment volume for the first time, up 56% in dollar terms, with monthly active users reaching 88 million, up 30%. The credit portfolio grew 75% to more than $16 billion, driven by credit cards, with 2.6 million cards issued in the quarter. The 15-to-90-day delinquency rate stood at 7%, up 0.3 percentage point from a year earlier but down 1 point from the first quarter.

Users active on both the marketplace and Mercado Pago rose 37% in the quarter, compared with growth of 20% to 30% a year earlier. "This is the most valuable segment for us," Cuccioli said, noting these users generate 70% more GMV per user than marketplace-only customers and almost 90% more TPV per user than fintech-only users.

Advertising revenue grew 73% in dollar terms, with market share surpassing 10% in Latin America's digital advertising market for the first time. Cross-border GMV rose 60% on a forex-neutral basis.

The investment phase, including free shipping, credit cards and cross-border expansion, is deliberately weighing on short-term profitability, with management saying it will not change in the near term. Investors will watch the earnings call for signs that Brazil's scale is translating into margin recovery.

This article is for informational purposes only and does not constitute investment advice.