VTEX's Q3 2025 Earnings Call: Contradictions Emerge in R&D Investments, Argentina's Outlook, and Latin American Churn Trends

Date of Call: November 6, 2025

Financials Results

• Revenue: $58.4M subscription revenue, up 8% YoY (7% FX-neutral); GMV $5.0B, up 13% in USD (12% FX-neutral)
• Gross Margin: Non-GAAP subscription gross margin 80%; total gross margin 77.5%, up 270 bps YoY
• Operating Margin: Non-GAAP operating margin 16%, up 230 bps YoY; non-GAAP income from operations $9.5M, up 25% YoY

Guidance:

• Q4 2025 FX-neutral subscription revenue growth targeted 5%–10%, implying $65.8M–$68.8M.
• Q4 non-GAAP income from operations margin targeted in the mid-20s.
• Q4 free cash flow margin targeted in the high teens.
• Full-year 2025 FX-neutral subscription revenue growth targeted 9.3%–10.7%, implying $234M–$237M.

Business Commentary:

* Revenue and Profitability Growth: - VTEX reported subscription revenue of $58.4 million for Q3 2025, up 8% in U.S. dollars and 7% FX neutral, marking a significant increase from $53.9 million in Q3 2024. - The growth was driven by consistent execution, expanding margins, and the gradual ramp-up of high potential revenue streams like global expansion and B2B use case customers.

• Operational Efficiency and AI Integration:
• VTEX achieved a non-GAAP operating margin of 16%, an improvement of 230 basis points year-over-year, and net income of $10.6 million, a 41% year-over-year increase.

• The company's profitability improved due to AI-powered support automations, reducing costs and enhancing service quality. The automation has structurally reduced costs in customer support, contributing to the non-GAAP subscription gross margin exceeding 80% for the first time.

• Regional Performance and Market Conditions:

• In Argentina, VTEX faced weak performance with no signs of short-term recovery, despite positive market reception of recent elections.
• The weakness is primarily attributed to high interest rates affecting consumption and credit availability, challenging retailers' ability to fund inventory and finance consumption.

• Strategic Growth Initiatives:
• The company's global expansion continues to show progress, with a focus on B2B use cases and retail media, notably in the U.S. with a multibillion-dollar enterprise implementation.
• VTEX's strategic pillars, including global expansion, B2B use cases, retail media, and Agentic commerce, are positioned to drive future growth as these segments exhibit strong traction and long-term opportunities.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted meaningful profitability improvement: "non-GAAP net income $10.6 million, a 41% growth year-over-year," "non-GAAP subscription gross margins above 80% for the first time," and guided to Q4 mid-20s operating margin and high‑teens FCF, signaling confidence in margin expansion and cash generation.

Q&A:

• Question from Marcelo Santos (JPMorgan Chase & Co): Can you explain the sequential increase in R&D spend while headcount declined ~49 employees, and how is churn trending amid LatAm weakness?
  Response: R&D spend will increase as the company accelerates AI and product investment; headcount declined due to AI-driven productivity (support automation) and commercial adjustments, and churn is stable overall with some pressure in Tier‑3 customers.

• Question from Maria Infantozzi (Itaú Corretora de Valores S.A.): With elections behind us, does Argentina outlook improve, and how will AI investments change how you monetize clients?
  Response: Argentina remains a cautious, credit-constrained market with limited near-term recovery; AI is a structural company transformation that will improve customer economics and create monetization levers (retail media, AI agents) but is broader than just a monetization tool.

• Question from Vitor Tomita (Goldman Sachs Group, Inc.): Are you still confident in prior mid/high‑teens operating/FCF margin expectations, and were there surprises in working capital or CapEx for Q4?
  Response: Q4 guidance targets mid‑20s non‑GAAP operating margin and high‑teens FCF margin for the quarter (full‑year FCF nearer mid‑teens); working‑capital swings reflect timing from upfront annual billing and longer decision cycles, not structural issues.

• Question from Cesar Davanco (Santander Investment Securities Inc.): You referenced Brazil FX‑neutral GMV growth shifting and a mix toward large enterprise lowering implied take rate—can you comment on Q3 numbers and expectations for Q4?
  Response: Brazil performed in line with expectations: prior quarter low‑20s FX‑neutral growth decelerated to high‑teens in Q3; expect Brazil to be stable to slightly decelerating in Q4 due to elevated interest rates.

• Question from Lucca Brendim (BofA Securities): Update on U.S. operations—are large customer migrations on track—and have marketplace moves (Nelly, Shopee) impacted your GMV or operations?
  Response: U.S. and EMEA momentum is strong with major enterprise migrations progressing; marketplaces are treated as channels—not an existential threat—and can complement VTEX by driving volume while VTEX remains the backbone for brand‑owned commerce.

• Question from Madison Schrage (KeyBanc Capital Markets Inc.): Where does B2B sit in the new‑logo pipeline and how much more cost can AI cut in customer support or other areas?
  Response: B2B is a significant growth driver (≈50% of deals in U.S./EMEA); most customer‑support savings from AI have already been captured, with limited incremental headcount reductions as large Tier‑1 customers still require human engagement—focus now on quality and orchestration.

• Question from Gustavo Farias (UBS Investment Bank): How does LatAm B2B momentum compare to U.S./Europe and what opportunities/challenges do you see from agentic commerce/OpenAI commerce protocols?
  Response: B2B traction is stronger in U.S./EMEA (≈50% of pipeline) and earlier in LatAm; agentic commerce/OpenAI aggregators are viewed as a net opportunity—VTEX is positioning as the backend 'backbone' via AI agents and integrations to capture demand routed to brand channels.

Contradiction Point 1

R&D Investment and Churn Trends

It involves the company's strategy regarding R&D investments and how they relate to churn trends, which are crucial for understanding the company's growth strategy and customer retention.

Can you explain the sequential increase in R&D spending and link it to the employee reduction? Also, how is churn trending, particularly in the Latin American market? - Marcelo Santos (JPMorgan Chase & Co)

2025Q3: VTEX is investing heavily in R&D to build the next generation of the platform, focusing on AI transformation, B2B commerce, retail media, and core commerce. The investment aims to lead a transition similar to becoming cloud-native a decade ago. - Geraldo do Carmo Thomaz(CTO)

What caused the decline in GMV and new subscriptions guidance? Which business lines are driving the most growth or contributing most to margin expansion? - Marcelo Peev dos Santos (JPMorgan)

2025Q2: Despite investing more in R&D, G&A and sales & marketing expenses are flat year-over-year, with headcount reductions in sales & marketing expected to show savings in the second half of the year. - Ricardo Camatta Sodre(CFO)

Contradiction Point 2

Argentina's Operating Momentum

It involves the company's outlook and performance in Argentina, which is critical for understanding regional market dynamics and macroeconomic impacts.

Does the recent stabilization in Argentina impact your outlook for the region? Also, how will AI investments drive monetization moving forward? - Maria Infantozzi (Itaú Corretora de Valores S.A.)

2025Q3: Argentina remains challenging due to high interest rates impacting financing for retailers. The macroeconomy shows limited visibility, but Retail media and AI-driven support platforms help customers navigate. - Geraldo do Carmo Thomaz(CTO)

What caused Argentina's declining operating momentum? What is Argentina's competitive landscape like? - Maria Clara Infantozzi (Itaú Corretora de Valores S.A.)

2025Q2: Argentina was a significant drag this quarter, with GMV growth reversing back to double-digit negative territory, impacting our results. We expected to see stable growth trends from Q1 but instead faced a reversal. - Ricardo Camatta Sodre(CFO)

Contradiction Point 3

Churn and Customer Engagement in Latin America

It highlights differing perspectives on customer churn and engagement in the Latin American market, which could impact business strategy and investor expectations.

Explain the sequential increase in R&D expenses and how it relates to the employee reduction? How is churn trending, particularly in the Latin American market? - Marcelo Santos (JPMorgan Chase & Co.)

2025Q3: Demand is mixed, with resilience in the U.S. and EMEA, and challenges in Latin America due to high interest rates. Despite this, customers remain engaged, and retention is strong. - Mariano Gomide de Faria(Co-CEO)

Can you explain the GMV softness in Brazil and how this impacts guidance? How is the new administration affecting the U.S. environment, and how will it impact your pipeline? - Thiago Kapulskis (Itau BBA)

2024Q4: We are starting to see some deal pushouts as the result of macroeconomic conditions in the region, specifically in Mexico and Argentina. - Mariano Gomide de Faria(Founder and Co-CEO)

Contradiction Point 4

Market Conditions and Customer Momentum

It involves differing perspectives on market conditions and customer momentum, which could impact investor expectations of the company's performance.

How is your churn trending, particularly in the Latin American market? - Marcelo Santos (JPMorgan Chase & Co)

2025Q3: Despite this, customers remain engaged, and retention is strong. Sales cycles are longer, and some customers delay decisions, but no significant churn is evident. - Mariano Gomide de Faria(CEO)

How do U.S. tariffs impact the macroeconomic environment and the companies you've discussed? - Leonardo Olmos (UBS)

2025Q1: Despite macroeconomic volatility, VTEX's performance remains strong, with a 17% growth in GMV and 15% in subscription revenue. - Ricardo Sodre(CFO)

Contradiction Point 5

Argentina's Macroeconomic Impact and Strategic Focus

It showcases differing perspectives on the macroeconomic impact of Argentina's challenges and strategic focus, which could affect business operations and investment strategies.

Does the recent stabilization in Argentina impact your outlook there? Also, explain how AI investments will drive monetization moving forward? - Maria Infantozzi (Itaú Corretora de Valores S.A.)

2025Q3: Argentina remains challenging due to high interest rates impacting financing for retailers. The macroeconomy shows limited visibility, but Retail media and AI-driven support platforms help customers navigate. - Geraldo do Carmo Thomaz(Co-CEO)

Could you clarify the assumptions behind the guidance, specifically for Latin America ex Brazil and the rest of the world? - Leonardo Olmos (UBS)

2024Q4: Argentina's recovery is assumed, but still below average. - Ricardo Sodre(CFO)