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    DLO
    Earnings call· Jun 2026(Q2 FY26)

    dLocal Q2 FY26 earnings call DLO

    Aug 13, 2026 Source

    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

    5
    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

    5
    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—

    Operational metrics

    18
    Net Revenue Retention
    153%fifth straight quarter above 140%
    Q2 FY26

    Reflects deepening relationships with merchants.

    Gross Profit
    $127 millionup 29% year-on-year
    Q2 FY26

    Reached an annualized rate of more than $500 million.

    Operating Profit as % of Gross Profit
    50%up 6 percentage points quarter-over-quarter
    Q2 FY26

    Expected further improvements in operating leverage in the next two quarters.

    Adjusted Free Cash Flow Conversion
    86%of net income
    H1 FY26

    Cash generation remained strong.

    Total Operating Expenses
    $63 millionup 46% year-over-year and down 4% sequentially
    Q2 FY26

    Year-over-year increase reflects annualization of 2025 investments, higher salaries, and front-loaded marketing spend. Sequential reduction due to absence of non-recurring tax item.

    Operating Profit
    $64 millionup 15% year-over-year and 22% sequentially
    Q2 FY26

    Reflects improved operating leverage.

    Diluted EPS
    $0.18
    Q2 FY26

    Supported by earnings growth and share repurchase program.

    Effective Tax Rate
    16%
    Q2 FY26

    Normalized effective tax rate for H1 was 15% excluding non-recurring prior year tax adjustment.

    TPV Growth (H1)
    over 80%
    H1 FY26

    Supported by AI-driven engineering deployments with stable headcount.

    Mexico Revenue Growth
    64%year-on-year
    Q2 FY26

    Despite strong revenue growth, gross profit was modestly lower sequentially due to cost pressures.

    TPV Retention Rate
    188%
    Q2 FY26

    Demonstrates depth of relationships with merchants.

    Share of Wallet
    low teensincreased by 2 percentage points year-over-year
    H1 FY26

    Across the global South.

    Share of EM Digital Payments
    low single digits
    Q2 FY26

    Estimated market share, indicating massive opportunity.

    Local-to-Local Flows as % of TPV
    61%up 6 percentage points from Q1
    Q2 FY26

    Primarily driven by growth of ride-hailing and on-demand delivery businesses.

    Headcount
    broadly stablesequentially
    Q2 FY26

    No material increases expected this year.

    Gross Profit per Employee
    increased
    Q2 FY26

    Reflects efficiency gains.

    AI-generated Code
    over 60%
    Q2 FY26

    Led to nearly doubling of engineering deployments and significant reduction of lead times.

    Engineering Deployments
    nearly doublingyear-over-year
    Q2 FY26

    Result of AI integration, supporting volume growth with stable headcount.

    Industry KPIs

    3
    MetricValueDetails
    Capital returns$86 millionUSD
    Payments volume gdv$17.7 billionUSD
    Net revenue yield take rate—

    Product announcements

    2
    ProductTypeDetails
    dMorelaunch
    Buy Now, Pay Later (BNPL)expansion

    Risks & headwinds

    6
    Tougher TPV growth comparisonsH2 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 itemQ1 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 headwindsH1 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

    5

    Operating leverage improvement from automation

    Rest of the year
    CurrentOperating profit as % of gross profit up 6 percentage points QoQ to 50%
    TargetIncreasingly 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.

    Q&A highlights

    5

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.