XP Inc. Boosts Shareholder Value with Capital Return After Solid Q3 Growth

XP Inc. posted solid Q3 2025 results, with revenue climbing 9% year-over-year to R$4.9 billion. According to the report. This growth was led by a 32% surge in Corporate & Issuer Services revenue and a 25% jump in insurance premiums. Net income rose 12% to R$1.33 billion, and diluted earnings per share (EPS) increased 13% to R$2.47.

Client assets reached R$1.425 trillion, up 12% year-over-year. Despite this, retail segments faced headwinds. Retail trading activity declined 6% year-over-year, and net client inflows fell 14% to R$29 billion. Slower growth in retail client acquisition was also noted, at just 2% year-over-year. According to financial data, retail segments faced headwinds.

Fixed-income revenue dropped 2% year-over-year, even as average used credit (AUC) rose 22%. Earnings before taxes (EBT) margin contracted due to higher operating expenses. Management highlighted ongoing investments in wholesale banking and technology, backed by a $1 billion share buyback program extending through 2026. While these moves aim to support long-term growth, the company faces anticipated market volatility in 2026. The results underscore XP Inc.'s resilience but also point to areas where retail performance and margins need attention.

Capital Return Strategy: Value Creation Mechanism

XP Inc. has implemented a multi-pronged capital return strategy to enhance shareholder value. The company announced a $0.18 cash dividend totaling R$500 million alongside the retirement of 10.97 million shares (about 2.1% of the float), reducing outstanding shares to 519.9 million. Complementing these moves, XP authorized a R$1.0 billion share repurchase program funded by existing cash reserves, which remains active until November 2026 with built-in flexibility to adjust execution based on market conditions.

These actions strategically align with XP's growth trajectory as Brazil's leading low-fee financial technology platform. By returning capital, the company aims to reward shareholders while maintaining resources to pursue innovation in disrupting traditional finance. The repurchase program specifically allows opportunistic share buybacks during market volatility, preserving capital for expansion while acknowledging near-term revenue growth deceleration concerns.

The program complements XP's strong financial position, though investors should note persistent challenges. Analysts maintain a Hold rating with a $21.50 price target, while risk factors include high leverage and slowing revenue growth that remain unaddressed by these capital return measures. The R$1.0 billion repurchase authority provides tactical flexibility but doesn't resolve underlying business headwinds, requiring continued monitoring of revenue trends and leverage management.

Competitive Positioning: Growth Sustainability Assessment

Despite a 14% year-over-year net inflow decline to R$29 billion, XP Inc. retains potent sustainable advantages as Brazil's largest low-fee fintech platform, underscored by its exceptional 74 Net Promoter Score (NPS). This client loyalty metric remains a powerful moat, validating the company's user-centric, low-cost model even as retail trading activity slowed 6% YoY. The persistent inflow drop reflects not weakness but a deliberate strategic pivot away from frenetic retail trading towards acquiring higher-value, stickier clients. This shift is already showing quality improvements: client assets under management (AUM) still grew robustly 12% YoY to R$1.425 trillion, demonstrating that the assets retained and added are significantly larger on average, enhancing long-term revenue potential per client.

Management's focus on high-income segments and wholesale banking, highlighted as a bright spot in Q3, is the engine behind this AUM growth resilience. By prioritizing clients with greater assets and complex needs, XP aims to build a more stable and higher-margin client base, improving overall client quality. This strategy, while temporarily impacting retail growth (which slowed to a mere 2%), is designed to mitigate volatility inherent in pure retail trading activity. However, this very focus and the broader market environment introduce significant risks for 2026. The company explicitly flags anticipated market volatility next year as a key challenge, which could pressure trading volumes and fee income again. Furthermore, while XP boasts strong technical capabilities and a diversified product suite, analysts note persistent risks from the company's high leverage levels and the slowing trajectory of revenue growth, factors that could amplify the impact of any market downturn or operational hiccup on profitability. The recent $1 billion share repurchase program, funded from existing cash reserves, signals confidence in the balance sheet's strength but also underscores the need to manage this leverage carefully through potential volatility.

Risk Framework: Guardrails and Catalysts

After highlighting XP Inc.'s growth trajectory, we now examine near-term headwinds that could pressure its valuation.

XP Inc. reported 9% year-over-year revenue growth in Q3 2025, though fixed income revenue declined 2%. Despite these challenges, the company maintains a strong capital ratio of 21.2% and 23% return on equity. However, retail client growth slowed to just 2%, and management anticipates heightened volatility in 2026, which could pressure margins further.

In response, XP announced a $0.18 per share dividend and a R$1.0 billion share repurchase program, funded by existing cash with flexibility to adjust terms based on market conditions. Yet analysts rate the stock as Hold with a $21.50 target, while Spark's AI flags risks from high leverage and revenue deceleration. According to market analysis, these risks remain significant.

Thus, investors should closely monitor retail client growth recovery, capital return execution flexibility, and 2026 macro conditions to gauge XP's ability to navigate near-term headwinds.