America Movil’s Profit Miss Signals Vulnerability to Mexico’s Economic Slump

The telecommunications giant América Móvil, Latin America’s largest telecom operator, reported mixed results for Q1 2025, underscoring the fragility of its home market. While net profits rose 39% year-on-year to 18.70 billion pesos ($914 million), revenue fell short of expectations by 0.5%, reflecting a deepening economic slowdown in Mexico. The company’s struggles highlight a broader dilemma: its fortunes remain inextricably tied to Mexico’s economic performance, which is now buffeted by inflation, trade uncertainty, and structural fiscal risks.

The Earnings Dilemma: Growth vs. Vulnerability

América Móvel’s Q1 results revealed a stark divide between segments. Post-paid subscriptions surged by 2.4 million across key markets like Mexico and Brazil, driving higher-margin revenue. Yet pre-paid customers declined by 1 million—primarily in Mexico—due to affordability pressures. This divergence reflects Mexico’s uneven economic landscape: a growing middle class adopting premium services contrasts with a widening segment of households struggling to maintain basic connectivity.

The company’s EBITDA rose 13% to 91 billion pesos, aided by cost discipline. However, the 14% revenue growth to 232.04 billion pesos missed consensus estimates, signaling that Mexico’s decelerating GDP—now projected to grow just 0.5% in 2025—is eroding demand.

Mexico’s Economic Crossroads

The data paints a bleak picture. Mexico’s GDP contracted by 2.4% quarter-over-quarter in Q4 2024, with Q1 2025 showing no rebound. Key drivers of stagnation include:
- Export collapse: Manufacturing exports grew only 1.6% year-on-year in February 2025, while oil exports plummeted 29.7% due to declining production and global price pressures.
- Remittance decline: Remittances fell 2.6% in February, undermining household income in a context of 3.9% inflation.
- Structural crises: State-owned oil firm Pemex’s debt nears $100 billion, and judicial reforms threaten investor confidence.

América Móvil’s pre-paid losses are a canary in the coal mine: households cutting back on telecom services often do so after reducing spending on nonessentials. The company’s executives have warned that Mexico’s economic slowdown could worsen, with a 2.3% GDP growth assumption in the government’s 2025 budget deemed “unrealistic” by analysts.

Investor Implications: Growth Amid Uncertainty

For investors, América Móvil presents a paradox. Its post-paid expansion—driven by digital transformation and 5G investments—remains a bright spot. Yet its reliance on Mexico’s volatile economy leaves it exposed to macro headwinds.

The stock has underperformed the IPC index by 12% year-to-date, reflecting skepticism about Mexico’s trajectory. Key risks include:
1. Policy instability: U.S. tariffs and judicial reforms could disrupt cross-border supply chains and deter capital.
2. Fiscal drag: A 3.9% budget deficit target hinges on oil production that is 25% above current output.
3. Debt pressure: Pemex’s liabilities could force higher government subsidies, crowding out telecom infrastructure spending.

Conclusion: A Balancing Act on Shifting Ground

América Móvil’s Q1 results underscore a critical truth: its success depends on Mexico’s ability to navigate a perfect storm of economic and political risks. While post-paid growth signals long-term resilience, the pre-paid segment’s decline—now at 1 million lost customers—reveals the immediate toll of Mexico’s stagnation.

The numbers are stark: a 0.5% GDP growth forecast, 3.9% inflation, and a 20% peso/dollar exchange rate (up from 20.5 in 2024) create a precarious environment. For investors, the stock offers potential rewards in 5G and digital services but demands a close eye on Mexico’s macroeconomic and geopolitical dynamics. Until these stabilize, América Móvil’s performance will remain a barometer of Latin America’s most critical economy—and a reminder that telecoms are not immune to the vagaries of national growth.