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dLocal (DLO) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 13, 2026

Source: earnings call transcript

Executive summary

dLocal Q2 FY26 — Record TPV Growth and Operating Leverage Improvement

dLocal delivered record TPV growth, driven by significant merchant expansion and platform investments, leading to improved operating leverage. The company is focused on cost discipline and AI-driven automation to sustain profitability gains, while navigating regional mix shifts and external tax and FX impacts. Management emphasizes its cash-generative model and commitment to long-term shareholder value through strategic investments and returns.

Highlights

5

  • TPV reached $17.7 billion, accelerating to 92% year-over-year, the highest growth rate since Q1 2022.

  • Net revenue retention was 153%, the fifth straight quarter above 140%.

  • Gross profit hit $127 million, up 29% year-on-year.

  • Operating profit as a percentage of gross profit increased 6 percentage points quarter-over-quarter to 50%.

  • Adjusted free cash flow conversion was 86% of net income in the first half of the year.

Concerns

4

  • Mexico gross profit was modestly lower sequentially due to mix shift and large merchant ramp-ups reaching final pricing tiers.

  • Africa and Asia gross profit was down sequentially due to a lower share of higher spread markets.

  • Annual operating profit guidance maintained due to a non-recurring prior year tax item and FX headwinds not expected in the original forecast.

  • Potential upward pressure on the effective tax rate starting in 2027 due to OECD's Pillar 2 framework.

Guidance & targets

CategoryTargetConfidence
TPV growth
60% to 70% year-over-year
high materiality
High
Gross profit growth
25% to 30% year-over-year
high materiality
High
Operating profit growth
27.5% to 32.5% year-over-year
high materiality
Medium
Effective tax rate
15% to 16%
medium materiality
Medium
Effective tax rate impact from Pillar 2
Upward pressure
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Brazil
Gross profit reached a record $40 million, supported by the ramp-up of ride-hailing and travel merchants alongside sustained e-commerce growth.
———$40 million
Argentina
Delivered record gross profit of $20 million, driven by broad-based growth across e-commerce, ride-hailing, and on-demand delivery, as well as lower advancement costs.
———$20 million
Latin America (ex-Brazil/Argentina)
Gross profit grew 6% sequentially and 32% year-over-year.
—32%6%—
Mexico
Kept growing volume well, with revenue growth of 64% year-on-year. Gross profit was modestly lower sequentially due to mix shift to local-to-local and large merchants reaching final pricing tiers. Management noted it's primarily a cost issue, requiring better cost management of processing payments.
—64%——
Africa and Asia
Gross profit was down sequentially, mainly due to a lower share of higher spread markets like Mozambique and Vietnam, where Q1 gains did not recur.
——down sequentially—

DLO operating KPIs by quarter

DLO operating KPIs stated on its earnings calls, by fiscal quarter
KPI Dec 2025 Q4 FY25 Mar 2026 Q1 FY26This call Jun 2026 Q2 FY26Change vs prior quarter
Payments volume
$13B+ TPV surpassed $13 billion for the quarter, growing 70% year-on-year and 26% quarter-on-quarter. Source: earnings call transcript
$14.1B TPV reached $14.1 billion in Q1, up 73% year-on-year and 7% quarter-on-quarter, our sixth consecutive quarter above 50% growth, and that's a number we're very proud of. Source: earnings call transcript
$17.7B TPV reached $17.7 billion, accelerating to 92% year-over-year, the highest growth rate since the first quarter of 2022. Source: earnings call transcript
+25.5%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

ProductTypeDetails
dMorelaunch
Buy Now, Pay Later (BNPL)expansion

Risks & headwinds

Tougher TPV growth comparisons H2 FY26 and FY27

As we move through the second half of the year and into 2027

Mitigation:Continued investments in platform, product offering, and competitive positioning; share of wallet gains, new merchant expansion, new geographies, and new payment methods/products.

Volatility of emerging markets

Inherent volatility

Mitigation:Guidance reflects current business view, but subject to this volatility.

Non-recurring prior year tax item Q1 FY26 (recorded in OpEx)

$4.4 million

Mitigation:This was a one-off and is not expected to recur, allowing for operating leverage improvements in H2.

FX headwinds H1 FY26, impacting FY26 guidance

Currencies have become a little bit of a headwind versus where they were at the beginning of the year

Mitigation:Management is balancing this with gross profit upside and cost normalization.

Upward pressure on Effective Tax Rate (ETR) Starting in 2027

Particularly in jurisdictions that are implemented the OECD's Pillar 2 framework

Mitigation:Evaluating changes with external advisers; will provide updates as appropriate. Quantification is too early.

Cost discipline carries risk

Implied OpEx cut that's bigger than what we have currently planned

Mitigation:Holding operating profit guidance as is, allowing gross profit upside and cost normalization to play out, balancing near-term with long-term investments.

What to watch in Q3 FY26

Operating leverage improvement from automation

Rest of the year
Current Operating profit as % of gross profit up 6 percentage points QoQ to 50%
Target Increasingly visible operating leverage

Why it matters

Management expects further operating leverage improvements as AI and automation initiatives deploy, which is key for sustained profitability.

As those initiatives deploy and as we annualize our second half 2025 investments, we expect operating leverage to become increasingly visible during the rest of the year.

Find out whether DLO delivers this. Inve re-checks your case every morning.

Q&A highlights

What drove the unexpected 90%+ TPV growth, and how does the take rate dynamic, particularly with large merchants and local-to-local volumes, play out? What is the floor on the take rate?

The TPV surge was driven by phenomenal strength in ride-hailing and travel, with one large global merchant rapidly expanding into numerous new markets and gaining significant share of wallet. This rapid volume increase led to merchants hitting new pricing tiers faster, which drives down the headline take rate. Excluding this one large merchant's mix gains, the take rate would have been relatively flat sequentially, suggesting an asymptotic shape rather than a continuous decline. The focus remains on incremental TPV at incremental gross profit, not managing to a specific take rate.

“Were you to back out that one very large ride-hailing merchants mix gains at a lower take rate, take rate would have been relatively flat sequentially. That doesn't necessarily signal a bottom, Tito, but it does show that there is potentially increasingly an asymptotic shape to this.”

asked by Tito Labarta · answered by Pedro Arnt

2 min read 5 chapters

Detailed narrative

Record TPV Growth and Market Share Gains

dLocal achieved its highest TPV growth rate since Q1 2022, reaching $17.7 billion, up 92% year-over-year. This was primarily driven by significant ramp-ups from large global merchants, particularly in ride-hailing and on-demand delivery, expanding into new markets and gaining share of wallet. The company estimates its share of EM digital payments to be in the low single digits, indicating substantial growth opportunity.

Operating Leverage and AI/Automation Initiatives

Operating profit as a percentage of gross profit improved by 6 percentage points sequentially to 50%. This improvement is attributed to the annualization of 2025 investments, front-loaded marketing spend in H1, and the deployment of AI and automation. Over 60% of code is now AI-generated, leading to nearly doubled engineering deployments and reduced lead times, supporting volume growth with broadly stable headcount.

Product Expansion and Value-Added Services

The company is expanding its value-added services, including the upcoming launch of 'dMore,' a merchant of record solution designed to simplify go-to-market for merchants in new emerging markets by handling statutory and tax issues. The Buy Now, Pay Later (BNPL) offering has also expanded and is now live in eight markets, contributing to a broader product portfolio.

Regional Performance and Cost Management

Brazil and Argentina delivered strong gross profit growth, reaching $40 million and $20 million respectively, driven by ride-hailing, travel, and e-commerce. In Mexico, despite strong TPV and revenue growth (64% YoY), gross profit was modestly lower sequentially due to mix shifts and pricing tiers, highlighting a need for better cost management in processing payments.

Capital Allocation and Share Repurchase Program

dLocal continues to execute its capital return strategy. Under the $300 million share repurchase program authorized in March, the company repurchased approximately 6.9 million Class A shares for $86 million up to the end of Q2, all of which have been canceled. This program contributed to the diluted EPS of $0.18.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.