By Brazil Stock Guide – Mercado Livre (Nasdaq: MELI) reported $559 million in net income for the fourth quarter of 2025, down 13% from $639 million a year earlier, despite revenue accelerating sharply across Latin America. Net revenues and financial income reached $8.8 billion, up 45% year-on-year. However, net margin compressed to 6.4%, from 10.5% in 4Q24.
Operating income rose to $889 million, though the margin fell to 10.1%. Excluding $99 million in one-off tax credits in Brazil, operating margin would have been 9.0%. The combined impact of strategic investments — including lower free-shipping thresholds in Brazil, cross-border trade expansion, first-party (1P) scaling and credit card growth — represented an estimated 5 to 6 percentage-point drag on operating margin in the quarter.
The company said net income declined mainly due to normalization of its tax rate versus unusually low levels in 4Q24.
Scale at Any Cost
Gross merchandise volume reached $19.9 billion, up 37% FX-neutral. Total payment volume hit $83.7 billion, growing 42% year-on-year. The credit portfolio expanded 90% to $12.5 billion, and has grown more than fourfold in three years.
Same- and next-day deliveries rose 29%. The logistics network absorbed a 41% annual increase in shipment volume, nearly 500 million additional packages in 2025, while unit shipping costs in Brazil fell 11% year-on-year in local currency. Nearly 75% of fast shipments are delivered within 48 hours.
Advertising revenue accelerated 67% FX-neutral in 4Q25, becoming a growing monetization lever. Cross-border trade expanded 74% FX-neutral, supported by the opening of Mercado Livre’s first fulfillment center in China in December.
Credit also deepened. Net Interest Margin After Losses (NIMAL) stood at 23.3%. The 15–90 day non-performing loan ratio in the credit card portfolio fell to 4.4%, a historic low.
Cash Flow Remains Strong
Despite margin pressure, cash generation was robust. Adjusted free cash flow reached $763 million in the quarter, bringing the 2025 total to $1.5 billion. The company ended the year with $6.7 billion in available cash and net leverage of 1.16x EBITDA.
The strategy remains consistent: invest upfront, scale aggressively, and monetize later.
Market Leadership Shifts
In capital markets, symbolism has shifted. Mercado Livre is no longer Latin America’s most valuable listed company. It has fallen to third place behind Petrobras (B3: PETR4, NYSE: PBR) and Itaú Unibanco (B3: ITUB4, NYSE: ITUB), as investors rotate into energy and banking stocks in 2026.
The contrast is telling. Latin America’s dominant technology platform continues to outgrow most peers. Yet investors are rewarding cash yield and dividend stability over expansion cycles.
Mercado Livre chose scale over margin. Profit fell. Revenue surged. The bet is that dominance today secures structural returns tomorrow.
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