MercadoLibre (MELI) Q1 FY26 earnings call: guidance and Q&A

Clarification on the company's investment philosophy and whether the Q1 margin level should be expected for the remainder of 2026, given the deliberate investment decisions.

Martin de Los Santos stated that the investment philosophy hasn't changed, focusing on long-term growth over short-term margins. Investments in credit cards, fulfillment, CBT, 1P, and free shipping are yielding strong results, validating the strategy. He reiterated that they are not optimizing for short-term margins and will continue bold investments, not expecting the margin level to materially change in the near term.

“We're not trying to optimize short-term margins. We're trying to -- what we're doing is we're investing for the long term. So we will continue to invest boldly in those initiatives.”

asked by Irma Sgarz · answered by Martin de Los Santos

Understanding the decision behind lowering take rates for competitively priced sellers in Brazil and how investment dollars are balanced between seller and buyer initiatives.

Ariel Szarfsztejn explained that take rate reductions are targeted investments in specific categories and price ranges, conditional on competitive pricing. These are based on proven results from past reductions, which led to significant buyer and GMV growth. He emphasized that these are part of a complex strategy to drive engagement and value for users, with the Q1 changes impacting Q2 financials.

“Basically, the last take rate reduction are a function of the results that we have already proven and we've seen over the last 18 months.”

asked by Andrew Ruben · answered by Ariel Szarfsztejn

Inquiring about the drivers of Brazil's NIM compression, specifically if it's related to an upmarket move, longer loans, or riskier products, and the current stage of this strategy.

Osvaldo Giménez clarified that NIM compression is primarily due to a higher mix of credit cards, which have smaller NIMALs due to immature cohorts. Additionally, extending the average term of personal loans from 5 to 8 months and expanding reach to new segments with smaller spreads contributed. He stressed that asset quality remains stable due to effective models.

“a big part of that is related to a higher mix of credit cards which have a significantly smaller NIMAL and because they are still immature cohorts in the portfolio.”

asked by Marcelo Santos · answered by Osvaldo Giménez

Questions on the future trajectory of unit cost reductions in logistics and early learnings from implementing agentic AI experiences within the e-commerce platform.

Ariel Szarfsztejn detailed that the 17% unit cost reduction was driven by volume density, slow shipping network utilization, and tech improvements, expecting continued downward but non-linear trajectory. He highlighted the deployment of LLMs in search in Brazil, Mexico, and Argentina, which has led to higher conversions, better ad returns, and improved user engagement by better understanding user intent.

“we deployed LLMs in search in commerce for the first time this quarter. And basically, that is live in Brazil, Mexico and Argentina.”

asked by Josh Beck · answered by Ariel Szarfsztejn

Why the company provided unusual clarity on margins ('not changing materially in the near term') and what unforeseen circumstances could alter this outlook.

Martin de Los Santos explained that the clarity stems from the strong results validating their investment posture. He reiterated that margins are a consequence of their investment intensity, and they will continue to invest boldly as long as results are positive. While unforeseen circumstances could change the outlook, the core philosophy remains maximizing long-term opportunity over short-term margin optimization.

“I think what we try to say there is that we will continue to invest disciplined in the similar areas that we're investing today. And if we see opportunities and we see results of those investments performing according to plan, we will continue to invest.”

asked by Geoffrey Elliott · answered by Martin de Los Santos

Inquiring about the substantial increase in cost of risk (around 37%), whether it's a new normal, and the company's interest in entering the payroll loan market in Brazil.

Martin de Los Santos clarified that 2/3 of the margin compression from provisions is due to the credit book growing significantly faster (87% YoY) than revenue (49% YoY), requiring more provisioning for new loans. The remaining 1/3 is from the Brazil consumer credit book being less profitable than a year ago. Osvaldo Giménez confirmed they are about to launch private payroll loans in Brazil, having integrated with the government.

“2/3 of the margin compression comes from that. That's natural. That's something that we have seen over time.”

asked by Neha Agarwala · answered by Martin de Los Santos