MELI Still Split: E-comm Burns Cash, Lending Tightens?

MercadoLibre reported Q2 on Aug 6, with topline and biz growth still strong. Nominal revenue growth was near 50%, well ahead of estimates. However, operating profit fell 17% YoY, roughly in line with the Street. Growth without profit remains an overhang that the market dislikes, details below:

1) Logistics investment paying off; GMV still surging: In e-com, GMV rose ~44% YoY, +~36% at FXN, broadly unchanged vs. last quarter, sustaining solid momentum.

By price-volume mix, order count increased nearly 45% YoY, easing ~1ppt QoQ. Even so, it remains well above the prior ~30% run-rate.

Digging deeper, unique buyer growth was stable, while slower order growth was mainly due to a softer increase in orders per buyer. In Brazil, where free shipping efforts are concentrated, items per buyer still rose 19% YoY, and after lowering thresholds, DAU growth stayed above MAU. Faster delivery and lower free-shipping thresholds are boosting demand and stickiness.

2) Proactive fee cuts amid intensifying Brazil e-com competition: This quarter, e-com revenue grew ~50% YoY, a modest acceleration vs. 47% in Q1. 1P revenue grew ~80% YoY but slowed QoQ, while 3P platform revenue accelerated to ~42%.

The implied blended take rate was 20.1%, now down QoQ for three straight quarters. Beyond logistics fee waivers, the company lowered commission-based monetization in certain categories in Brazil. This suggests MELI turned more aggressive competitively in Brazil.

3) Payments: steady high growth with early traction off-platform: In fintech’s first pillar, TPV rose 56% YoY, a clear acceleration vs. last quarter, mainly aided by FX tailwinds. Ex-FX, growth accelerated by only ~1.2ppt.

By mix, off-platform acquiring TPV growth outpaced on-platform—a positive signal that Mercado Pago is penetrating beyond its own marketplace, supportive for payment revenue since on-platform payment is generally not charged.

As we’ve noted, payment take rates are trending down (partly on mix). With fees as the main driver, financial services revenue grew 31% YoY, with a slight QoQ deceleration.

4) Tighter underwriting; lending growth cooled: In lending, loan book reached $16.4bn, +75% YoY, down from 87% in Q1.

Growth in prior drivers—consumer and credit card loans—slowed by ~10ppt QoQ. Management said it tightened approvals, prioritizing higher-credit borrowers. As a result, lending revenue growth also eased to 72%.

Based on recent communications, MELI may be preempting a potential pickup in LatAm credit risk. The company raised risk controls to avoid elevated NPL losses.

5) NIM continued to improve: With tighter underwriting, NIM rose to 20.7% from 17.8% in Q1, a meaningful improvement. Structurally, the key tailwind was a sharp drop in provision rate, from ~37% to ~29%, consistent with stricter risk controls.

That said, funding costs increased notably, weighing on NIM. This seems to suggest tighter liquidity conditions in LatAm.

6) Strong growth, margin still under pressure: Overall, MELI’s total revenue grew nearly 50% YoY, but ex-FX, underlying growth was ~43%, down from 46% in Q1, mainly on slower loan book and lending revenue. Even so, the print beat conservative expectations.

The issue remains profit: OP was $680mn, -17% YoY, roughly in line. With revenue beating, OPM was 6.7%, ~20bps below the Street.

Similar to the last two quarters, the primary drags were free shipping in Brazil, lower commissions in some categories, and higher energy and IT equipment costs. A partial offset came from tighter credit risk and higher NIM, which improved lending margins.

7) Key financials at a glance

Dolphin Research view:

1) Broadly consistent with the last two quarters, MELI is investing for faster growth and a larger long-term TAM, and to proactively counter competition, accepting near-term margin pressure.

Results suggest the spend is working. E-com GMV and orders maintained high growth with minimal slowdown vs. Q1.

In payments, TPV growth is accelerating, and off-platform now outpaces on-platform, signaling progress in non-MELI use cases. That is a constructive signal for the ecosystem.

In lending, tighter approval standards skewed toward higher-credit users. This led to a notable slowdown in loan balance growth, while lower provisioning lifted NIM and thus lending margins.

However, based on the call, the market fears Brazil/EM credit could worsen in 2H (higher delinquencies, tighter funding). While management said it has not seen clear signs, the proactive tightening is likely preemptive.

Given profits largely come from fintech today, a credit downturn in LatAm would be negative for a company simultaneously waging an e-com share battle.

3) Investment take: flows favor earnings certainty over long-dated stories. In an invest-for-growth phase, MELI is unlikely to be a top pick right now, and credit risk needs watching.

Despite strong growth and our constructive long-term view of MELI as LatAm’s largest, most comprehensive internet platform, near term we need to see e-com spend narrow and at least OP stop declining YoY. That would set up a better trend opportunity.

On valuation, per Dolphin’s deep dive, a long-horizon DCF implies ~$2,400–$2,500 per share, suggesting ample upside long term.

But today’s market emphasizes near-term earnings over distant outlooks. On current Street 2027 OP of ~$4.0bn (2026 OP likely down, so less relevant for valuation), the implied multiple is ~22.5x at the current mkt cap; with the growth runway, that is not demanding. If price and multiples compress further, buying the dip could be considered.

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Dolphin Research historical [MELI] coverage:

Earnings reviews:

2026.2.25 Review: LatAm 'Alibaba' Split Personality: Revenue Giant, Profit Dwarf

2026.2.25 Call: Mercado (Trans): Will Build an E-com Agent In-house

2025.10.30 Review: MELI: Profit Miss? Possibly Just 'Growing Pains' Before Victory

2025.10.30 Call Notes: Mercado (Trans): Focused on Long-term Value over Short-term Profit

2025.8.5 Call Notes: Mercado (Trans): Uncertain About Lowering Free-shipping Thresholds in Other Markets

2025.8.5 Review: Growth vs. Profit? Mercado’s Choice

Deep dives:

2025.7.10: Mercado: The Long Game to $100bn Market Cap in LatAm

2025.9.16: LatAm 'Alibaba' MELI: 'Fake' E-com, 'Real' Lending?