XP 2025 Q1 Earnings Strong Performance as Net Income Rises 20%

XP(XP) reported its fiscal 2025 Q1 earnings on May 20th, 2025. The total revenue of XP increased by 7.2% to $4.34 billion in 2025 Q1, up from $4.05 billion in 2024 Q1. XP's earnings surpassed expectations with a notable rise in net income, reflecting the company’s robust financial health. The firm maintained its revenue growth guidance, predicting at least a 10% increase for 2025 and anticipates higher growth in the year's second half, particularly from retail. XP is poised to return over 50% of its net income to shareholders through dividends and buybacks, reinforcing its commitment to shareholder value.

Revenue
XP Inc. demonstrated remarkable growth, with revenue climbing to $4.34 billion, marking a 7.2% year-over-year increase. The revenue from services rendered reached $1.65 billion, showcasing the company's strong service performance. However, net income from financial instruments at amortized cost reflected a decline, amounting to -$902 million. Conversely, financial instruments at fair value through profit or loss contributed significantly, generating $3.60 billion. Overall, XP's total revenue and income showcased resilience and growth potential.

Earnings/Net Income
XP's EPS rose 22.4% to $2.30 in 2025 Q1 from $1.88 in 2024 Q1, marking continued earnings growth. Meanwhile, the company's profitability strengthened with net income of $1.24 billion in 2025 Q1, marking 20.0% growth from $1.03 billion in 2024 Q1. The Company has sustained profitability for 7 years over the corresponding fiscal quarter, reflecting stable business performance. The EPS growth indicates strong financial performance.

Post Earnings Price Action Review
The strategy of acquiring XP shares following a quarterly revenue drop and holding them for 30 days led to a substantial financial loss. This investment approach yielded a return of -54.79%, which contrasts sharply with a benchmark return of 88.25%, resulting in an excess return of -143.04%. The strategy's Sharpe ratio was calculated at -0.29, underscoring inadequate risk-adjusted returns, while the maximum drawdown reached -84.20%, pointing to high risk and considerable potential losses inherent in this strategy. Overall, the strategy proved to be risky and financially unfavorable.

CEO Commentary
Thiago Maffra, CEO, highlighted that XP Inc. achieved a record high quarterly net income of BRL1.236 billion, reflecting a 20% year-over-year growth. He noted that client assets reached BRL1.8 trillion, driven by a 13% growth year-over-year, with net new money of BRL24 billion, a 79% increase. Maffra emphasized that the firm remains committed to its strategy, focusing on expanding its retail and institutional client bases, and maintaining a strong capital discipline with a comfortable capital ratio of 19%. He expressed optimism about future growth, stating, "We are starting to reap the benefits of our cross-sell and wholesale strategy."

Guidance
XP Inc. maintains its revenue growth guidance of at least 10% for 2025, with expectations for higher growth in the second half of the year, particularly from retail. The company anticipates continued strong performance in fixed income, credit cards, and insurance, with retail net new money projected at around BRL20 billion per quarter. Additionally, XP expects to return over 50% of its net income to shareholders through dividends and buybacks, reinforcing its capital distribution strategy and commitment to shareholder value.

Additional News
XP Inc. has announced a new share repurchase program as part of its strategy to enhance shareholder value. The program authorizes the company to buy back shares, reflecting confidence in its financial position and future prospects. Additionally, XP Inc. has faced scrutiny following allegations by a short-seller, claiming the company operates a "Madoff-like Ponzi scheme." This has prompted several law firms to initiate investigations, urging investors who suffered losses to come forward. Despite the controversy, XP remains focused on executing its business strategy and maintaining growth momentum.