MercadoLibre Inc. (MELI) saw its shares slide about 4% in after-hours trading Thursday after the Latin American e-commerce and fintech giant reported a 15.6% decline in first-quarter net profit, even as revenue surged 49% to $8.8 billion. The profit miss overshadowed a top-line beat and rapid growth in key markets, highlighting investor unease over rising costs tied to logistics, credit expansion, and free shipping.
Net profit for the quarter ended March 31 came in at $417 million, falling short of analyst expectations compiled by Reuters and FactSet. Earnings per share landed at $8.23, below the $8.50 consensus estimate and down from $9.74 a year earlier. Revenue, however, topped the $8.3 billion consensus, reaching $8.8 billion and posting the fastest growth rate since the second quarter of 2022.
Spending for Market Share
The company is pressing investors to accept lower short-term profits as it invests heavily to deepen its dominance in e-commerce, digital payments, and lending across Latin America. Leandro Cuccioli, senior vice president of investor relations, told Reuters that the increased costs tied to logistics, credit growth, and free shipping are a deliberate trade-off: current profit for a larger slice of the market down the road. “Opportunity is worth it,” he said.
Brazil, MercadoLibre’s largest market, powered the gains. After lowering the free-shipping threshold there last year—a change Cuccioli called “here to stay”—unique buyers surged 32% year-over-year, the sharpest jump in five years. Items sold shot up 56%. Gross merchandise value rose 42% to $19 billion, driven by strong performance in Brazil and growth in Mercado Pago users.
Fintech Engine Accelerates
Mercado Pago, the company’s fintech unit encompassing payments, digital accounts, and lending, continued its rapid expansion. Monthly active users jumped 29% to 83 million. Net revenue for the division hit $4 billion, a 51% increase. Customer assets on the platform soared 77%, closing in on $20 billion.
However, the loan book remains a key risk. MercadoLibre’s credit portfolio ballooned 87% to $14.6 billion, with its credit card segment more than doubling to $6.6 billion after issuing 2.7 million new cards. If default rates climb or funding costs turn unfavorable, Mercado Pago’s growth could quickly reverse course.
AI and Competitive Landscape
Artificial intelligence played a supporting role, with MercadoLibre noting that AI tools boosted conversion rates in both Brazil and Mexico, according to Seeking Alpha. The company also highlighted AI-powered campaign tools at its advertising unit, Mercado Ads.
Competition remains intense. MercadoLibre faces Amazon.com Inc. (AMZN) and Temu (owned by PDD Holdings) in e-commerce, and Nu Holdings Ltd. (NU) in digital finance. Despite these pressures, some analysts remain bullish. Derrick Irwin, co-head of intrinsic emerging markets equity at Allspring Global Investments, told Barron’s that MercadoLibre’s “long-term growth drivers remain intact.” Ryan Kerley of Vontobel described the higher spending as a “deliberate investment cycle.”
James Friedman at Susquehanna maintained his $2,400 price target ahead of the report, calling the setup “good.” Still, investors appeared unconvinced after the numbers, seeking more assurance that rising expenses won’t drag margins down for longer.
Cuccioli also told Reuters that the company is not planning an IPO for Mercado Pago, keeping payments, savings, and credit bundled within MercadoLibre’s public equity narrative—a story now under pressure as revenue soars but profits slide the other direction.
