Detailed narrative
Decade of Compounding Growth and Strategic Model
DLocal celebrates 10 years since its founding and 5 years since its IPO, highlighting a consistent 90% CAGR over the decade. The company's strategic model, "One dLocal," focuses on a single API, deep local infrastructure, continuous expansion of payment method coverage, licensing, regulatory capabilities, and products across over 60 countries, serving 760+ enterprise merchants. This infrastructure is crucial for localization in emerging markets, where local payment methods and local processing of global card schemes are key to maximizing conversion and reaching new customers.
Vertical Diversification and Merchant Expansion
The platform has demonstrated resilience through vertical diversification, with every vertical growing between Q1 2024 and Q1 2026. E-commerce remains the largest, but travel and gaming are gaining traction. The company scales with merchants by expanding into new countries, adopting products, and adding payment methods, as evidenced by revenue retention exceeding 140% for four consecutive quarters. Examples include a ride-hailing merchant expanding to 18 countries and an internet service provider to 40 countries.
Q1 Financial Performance Overview
Q1 FY26 saw TPV reach a record $14.1 billion, up 73% YoY, and gross profit hit $119 million, up 40% YoY. This growth was broad-based across countries (Mexico, Brazil, Argentina, Chile, Nigeria, Colombia, Vietnam), verticals (travel up 38% QoQ, on-demand delivery up 24% QoQ), and merchants. However, reported operating profit and net income were impacted by a $9.7 million one-off📎 prior period tax adjustment ($5.3M in corporate tax, $4.4M in OpEx).
Operating Expenses and Leverage Outlook
Total operating expenses (excluding the one-off📎 tax adjustment) were $62 million, up 58% YoY and 16% QoQ, reflecting the expected carryover of 2025 investment cycle costs. Management reiterated that operating leverage is expected to be more pronounced in the second half of the year as these costs annualize and growth rates moderate. Corrective actions, including no new net hiring for the rest of the year, are being implemented to manage OpEx.
Working Capital and Cash Generation
Adjusted free cash flow was temporarily impacted by working capital effects, specifically timing in tax credit netting and higher receivables from advancements operations. However, the underlying cash generation remains healthy, with cash flow from operations before working capital changes at $69.3 million, up nearly 10% YoY. Management expects these temporary effects to reverse over the coming quarters, leading to a one-off📎 free cash flow gain.
Strategic Importance of Africa Asset Transaction
An asset transaction in Africa, which closed in Q1, is strategically important for deepening DLocal's capabilities and positioning in the region. While not materially impacting Q1 results due to legal/regulatory hurdles and deal structure changes, it brought customer relationships, IP, licenses, and talent, reinforcing DLocal's commitment to Africa's long-term digital payment opportunity. No near-term revenue impact is signaled.
Merchant Priorities and Product Roadmap
Conversations with merchants indicate a shift towards viewing emerging market payments infrastructure as a core part of their global go-to-market strategy. Merchants are increasingly interested in real-time networks, digital wallets, local card schemes, and localization of credit cards. DLocal recently launched its stablecoin solution and is developing a Card-Present product for a large client, expected to go live in H2 FY26.