Nu Holdings: A High-Conviction Play on Digital Banking's Next Frontier

Nu Holdings (NU) just delivered a Q2 2025 report that screams “buy the dip.” Revenue of $3.7 billion handily beat estimates of $3.16 billion, with annualized growth of 85% since 2021. Net income nearly tripled in two years to $637 million, while gross profit surged 78% to $1.5 billion. These numbers aren't just impressive—they're a masterclass in how to scale a digital bank in emerging markets.

Let's start with the margin discipline. Nu's efficiency ratio dropped to 28.3%, a testament to its low-cost digital infrastructure. Compare that to traditional banks, which often hover around 50–60%. Meanwhile, its return on equity (ROE) hit 28%, outpacing peers like JPMorgan (JPM) and Citigroup (C).

But the real fireworks come from revenue growth. Nu's credit portfolio ballooned to $27.3 billion, up 40% YoY, with secured lending up 200% and unsecured loans up 70%. This isn't just lending—it's a full-blown ecosystem. The company's cross-sell strategy is turning single-product users into customers for credit, insurance, and even crypto. Monthly revenue per active customer (RPAC) now stands at $12.20, up 18% YoY.

Now, let's talk strategic R&D. Nu isn't just digitizing banking—it's weaponizing AI. The company's upgraded credit models in Brazil alone have slashed delinquency rates to 4.4% for 15–90-day NPLs. This AI-driven underwriting isn't just safer; it's expanding access to credit for millions of previously unbanked customers. With a cost to serve of just 80¢ per active customer, Nu is proving that tech can democratize finance without sacrificing margins.

The leadership team is equally compelling. New CTO Eric Young and ex-Central Bank of Brazil chief Roberto Campos Neto aren't just names—they're blueprints for scaling innovation and navigating regulatory landscapes. Nu's recent foray into Mexico and Colombia? That's just the beginning. The company's scalable model and $6.92 billion FY2025 revenue forecast suggest it's primed to replicate its Brazil success across Latin America.

So why is the stock down 2.95% post-earnings? The 30.67 P/E ratio feels cheap for a company growing earnings at 100%+ annually. Analysts' mixed price targets ($9–$19) reflect short-term jitters about Brazil's inflation or Mexico's political shifts—but Nu's diversified portfolio and AI-driven risk models insulate it from regional volatility.

Here's the bottom line: Nu is a rare beast—a fintech with a proven business model, a fortress balance sheet, and a clear path to $8.54 billion in FY2026 revenue. At today's price, it's not just a long-term play; it's a high-conviction bet on the future of finance in the world's most underpenetrated markets.

Investment Thesis: Buy Nu Holdings for its AI-powered margin expansion, explosive cross-sell potential, and leadership in a $10 trillion emerging market fintech sector. With a P/E that undercuts its growth and a ROE that outpaces legacy banks, this is the kind of stock where patience pays off.