By Brazil Stock Guide — Mercado Livre (NASDAQ: MELI) reported a 45% increase in third-quarter revenue to $10.75 billion, but operating profit fell 6.6% as higher spending on free shipping, logistics and customer acquisition weighed on margins.
Net income rose 6% to $448 million, while operating income declined to $676 million from $724 million a year earlier, according to results released Wednesday, November 4. The operating margin narrowed to 6.3% from 9.8%, reflecting the company’s strategy of prioritizing growth and market share over short-term profitability.
Brazil remained Mercado Livre’s largest market, generating $6 billion in revenue, up 49.7% year over year and accounting for approximately 56% of the company’s total. Revenue from its Brazilian commerce operations reached $3.66 billion, while financial services contributed $2.34 billion.
Gross merchandise volume (GMV) in Brazil increased 36% in constant currency, while the number of items sold rose 45%, supported by expanded free-shipping benefits and higher purchase frequency. Across Latin America, GMV reached $22.8 billion, up 38% in reported terms, while unique active buyers increased 22.3% to 93.9 million.
Mercado Pago, the company’s financial services platform, reported a 62.3% expansion in its credit portfolio to $17.88 billion. Total payment volume increased 53% to $108.8 billion, while monthly active fintech users reached 92.9 million, up 28.7%. The ratio of loans overdue by 15 to 90 days remained stable at 7% from the previous quarter.
Higher shipping expenses, discounts on seller fees, incentives linked to Brazil’s Pix payment system and credit provisions pushed the consolidated gross margin down 2.5 percentage points to 40.8%. Mercado Livre expanded its fulfillment capacity by almost 20% during the quarter, increasing operating expenses ahead of the year-end shopping season.
The company said logistics efficiency continued to improve despite the additional spending. Average shipping costs per package in Brazil declined 5% in local currency from a year earlier, supported by automation and higher volumes. Mercado Livre handled 591 million shipments during the quarter, including 258 million delivered on the same day or the following day.
Advertising revenue increased 58% in reported terms, while the company stepped up investments in artificial intelligence for advertising, customer service and financial products. Mercado Livre generated $285 million in adjusted free cash flow during the quarter, after $503 million in capital expenditures and approximately $2.1 billion invested in credit expansion.
The results highlight the challenge facing Mercado Livre as it expands its leadership in Latin American e-commerce and digital financial services. While revenue and transaction volumes continue to grow rapidly, investments in customer incentives, infrastructure and lending are limiting how much of that growth translates into operating profit.
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