# Magazine Luiza profit drops 70% as higher rates weigh, but fintech and AI units show strength

*Luizacred and Magalupay drive margins while “Lu’s WhatsApp” AI platform boosts engagement; strong cash flow and diversification offset macro drag.*

- Published: 2025-11-06
- Section: Insights
- Tags: Magalu, Magazine Luiza, Retail
- URL: https://brazilstockguide.com/insights/magazine-luiza-3q25-results-profit-fall-fintech-ai-commerce/

**By Brazil Stock Guide –** Magazine Luiza (B3: MGLU3) reported a sharp **69.8% drop in adjusted net income to R$21 million** in the third quarter of 2025, as higher interest costs eroded earnings despite operational resilience. Including non-recurring gains, net profit reached **R$84.6 million**, still down 17% from a year earlier. Adjusted EBITDA remained stable at **R$711 million**, with a **7.9% margin**, while operating cash flow strengthened to **R$535 million**, lifting total cash to **R$7.6 billion** and net cash to **R$1.6 billion**.

### Fintech engines cushion profitability

Even as net profit fell, the company’s financial arms proved to be key shock absorbers. **Luizacred** posted a **R$68 million profit**, supported by a **R$20 billion credit portfolio** and one of its lowest historical delinquency levels (8%). The newly launched **Magalupay SCFI**, already operating in 50 stores, began absorbing the retailer’s entire consumer credit book, offering cheaper funding and higher margins. Magalupay processed **R$24.6 billion in transactions** in the quarter, underscoring the growing weight of fintech in Magalu’s margin mix and customer loyalty strategy.

### AI commerce gains traction

The quarter also marked the commercial rollout of **“Lu’s WhatsApp,”** an AI-powered conversational sales platform built on **Google LLMs** and hosted by **Magalu Cloud**. The channel allows customers to browse, buy and pay directly within WhatsApp — via text, voice or image — yielding a **conversion rate three times higher** than Magalu’s app and an **NPS of 90 points**. Executives call it the company’s most disruptive channel since the marketplace’s debut, positioning Magalu as an early mover in Brazil’s emerging **AI commerce** frontier.

### Focus on profitability over volume

Total sales reached **R$15.1 billion**, down 2.6% year-on-year, as Magalu prioritized margin over growth. Brick-and-mortar revenue climbed **5.2%**, offsetting a **5.8% decline in total e-commerce**, while the **gross margin held at 31.5%**. The share of orders fulfilled through **Fulfillment Magalu** rose to **28%**, boosting efficiency and delivery conversion.

### Diversified ecosystem remains key

Beyond retail, the company’s ecosystem delivered steady results. **Magalog**, its logistics subsidiary, handled **5.5 million external deliveries** for brands like Arezzo, C&A, and Renner. **Magalu Ads** grew **69%**, fueled by video formats and the launch of “Sponsored Brands.” **Magalu Cloud**, now ISO 27001-certified, surpassed **1,000 external clients** and hosts **over half of Magalu’s internal workloads**, cutting costs and improving scalability. Subsidiaries also added to profitability: **Netshoes** earned R$24 million, **Kabum** R$11 million, and **Época Cosméticos** R$3 million.

### Outlook

Executives said they remain optimistic heading into **Black Friday** and the holiday season, citing a likely interest-rate downcycle that could revive durable-goods demand and ease financial expenses. The upcoming **Galeria Magalu**, blending retail, entertainment, and digital content, is set to open in 4Q25, symbolizing a new growth phase anchored in **technology, fintech, and ecosystem monetization**.

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Source: Brazil Stock Guide, https://brazilstockguide.com/insights/magazine-luiza-3q25-results-profit-fall-fintech-ai-commerce/