By Brazil Stock Guide – Mercado Livre (NASDAQ: MELI) reported a 50% increase in second-quarter net revenue and financial income to $10.17 billion as investments in shipping, competitive pricing, credit and payment services pressured operating profit and margins.
The figures are from Mercado Livre’s shareholder letter and earnings presentation released on Aug. 5. On a currency-neutral basis, revenue increased 43% from a year earlier, while reported growth reached its fastest pace in four years.
Income from operations declined 17% to $683 million. The operating margin narrowed by 5.5 percentage points to 6.7%, compared with 12.2% in the same period of 2025.
Net income fell 11% to $466 million, while diluted earnings per share decreased to $9.19 from $10.31. Lower foreign-exchange losses partly offset the decline in operating income.
Commerce growth remains strong
Gross merchandise volume advanced 44% to $21.9 billion and increased 36% on a currency-neutral basis. The number of products sold rose 45% to 795 million.
Mercado Livre recorded 89 million unique active buyers, an increase of 26%. Items purchased per buyer climbed 14%, led by a 19% gain in Brazil following the reduction of the company’s free-shipping threshold.
Brazilian marketplace GMV increased 39% on a currency-neutral basis, while items sold surged 56%. The company said the lower shipping threshold produced sustained improvements in conversion, customer retention and the number of product categories purchased by users.
Mercado Livre also introduced discounts for purchases made through Brazil’s Pix instant-payment system and reduced seller fees in selected categories. Active sellers in the country increased 29%.
In Mexico, currency-neutral GMV rose 26% and items sold climbed 34%, despite pressure from tax changes and softer consumer demand. Argentina posted currency-neutral GMV growth of 38%, while the number of products sold increased 22%.
Cross-border commerce expanded 60% on a currency-neutral basis. Volume handled through the company’s China fulfillment operation rose 170% from the previous quarter.
Fintech portfolio reaches $16.4 billion
Total payment volume increased 56% to $101 billion. Mercado Pago reached 88 million monthly active users, up 30%, with user growth of 38% in Brazil and 45% in Mexico.
Assets under management climbed 68% to $23 billion. Mercado Livre’s credit portfolio expanded 75% to $16.4 billion as the company increased consumer lending and credit-card issuance.
The net interest margin after losses, or NIMAL, fell to 20.7% from 23% a year earlier, although it improved by three percentage points from the previous quarter. The annual decline reflected a larger share of lower-margin credit-card loans in the portfolio.
Mercado Livre issued 2.6 million new cards during the quarter, compared with 1.6 million a year earlier. Credit cards represented 47% of the portfolio, up from 43%.
The company’s 15-to-90-day nonperforming-loan ratio stood at 7% for the overall credit portfolio and 4.6% for credit cards, with both indicators near historical lows.
Investments weigh on profitability
The company attributed the margin contraction to lower prices and seller fees in Brazil, shipping costs, user-acquisition spending and higher point-of-sale device expenses, particularly in Mexico.
Mexico’s direct contribution margin narrowed by about four percentage points from the first quarter. Almost half of that decline came from investments in the payments-acquiring business, including customer acquisition and more expensive devices.
Operating expenses declined as a percentage of revenue from the previous quarter, partly because provisions for doubtful accounts normalized in Brazil. On an annual basis, however, provisions increased by about two percentage points as a share of revenue because the loan portfolio grew faster than the broader business.
Adjusted earnings before interest, taxes, depreciation and amortization fell to $975 million from $1.02 billion.
Advertising and AI support expansion
Mercado Livre said it exceeded a 10% share of Latin America’s digital advertising market for the first time. Advertising revenue increased 62% on a currency-neutral basis, supported by self-service tools, large brands and cross-border sellers.
The company expanded its video advertising inventory through an integration with HBO Max, increasing its addressable video audience by about 50%.
Artificial-intelligence investment rose by roughly $80 million from a year earlier. Still, product-development expenses declined to 7.2% of revenue from 8.4% as automation allowed the company to expand technology output without increasing its engineering workforce at the same pace.
Code submissions more than doubled, deployments increased almost 75% and autonomous AI agents reviewed more than 500,000 code submissions over the past year.
Adjusted free cash flow totaled $214 million in the quarter after $441 million in capital expenditures and $2.1 billion invested in credit portfolio expansion. Mercado Livre ended June with net debt of $6.43 billion, compared with $4.68 billion at the end of 2025.
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