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    MELI
    Earnings call· Jun 2025(Q2 FY25)

    MERCADOLIBRE Q2 FY25 earnings call MELI

    Aug 4, 2025 Source

    Executive summary

    MercadoLibre Q2 FY25 — Strong Revenue Growth and Fintech Traction

    MercadoLibre delivered strong Q2 FY25 results, driven by robust revenue growth and record operating income. The company saw significant traction in both its commerce and fintech segments, with accelerated GMV growth in Brazil following free shipping adjustments and strong user growth in Mercado Pago. Strategic investments in marketing and platform enhancements, including AI integration, are expected to drive long-term engagement and market share, despite some short-term margin pressure.

    Highlights

    6

    • Revenues grew over 30% year-on-year.

    • Record income from operations of $825 million.

    • Advertising revenue grew 38% year-on-year (59% FX neutral).

    • Monthly active users of Mercado Pago reached 68 million.

    • Credit portfolio surpassed $9.3 billion, growing by 91% year-on-year.

    • 50 to 90 days NPLs fell below 7% for the first time.

    Concerns

    3

    • Sales and marketing spend increased almost 50% in USD terms, compressing margin by 1 percentage point due to campaigns and free shipping investment.

    • Longer-term NPLs (over 90 days) slightly increased sequentially from 18% to 18.5%.

    • NIMAL for credit cards is lower than other products and has an impact on overall NIMAL as credit card portfolio grows 118% year-over-year.

    Segment performance

    1
    SegmentRevenueYoYQoQMargin
    Brazil
    Accelerated GMV growth in June following free shipping threshold reduction.
    Items sold growth: 34% YoY in June
    		————

    Operational metrics

    27
    Income from operations
    $825 millionrecord
    Q2 FY25

    Record income from operations.

    Sales and marketing spend growth
    almost 50%YoY
    Q2 FY25

    Excluding provisions, spend was almost up 50% in U.S. dollar terms.

    Sales and marketing margin compression
    1compared to last year
    Q2 FY25

    We compressed margin by 1 percentage point this quarter compared to last year in sales and marketing.

    Mercado Pago Monthly Active Users (MAU)
    68 millionrapid user growth
    Q2 FY25

    Monthly active users of Mercado Pago reached 68 million.

    Assets under management (Mercado Pago)
    doubledYoY
    Q2 FY25

    Assets under management more than doubled year-on-year once again.

    Credit portfolio
    $9.3 billionsurpassed
    Q2 FY25

    Our credit portfolio surpassed $9.3 billion.

    Credit portfolio growth
    91%YoY
    Q2 FY25

    Our credit portfolio surpassed $9.3 billion, growing by 91% year-on-year.

    New credit cards issued
    1.5 million
    Q2 FY25

    Strong asset quality and ongoing enhancements to our credit models enabled us to issue 1.5 million new cards in Q2.

    Credit card portfolio growth
    118%YoY
    Q2 FY25

    The credit card specifically grew 118% year-on-year.

    NIMAL positive portfolio
    more than half
    Q2 FY25

    More than half of our portfolio in Brazil already being NIMAL positive.

    NIMAL for credit card
    —
    Q2 FY25

    NIMAL for credit card is lower than for the other products.

    NIMAL for credit card
    breakeven
    Q2 FY25

    NIMAL is breakeven in Brazil.

    NIMAL for credit card
    not yet breakeven
    Q2 FY25

    It's not yet the case in Mexico.

    NIMAL for credit card
    initially negative
    future

    Whenever we start in Argentina, initially, it will be negative, but we expect that within a few years, it should achieve breakeven.

    Credit card market share
    roughly 2%
    current

    If you look at our market share today in credit cards in Brazil, it's roughly 2%.

    Payback periods (credit cards)
    2 and 3 years
    future

    Issue cards at a pace that allows us to have payback periods of roughly between 2 and 3 years.

    Interest paid to users
    25%down from ~27%
    current

    Impact of reserve requirement changes will be roughly 2 percentage points, from close to 30% (~27%) down to around 25%.

    Free shipping threshold
    BRL 19down from BRL 79
    Q2 FY25

    Lowered the free shipping policy for Brazil from BRL 79 to BRL 19.

    Free shipping threshold
    BRL 79
    prior

    Lowered the free shipping policy for Brazil from BRL 79 to BRL 19.

    Free shipping threshold
    BRL 99
    prior

    Moved from BRL 120 to BRL 99 then from BRL 99 to BRL 79.

    Free shipping threshold
    BRL 120
    prior

    Moved from BRL 120 to BRL 99 then from BRL 99 to BRL 79.

    E-commerce penetration
    15%
    current

    In a country in which we only have 15% of e-commerce penetration.

    50-90 days NPLs
    6.7%down from 8.2%
    Q2 FY25

    50 to 90 days NPLs falling below 7% for the first time since we began reporting the metric.

    50-90 days NPLs
    8.2%
    prior

    50 to 90 days NPLs falling below 7% for the first time since we began reporting the metric.

    Over 90 days NPLs
    18.5%up 0.5 percentage point sequentially
    Q2 FY25

    Slight increase in over 90 days, but it's roughly in line with what it was before. It was 18.5% a year ago, and it's 18.5% now, sequentially up 0.5 percentage point from 18% to 18.5%.

    Over 90 days NPLs
    18%
    prior quarter

    Sequentially up 0.5 percentage point from 18% to 18.5%.

    Over 90 days NPLs
    18.5%
    year ago

    It was 18.5% a year ago, and it's 18.5% now.

    Industry KPIs

    4
    MetricValueDetails
    Regional market performance—
    Advertising revenue take rate38%%
    Subscription membership program—
    Operating income EBIT and adjusted EBITDA$825 millionUSD

    Product announcements

    3
    ProductTypeDetails
    Google Manager integrationlaunch
    Credit card fundingupdate
    Credit cardslaunch

    Risks & headwinds

    3
    Short-term margin pressure from increased sales and marketing spendQ2 FY25

    1 percentage point margin compression in Q2 FY25

    Mitigation: Investments are for long-term user growth, engagement, and platform strength, with positive returns expected.

    Longer-term NPLs (over 90 days) slightly increased sequentiallyQ2 FY25

    Up 0.5 percentage point from 18% to 18.5% sequentially

    Mitigation: Overall NPLs are stable year-over-year, and portfolio profitability is improving. Management is comfortable with models and collections.

    Impact of new reserve requirements on money market funds in Argentinaimmediate

    Expected to reduce interest paid to users by ~2 percentage points (from ~27% to ~25%)

    Mitigation: Quantified and managed, with the impact understood.

    What to watch in Q3 FY25

    5

    Impact of Brazil free shipping changes

    Near future / next quarter
    CurrentAccelerated GMV growth and 34% items sold growth in June
    TargetFurther positive impact on engagement, frequency, orders, and order sizes

    Why it matters

    This is a major strategic investment to drive long-term e-commerce penetration and market share in Brazil.

    We are happy with the early results we've seen, and we are encouraged by the fact that from our experience, we are expecting even more of a positive impact in the near future.

    Q&A highlights

    5

    How do lower seller fees translate into price reductions and selection improvements for consumers, and how does this dynamic work with the free shipping investment?

    Lowering the 'cliff' in take rates led to merchants reducing prices and increasing selection. This positive impact is expected to strengthen over time, based on prior testing.

    “Our experience actually shows that this initiative has a positive impact. And it comes from, a, merchants lowering prices; and b, bringing more selection to our platform. And more importantly, those impacts are not necessarily perceived at the moment in which we execute the changes, but they get strengthening over time.”

    asked by Andrew Ruben · answered by Ariel Szarfsztejn

    2 min read6 chapters

    Detailed Narrative

    01

    Brazil Free Shipping Strategy

    MercadoLibre lowered its free shipping threshold in Brazil for the third time in 5 years, from BRL 79 to BRL 19, aiming to attract new users, increase engagement, and expand assortment. This strategic initiative resulted in accelerated GMV growth and a 34% year-over-year increase in items sold in June. Management expects further positive impact on customer satisfaction, retention, and frequency, viewing it as a long-term investment to extend its e-commerce position.

    02

    Marketing Investment and AI Efficacy

    The company increased sales and marketing spend by almost 50% year-over-year, compressing margin by 1 percentage point, due to high-profile campaigns for Mercado Pago and free shipping in Brazil, Argentina, and Mexico. Management is bullish on AI's role in improving marketing execution and ad spend efficacy. AI is being used to produce multiple creatives for campaigns, test and learn across the board, and help sellers optimize bidding and understand the ad stack.

    03

    Credit Portfolio Performance and Quality

    Mercado Pago's credit portfolio exceeded $9.3 billion, growing 91% year-over-year, with 1.5 million new credit cards issued in Q2. Early delinquencies (50-90 days NPLs) fell below 7% for the first time, down from 8.2%, while over 90-day NPLs remained stable at 18.5% year-over-year, though up 0.5% sequentially. Profitability of most portfolios improved, leading to accelerated growth, with more than half of the Brazil portfolio already NIMAL positive.

    04

    Advertising Revenue Growth

    Advertising revenue grew 38% year-over-year (59% FX neutral), with Argentina showing particularly strong growth due to favorable macro conditions and effective team execution. Display and video ads nearly doubled year-over-year from a low base, and product ads performed well across countries. This performance is supported by improved user experience, tools for sellers, and AI-driven budget recommendations.

    05

    Low ASP Strategy and Infrastructure Adaptation

    MercadoLibre is focused on increasing selection in low Average Selling Price (ASP) items, particularly in Brazil, following the new free shipping policy. The company views this as a long-term investment to bring offline retail online in a country with only 15% e-commerce penetration. While individual low-ticket items may have varying margins, the overall initiative is expected to be net positive for the P&L in the longer term due to increased engagement, frequency, and scale-driven shipping cost reductions.

    06

    Argentina Credit Operations and Reserve Requirements

    The credit portfolio in Argentina grew significantly from a very small base. Despite a worsening market for traditional banks, Mercado Pago's NPLs have not been significantly impacted, attributed to strong customer principality. Recent changes in reserve requirements for money market funds in Argentina are expected to reduce the interest paid to users by approximately 2 percentage points, from around 27% to 25%.

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