MercadoLibre's Q3 2025: Contradictions Emerge on Argentina's Outlook, Investment Strategy, and Credit Risk

Date of Call: October 29, 2025

Financials Results

• Revenue: Revenues grew 39% year-on-year (27th consecutive quarter >30% growth)

Business Commentary:

• Revenue and Growth:
• MercadoLibre reported revenues growth of 39% year-on-year for Q3 2025, marking its 27th consecutive quarter of growth above 30%.

• Growth was driven by strategic investments in free shipping thresholds, logistics, and credit card offerings, which increased transaction volumes and market share.

• Credit Card Maturity and Profitability:

• The credit card business showed rapid growth, with older cohorts (more than 2 years old) already profitable.

• This profitability was supported by an increase in user base and share of wallet, as well as improved credit card models and technology.

• Argentina Market Dynamics:

• Argentina faced macroeconomic challenges, impacting revenue growth and profitability.

• Despite these challenges, MarketLibre maintained strong market leadership and increased GMV and buyers, supported by strategic investments and consistent market focus.

• ** fulfilled Center Expansion:**

• MercadoLibre increased its fulfillment centers, with a 41% year-on-year growth in capacity.
• This expansion is driven by the need to manage increased shipping volumes and accelerate logistics efficiency.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly highlighted strong execution and record metrics: "Revenues grew by 39% year-on-year," "Operating income of USD 724 million, grew by 30% year-on-year," record NPS, accelerating GMV and buyer growth, and repeated statements of being "optimistic" and continuing disciplined investments to capture long-term opportunities.

Q&A:

• Question from Andrew Ruben (Morgan Stanley): How did Argentina's GMV, TPV and funding costs evolve through the quarter and how do Sunday's election results affect your economic outlook and investment plans (fulfillment centers, credit cards)?
  Response: Argentina saw a Q3 slowdown from macro/election-driven funding-cost pressure but remained resilient: revenues +39% YoY (97% in local currency), items +34%, credit book +100% YoY with healthy credit metrics; company remains optimistic long-term and continues investing (2nd fulfillment center opened, launched credit card).

• Question from Irma Sgarz (Goldman Sachs Group, Inc.): Can you break down the 6–7M new quarterly active users between brand-new users and re-engaged users, demographics, promotion-sensitivity risk, and how should we think about marketing spend into next year?
  Response: Total unique buyers reached 75M with 7.8M new buyers this quarter (≈4M in Brazil); marketing spend was ~11% of revenues (in line with Q2) and will remain in a similar range with disciplined, performance-driven acquisition (affiliate channel grew 4x YoY) to ensure contribution to profitability.

• Question from Robert Ford (BofA Securities): Can you comment on merchant adherence to the recent relative-value notice in Brazil, implied search-algorithm changes, and how cost structure/ancillary revenue streams should be thought about amid intensifying competition?
  Response: Testing a short-term price-monitoring/storefront-qualification initiative to surface most competitive listings; expect high seller adherence; initiative complements heavy investments in logistics, free shipping and promotions—too early to report outcomes.

• Question from Josh Beck (Raymond James & Associates, Inc.): Shipping unit costs were down 8%—how much headroom remains from utilization/slow-shipping, and what are you investing in robotics/automation mid-to-long term?
  Response: Brazil shipping cost down 8% Q/Q mainly from scale and spare-capacity utilization; some further optimization in slow-shipping exists but gains are largely scale-driven; deploying robotics and warehouse tech with observable productivity gains in put-away, picking and packing.

• Question from Craig Maurer (Financial Technology Partners LP): Are credit-card cohorts from last year approaching breakeven and could that be a tailwind into next year?
  Response: Cohorts older than two years are profitable; in Brazil 2023 and earlier cohorts are already profitable; overall card profitability depends on cohort mix.

• Question from Vinicius Pretto de Souza (Itaú Corretora de Valores S.A.): Given the GMV acceleration in Brazil but low contribution margin, do you view current margin investments as sufficient to hit growth/share goals, and would you go below these margins to accelerate share?
  Response: Management prioritizes long-term value over short-term margin and is willing to invest behind growth (e.g., lower free-shipping threshold drove items sold acceleration from 26% to 42% in Brazil), expecting margins to recover as investments (credit card, 1P) mature.

• Question from Trevor Young (Barclays Bank PLC): Should we expect the same NIMAL seasonality (Q4 up sequentially then down in Q1) and will NIMAL remain pressured as you ramp card issuance in Argentina amid higher funding costs even as older cohorts become profitable?
  Response: NIMAL fluctuations are largely mix-driven (Argentina funding-cost increase was the main driver), Q4 typically a bit stronger than Q1 but mix matters; Brazil's older card cohorts (~50% of TPV) are nearing profitability, Mexico lags, and Argentina issuance is early and will be expanded with investment.

• Question from John Halpert (Cantor Fitzgerald & Co.): Any early engagement metrics on the Argentina credit card launch, adoption curve vs Brazil, expected time-to-breakeven, and targeted penetration over 12–18 months?
  Response: Too early to provide metrics—card launched late in the quarter; management is bullish given a large engaged user base and competitive offering (no monthly fee), but no near-term guidance on adoption or penetration yet.

• Question from Neha Agarwala (HSBC Global Investment Research): With the big increase in shipments, will you need more fulfillment centers than planned and what further Brazil investments should we expect? Also, early trends and asset quality in Mexico credit amid competition?
  Response: Brazil saw a 28% Q/Q volume increase but no unplanned fulfillment centers—short-term capacity sufficient; mid/long-term capacity will be evaluated and built as needed; Mexico credit is gaining traction via the ecosystem with low acquisition costs, models improved and issuance reaccelerating while maintaining asset-quality discipline.

• Question from James Friedman (Susquehanna Financial Group, LLLP): How are you defining 'principality,' and are there financial services you might add to further increase principality?
  Response: Principality approximated as clients with ≥50% of income flowing through Mercado Pago (measured via surveys/open banking); management has yielding accounts and trade offerings in place but lacks broad payroll-deposit capability in Mexico (banking license pending), representing a clear opportunity to deepen principality.

• Question from Joao Pedro Soares (Citigroup Inc.): Are you satisfied with current investment levels and where should we expect continued operating leverage vs. additional resource needs?
  Response: Management is satisfied—investments are delivering (full-quarter effect evident), driving scale and operating-leverage (G&A and product development dilution); they will continue disciplined investments across 1P, logistics, credit and capacity (fulfillment +41% YoY) while capturing growth.

• Question from Marvin Fong (BTIG, LLC): Can you dimensionalize the Casas Bahia/B2B opportunity and comment on why average loan size is growing—are you loosening underwriting or maintaining discipline?
  Response: Casas Bahia complements 1P/3P to close selection gaps in bulky categories and brings logistics expertise—B2B is a multibillion long-term opportunity; credit underwriting discipline is maintained, models and tech improved, enabling controlled line increases and larger average loans while keeping NPLs in check.

• Question from Kaio Penso Da Prato (UBS Investment Bank): Discuss the pace and drivers of acquiring TPV growth in Brazil (≈28% YoY) and sustainability going forward.
  Response: Acquiring TPV acceleration driven by a strategic go-to-market shift (direct salesforce, direct-to-consumer channels), focus on credit-card acquiring and selective Pix; gains have been sustained across top markets and management is comfortable with continuing market-share gains.

• Question from Marcelo Santos (JPMorgan Chase & Co): Strong metrics in other countries—what initiatives drove GMV/TPV/margin performance and what to expect going forward?
  Response: Chile and Colombia GMV acceleration driven by improved fulfillment/logistics, selection and demand generation; Chile fintech showing strong adoption (monthly users +75% YoY), rising yields and product usage—management expects continued market-share gains supported by these investments.

• Question from Pedro Caravina: How are you thinking about OpenAI's move into e-commerce (browser partners like Shopify/Walmart)—opportunity or threat and could similar developments happen in South America?
  Response: Management is excited about agentic AI, has launched seller and fintech AI assistants to improve discovery and service; it's early to judge OpenAI partnerships' long-term impact—focus is on building in-platform agentic experiences to retain optionality.

• Question from Geoffrey Elliott: Can you comment on competitive behavior in Brazil—are competitors behaving rationally or irrationally?
  Response: Brazil is intensely competitive but management views competitors as behaving rationally; the lower free-shipping threshold was a rational, user-focused move that strengthened retention and market position—strategy remains user-centric rather than competitor-driven.

Contradiction Point 1

Argentina's Economic Outlook and Market Strategy

It reflects differing perspectives on the economic outlook and strategic focus in Argentina, which are crucial for understanding the company's growth strategy and market position in the region.

How did GMV, TPV, and Argentina’s higher funding costs evolve this quarter? How do you assess the economic outlook post-elections and its impact on growth investments? - Andrew Ruben (Morgan Stanley)

2025Q3: Argentina remains crucial due to its size and MercadoLibre's leadership position. Focus is on improving user value and platform quality. Despite macro instability, revenue growth by 39% year-on-year, with strong growth in buyers and items. Credit portfolio grew 100% with healthy metrics. Looking ahead, optimistic about Argentina's long-term growth perspective despite macro challenges. - Martin de Los Santos(CFO)

Can you explain the application of the same shipping strategy to countries like Argentina and Mexico, and what factors you would consider? - Marcelo Peev dos Santos (JPMorgan)

2025Q2: Argentina's macroeconomic environment has been challenging. The challenging economic situation in Argentina accelerated the adoption of financial services, such as our credit products and digital wallet, Mercado Pago. - Ariel Szarfsztejn(Commerce President)

Contradiction Point 2

Investment Strategy and Short-Term Margin Pressures

It involves the company's approach to investment strategy and short-term margin pressures, which are critical for understanding the company's financial strategy and growth trajectory.

Do current margins in Brazil justify investment, and would you consider lower margins to gain market share? - Vinicius Pretto de Souza (Itaú BBA)

2025Q3: Focus is on growth opportunities in commerce and fintech, managing short-term margin pressures. Confident in long-term margin trajectory as investments scale ecosystem. Not hesitant to invest behind growth despite short-term margin impact. - Martin de Los Santos(CFO)

Can you apply the same shipping strategy to countries like Argentina and Mexico? What factors would you consider? - Marcelo Peev dos Santos (JPMorgan)

2025Q2: We are investing to support growth. And if we have to reduce just a little bit the short-term margin to grow the business in the long term, we're absolutely comfortable doing that. - Martin de Los Santos(CFO)

Contradiction Point 3

Argentina's Economic Outlook and Investment Strategy

It highlights differing perspectives on Argentina's economic outlook and the strategic investments MercadoLibre plans to make in the region, which could impact financial performance and market positioning.

How did GMV, TPV, and Argentina's higher funding costs change during the quarter? How will the post-election economic outlook affect growth investments? - Andrew Ruben (Morgan Stanley)

2025Q3: Despite macro instability, revenue growth by 39% year-on-year, with strong growth in buyers and items. Credit portfolio grew 100% with healthy metrics. Looking ahead, optimistic about Argentina's long-term growth perspective despite macro challenges. - Martin de Los Santos(EVP & CFO)

Can you explain the sustainability of Argentina's 52% growth in items sold and how its strong margin trends can be maintained despite significant investments in Brazil and Mexico? - Andrew Ruben (Morgan Stanley)

2025Q1: Argentina's strong growth is due to market share gains, recovery in demand, and strategic investments in shipping and affordability. Comparables are toughening, but the core strategy remains strong. Margin improvements are due to Argentina's stabilization and improved credit performance. - Ariel Szarfsztejn(Commerce President)

Contradiction Point 4

Credit Card Profitability and Risk Strategy

It revolves around the company's approach to credit card profitability and risk management, which directly affects financial performance and customer relationships.

Will NIMAL dynamics remain pressured as credit card issuance increases, and how will Argentina's higher funding costs impact this? - Trevor Young (Barclays)

2025Q3: We continue to maintain underwriting discipline, issuing more cards while controlling risk. - Osvaldo Giménez(Fintech President)

Can you clarify the credit business strategy and funding breakdowns? - Kaio Prato (UBS)

2025Q1: The credit portfolio remains profitable with no deterioration in risk. Tightening of credit issuance is conservative, not impacting NPLs. - Osvaldo Gimenez(Fintech President)

Contradiction Point 5

Argentina Economic Outlook

It involves differing perspectives on the economic outlook for Argentina, which can impact strategic decisions and investor confidence.

Can you elaborate on how GMV, TPV, and funding costs in Argentina evolved during the quarter? Also, how do recent elections impact the economic outlook and growth investments? - Andrew Ruben(Morgan Stanley)

2025Q3: Argentina remains crucial due to its size and MercadoLibre's leadership position. Focus is on improving user value and platform quality. Despite macro instability, revenue growth by 39% year-on-year, with strong growth in buyers and items. Credit portfolio grew 100% with healthy metrics. Looking ahead, optimistic about Argentina's long-term growth perspective despite macro challenges. - Martin de Los Santos(CFO)

What will margin trends in Argentina and Brazil look like in 2025? - Irma Sgarz(Goldman Sachs)

2024Q4: Argentina's market is clearly in recovery with strong demand recovery and improving GDP trends. The margin was positive as we expected, driven by healthy growth in active users, higher GMV, a significant improvement in the quality of the credit book and the increase in the flow of payments through Mercado Pago. - Martin de Los Santos(CFO)