MercadoLibre Q2 2026 Earnings Report

MercadoLibre EPS Results

• Actual EPS: $9.19
• Consensus EPS: $8.65
• Beat/Miss: Beat by +$0.54
• One Year Ago EPS: $10.31

MercadoLibre Revenue Results

• Actual Revenue: $10.17 billion
• Expected Revenue: $9.79 billion
• Beat/Miss: Beat by +$374.80 million
• YoY Revenue Growth: +49.80%

MercadoLibre Announcement Details

• Quarter: Q2 2026
• Date: 8/6/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, August 5, 2026
• Conference Call Time: 5:00PM ET

MercadoLibre (NASDAQ:MELI) operates an integrated e-commerce and fintech ecosystem serving consumers and businesses across Latin America. The company provides an online marketplace that connects buyers and sellers for a wide range of goods and services, supported by tools for merchants, advertising, and classifieds. Over time MercadoLibre has expanded beyond its marketplace roots into complementary areas that support digital commerce end to end.

Key offerings include its marketplace platform and a suite of logistics and payment services. Mercado Pago is the company’s fintech arm, providing payment processing, a digital wallet, point-of-sale solutions and consumer and merchant credit products. Mercado Envíos handles fulfillment and logistics integration to streamline shipping for marketplace transactions. The company also offers merchant-focused products such as Mercado Shops for online store creation, advertising solutions to help sellers reach customers, and Mercado Crédito for lending to consumers and small businesses.

Founded in 1999 by Marcos Galperin, MercadoLibre built one of the largest e-commerce networks in Latin America and raised public capital with a Nasdaq listing (ticker: MELI). The business has a broad geographic footprint across the region, with particularly large operations in markets including Brazil, Mexico, Argentina, Colombia and Chile, among others. MercadoLibre’s combination of marketplace, payments, logistics and credit services positions it as a vertically integrated platform aimed at facilitating digital commerce in fast-growing Latin American economies.

MercadoLibre Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 revenue surpassed $10 billion, rising 50% year over year, while operating income reached $683 million. Management emphasized that profitability is being deliberately reinvested in long-term growth, engagement, and scale.
• Positive Sentiment: Brazil’s lower free-shipping threshold continued to drive stronger user behavior, including a 19% increase in items per buyer, a 1.1-percentage-point conversion improvement, and a 20% rise in purchase frequency. Management said newer buyer cohorts are showing higher retention and broader category engagement.
• Positive Sentiment: The credit portfolio grew 75% year over year to $16.4 billion, while 50–90-day NPLs remained near historical lows and NIMAL improved to 21%. Executives said disciplined underwriting and a shift toward lower-risk users are supporting credit growth across major markets.
• Positive Sentiment: Management reported encouraging returns from AI investments, including improved search conversion and advertising click-through rates, customer-service automation, and higher developer productivity. MercadoLibre invested about $80 million more in AI than a year ago but said several initiatives are already generating positive returns.
• Negative Sentiment: The EBIT margin fell 550 basis points year over year to 6.7% as the company absorbed investments in commerce, lower seller take rates, shipping costs, and acquiring-device costs. Mexico also faces near-term demand pressure from tax reform, weaker macro conditions, and World Cup-related consumption softness.

Presentation

[Richard Cathcart, Senior Director of Investor Relations at MercadoLibre]

Hello everyone. Good evening, thank you for joining MercadoLibre's conference call for the quarter ended June 30th, 2026. I'm Richard Cathcart, Senior Director of Investor Relations. I'm joined this evening by Ariel Szarfsztejn, our CEO, Martin de los Santos, our CFO, and Osvaldo Gimenez, President of Fintech. Tonight's format will be slightly different. I'll start by handing over to Martin for a few high-level opening remarks, then we'll head straight into the Q&A. Before we do that, I would like to remind you that management may make or refer to forward-looking statements and non-GAAP measures. Please refer to the disclaimer on screen, which is also available in our earnings materials on our investor relations website. Please note that this call is being recorded, and a replay will be made available on our investor relations website as well.

[Richard Cathcart, Senior Director of Investor Relations at MercadoLibre]

With that, I'll pass the call over to Martin de los Santos, our CFO.

[Martin de los Santos, CFO at MercadoLibre]

Good afternoon, thank you for joining us. MercadoLibre delivered another strong quarter in Q2 2026. Net revenue surpassed $10 billion for the first time, growing 50% year-on-year. Income from operations was $683 million, with a margin of 6.7%, broadly in line with last quarter, the result of a deliberate choice to continue prioritizing investment in long-term engagement, growth, and scale over near-term profitability. Before turning to a few details on this quarter's results, I want to spend a few minutes on what we've learned one year on from the decision we took last year to lower the free shipping threshold in Brazil. In Brazil, items per buyer grew 19% year-on-year in Q2, despite the fact that we've been adding large numbers of new buyers who typically start out purchasing far less than our average user. That's a sign of changed behavior, not just a bigger audience.

[Martin de los Santos, CFO at MercadoLibre]

It shows existing users engaging more deeply with us, not simply more people showing up. Conversion in Brazil is up 1.1 percentage points year-on-year. This wasn't an incremental gain. It was a step change, it has proven sustainable for a full year. The ratio of daily to monthly active users has inflected too, with daily actives growing faster every single quarter since the free shipping threshold was lowered, new buyer cohorts who joined after the change are a year on purchasing more items across more categories with higher retention than the cohorts that came before them. This is not an isolated case. Across our business, we see the same pattern. Users who engage more deeply with us become dramatically more valuable. The clearest evidence is what we call ecosystemic users, those who use both our marketplace and Mercado Pago, not just one or the other.

[Martin de los Santos, CFO at MercadoLibre]

These users generate meaningfully more GMV, purchase across a much wider range of categories, and engage far more deeply with our fintech products. Most importantly, they are dramatically more profitable. Contribution profit per ecosystemic user is multiples of the sum of a marketplace-only user and a fintech-only user. That is why we keep investing the way we do. We are changing behavior and building habits we believe will drive this business's profitability for years to come. With that strategic context in mind, I now would like to turn to three topics we believe are top of mind for investors and where we think it is worth spending a few additional minutes. First, our credit business. Our credit portfolio reached $16.4 billion in Q2, growing 75% year-on-year.

[Martin de los Santos, CFO at MercadoLibre]

We have achieved this growth alongside solid asset quality across the portfolio, which reflects our disciplined approach to risk management as we scale and the shift towards lower-risk users in recent years. Our 50-90 day NPL in Q2 was 7.0% for the total portfolio and 4.6% for the credit card specifically, both close to historical lows. NIMAL improved from 18% in Q1 2026 to 21% in Q2 2026, with gains in our three largest markets. This includes Brazil, where spreads in our consumer portfolio recovered as provisions normalized. NPLs in Brazil were broadly stable year-on-year. These results are not coincidental. They reflect the deliberate move upmarket in our consumer and merchant credit portfolios and the scaling of our credit card, which we only offer to lower-risk users.

[Martin de los Santos, CFO at MercadoLibre]

This is highly synergistic with our marketplace, where we have a large base of high-quality engaged users to draw from as we continue to grow the book. Second, a quick word on margins. This quarter's EBIT margin of 6.7% was down 550 basis points year-on-year as we continue to prioritize long-term strategic investments over short-term profitability. These investments are consistent with the areas of focus we have described in previous quarters. On a sequential basis, our margin was broadly stable. This is a function of stronger profitability in credit, particularly in the Brazil consumer portfolio, where provisions normalized after a spike in Q1. This was offset by margin compression in acquiring, primarily in Mexico, and incremental investments in commerce. Finally, on cash flow. In Q2, we continued to see the underlying cash generation strength of the business.

[Martin de los Santos, CFO at MercadoLibre]

We generated $214 million in adjusted free cash flow for the quarter, even after absorbing higher capital expenditure of $441 million and investing $2.1 billion into the growth of our credit book. It also plays a key role in engagement across the ecosystem. It's this overall strength, strong cash generation, robust profitability, and a healthy balance sheet that gives us the confidence to keep investing at the pace we are. With that, we'll open it up for your questions.

[Operator]

Thank you. We will now begin the analyst question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. Please limit yourself to one question. If you have any further questions, you may re-enter the question queue. The first question comes from Irma Sgarz with Goldman Sachs. Please go ahead.

[Irma Sgarz, Analyst at Goldman Sachs]

Yes. Hi, thank you very much for the opportunity to ask my question, and thanks also for all the detail in the shareholder letter on the engagement metrics across the ecosystem. Very interesting detail that you provided there. However, just feel obliged to ask you about margin for one second. There was a bit more quarter-over-quarter gross margin compression than we had perhaps expected. Thank you for also laying out the sources that drove this in the shareholder letter. Now, when I think through each of those, the first one, I think, was well mapped. The second and the third one felt a little bit more incrementally new. My question would be somewhat twofold. Firstly, how much scope do you see to adjust pricing to pass these cost pressures through to consumers?

[Irma Sgarz, Analyst at Goldman Sachs]

I think there's some in acquiring, there's some related to memory costs, but you'd also do mention higher shipping costs that weren't fully offset by revenue. I was wondering if that's gas prices or other pressures in the network, and whether you saw scope to pass that through to customers. Then secondly, whether those two incremental headwinds, either in nature or magnitude, were something that you were already factoring in when you last spoke to us in early May, and you had sort of suggested that you were expecting a similar margin level consistent with 1Q. Thank you.

[Martin de los Santos, CFO at MercadoLibre]

Hi, Irma. It's Martin here. How are you? Thank you for your question. I think the best way to answer your question is to look at sequential margins. As you can see, it's pretty much in line with Q1. There are two things moving in opposite directions there. The first one was an improvement in margins in the credit business, as we discussed on the letter. Last quarter, there was a spike on provisions. It was a temporary spike. We explained that last quarter, and now it has come back to normal spreads. They're a very profitable business. That contributed to margins. That was offset. I will go in order of importance. It was offset by some investments that we have made in Brazil, in commerce.

[Martin de los Santos, CFO at MercadoLibre]

We discussed this in the previous quarterly call, where in certain verticals, we lower take rates and we offer discounts to consumers buying and paying with Pix. That was a strategic initiative that we did in Brazil. We have done that in the past, and it has proven to have positive results, but it generated some margin compression. In addition to that, there was some margin compression on the acquiring business. Two things there. One is the fact that the devices have an increase in cost of devices because of higher cost of chips in the industry. That's something that's there to stay. We would monitor that situation as well. There was a one-off charge because we, in Mexico, we restocked a significant volume in terms of devices, and that's because we are growing very fast in Mexico.

[Martin de los Santos, CFO at MercadoLibre]

We see a big opportunity to continue growing. As you know, as we sell those devices at a loss, we need to book the losses up front. When we increase the stock, there's a one-off compression on margins. That will compensate throughout the rest of the year. The last point I think you are addressing is the energy cost. We've seen some cost increases in terms of logistics because of energy costs. Some of them we pass on to our users, and some we elected to absorb ourselves. There is some margin compression. It's not significant, but there's slight margin compression there as well.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

Building on Martin's comment regarding POS devices and us not increasing the prices, that was driven by two things. On the one hand, the payback periods continued to be in line with what we expected, and therefore, there was no need to do that. Our competitors did not raise their prices, so it didn't make sense given how fast we're growing and how fast we're gaining market share to raise our prices.

[Martin de los Santos, CFO at MercadoLibre]

Thank you.

[Operator]

The next question comes from Andrew Ruben with Morgan Stanley. Please go ahead.

[Andrew Ruben, Analyst at Morgan Stanley]

Hi. Thanks very much for the question. I'm interested in some dynamics around Brazil seller growth. You mentioned the acceleration to 29. I don't think you've mentioned that one before, so just to level set what that was growing before the seller discounts. More fundamentally, is there a profit drag from these new sellers? Maybe they were more likely to take up your promotions or maybe something structural about the new seller mix. Really what I'm trying to understand here is there an element of maturation on your platform where a new seller starts to sell more over time, the seller economics change over time, the way we think about buyer economics? Again, I think that was a new callout, the growth, so I'd like to understand how that plays in. Thank you.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Hey, Andrew. Ariel here. Great to hear you. Yeah, I think what we did in Brazil with take rates goes back to the basics of e-commerce, right? When consumers are deciding where to shop, they are basically looking for the broadest selection at the best possible price with the fastest shipping and the best financing. Clearly, getting the right selection is a key part of our strategy. That's why we've been doing 1P, that's why we've been doing CBT, and that's why this quarter, as we did back in 2024 and 2025, we decided to lower seller take rates. We've already proven that lever, and we've consistently seen that every time we lower take rates, we get an acceleration in effective or successful sellers in our platform.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Clearly, given everything that we've been improving in terms of value proposition in Brazil, the trend of growth in successful sellers has accelerated over the last year, and particularly over the last quarter with the initiative that we just mentioned. In terms of unit economics and profitability coming from the acceleration of sellers, I would say there's nothing big to call out. While there are some programs in order to get seller to scale and so on, there's nothing really affecting our margins on that one.

[Operator]

The next question comes from Robert Ford with Bank of America. Please go ahead.

[Robert Ford, Analyst at Bank of America]

Thank you, good evening, everybody. Ariel, in the letter to shareholders and in the comments, you touch on some very compelling engagement and ecosystemic behaviors. What's your early read on your new gamification and points program in Brazil? Could you also touch on some of the behavioral implications from your agentic shopping pilot in terms of search, conversion, frequency, ad click-through rates, and your ability to promote more ecosystemic behavior from the engagement that you get agentically? Thank you.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Hey, Bob. I think it's too early to comment on the gamification initiatives and points. We've only rolled them out as an AB for some time, it's early to actually make a point. I would say the impact so far is positive. We see increased engagement coming from those users who do engage with the proposal, but nothing to share. On the bigger picture, I would say agentic, there are two big things we're doing in commerce with agentic. On the one hand, is improving our search through AI, that's proving to have positive results, both in terms of conversion rates in the marketplace, items sold, and so on, but also on our advertising platform.

[Ariel Szarfsztejn, CEO at MercadoLibre]

The more AI we deploy to search, the better context we provide, the better ads we are able to pick, choose, and display to our consumers, and the more CTR that we get from those ads, higher revenue. On the second initiative, which is our shopping assistant, we are just AB testing that one, nothing to really share in terms of engagement and results. We're very excited with the early results we're seeing on the shopping assistant, which is on live for some consumers in the marketplace. Taking a step back and picking up your point on engagement, I would say that we look at engagement with a broader view. The bigger and the more engaging our marketplace become, the better chances we have of building the largest digital bank in Latin America.

[Ariel Szarfsztejn, CEO at MercadoLibre]

The bigger the marketplace and the better the marketplace, the better our Mercado Pago application works. Conversely, the better Mercado Pago becomes, the more appealing our marketplace becomes to our users, too. Basically because users find the best financing and payments alternative right at the place where they are already shopping. Basically, we see very few companies anywhere in the world who operate at this intersection of commerce and fintech at the scale that we do it in Latin America, and that's really creating a unique flywheel that is very difficult to replicate for any other player across the region. We are very satisfied, and that's why we've been so precise on highlighting engagement this quarter. We think this is a unique competitive advantage that we have.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Basically, the results that every single one of the investments that we have been making, both across commerce and fintech, is playing on favor of making that flywheel turn faster and faster.

[Operator]

The next question comes from Marcelo Santos with JPMorgan. Please go ahead.

[Marcelo Santos, Analyst at JPMorgan]

Good evening. Thanks for taking my question. Could you discuss a bit how the ramp-up of credit card in Argentina is going? Are you happy with the early results? Is it progressing well? Just anything would be great. Thank you.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

Hi, Marcelo. We are very excited with how the credit card in Argentina is going. As we know, we only started issuing cards three quarters ago, roughly around September last year. We have seen a lot of demand, and we are seeing a significant adoption and use. It's significant, for example, how much people are using the card to pay on the MercadoLibre platforms. It's contributing to the amount of payments with Mercado Pago, means of payments within the platform. It's still early to talk about payback periods, because it's only nine months in the first cohort. However, we are glad to see that the payments are in line to what we expected when we started issuing the card, so there have been no surprises there.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

Even in an environment where some other financial institutions are concerned about the credit cycle in Argentina, we are very happy with the issues we have had in Argentina. We think that given our penetration in the market, where the majority of the country use Mercado Pago every day or every month and every day, we have been able to cherry-pick those users which we deem to be less risky. In general, I would say we are very happy and that this strengthens both the marketplace and Mercado Pago and the presence Mercado Pago has in Argentina.

[Marcelo Santos, Analyst at JPMorgan]

Okay, thank you very much.

[Operator]

The next question comes from Rodrigo Gastim with Itaú BBA. Please go ahead.

[Rodrigo Gastim, Analyst at Itaú BBA]

Good evening, guys. Just a quick question here on the credit cycle in Brazil. Investors are quite concerned about the potential deterioration during the second half of the year in 2027. Just trying to understand here, two part of my question. Number one, if you understand that so far so good, in other words, when you look at most of the products, at the NPL of these products, so far, no important deterioration or signs of deterioration. That's the first part. The second one is, what can you guys proactively do to protect yourselves from an eventual deterioration of the credit cycle, something that you cannot control? What you were doing here? That would be my question. Thank you very much.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

Hi, Rodrigo. Yes, I confirm that so far we are not seeing any deceleration or deterioration of credit booking in Brazil. If you look at NPLs, they are roughly in line to what they were a year ago, and they are even better. The NPLs are even better than they were last quarter. They are nearly bottoms of NPLs that we have had. We don't see any deterioration. I think that we have been very, I would say, conservative in terms of whom we issue credits to. With regards to what we expect for the future, I would say that we have been through a downgrade cycle in the past in Brazil, and we have been through, right now, about adverse macro conditions in Argentina, and in both cases, we have been cautious.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

When we thought that we had to curtail the number of available lines or the lines of credit, we have done so. At this point, we are confident that the models are working better than they were in the past.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Just to add on Osvaldo's comment. I think taking a step back, what you see in terms of credit and deterioration, it's actually the opposite. If you look at across the region, across products, we are almost at our all-time low NPLs for every single product and region, and I think that's a testament to, A, our risk management policies and how we're able, and we are prioritizing risk at the moment of issuance. B, the power of our technology, right? We are a tech company, and we've deployed lots of technology in underwriting, and the combination of the two has been vital for us to be successful.

[Operator]

The next question comes from Pedro Pinto with Bradesco BBI. Please go ahead.

[Pedro Pinto, Analyst at Bradesco BBI]

Hi, everyone. Thanks for taking my question. My question is about now that we completed one year since the implementation of the lower free shipping threshold in Brazil, which has been pretty effective in GMV acceleration in Brazil. Very clearly mentioned in the letter. Now the comps get tougher. Would you guys plan additional investments to continue consolidating the market? What would be the next frontier for Brazil commerce at this point? I don't know if it's quick commerce, social commerce, pharmacy category. What should we expect as a priority strategy-wise for Brazil commerce from this point onwards for momentum to persist?

[Martin de los Santos, CFO at MercadoLibre]

Hi, Pedro, it's Martin here. How are you? As we described in the letter, I think the results of the lowering the free shipping threshold in Brazil after one year are amazing. We are seeing tremendous growth. If you look at items growing at 56%, they were growing 26 or half of that rate a year ago. Engagement with the platform is incredible in terms of the numbers that are most amazing is conversion. We have been growing significantly in terms of traffic, and on top of that, we grew our conversion by 1.1 point year-on-year. At the scale of MercadoLibre, that's enormous in terms of volume. Also, vibrancy and frequency on our platform, daily active users growing much faster than monthly active users. We're getting more users are also buying on more

[Martin de los Santos, CFO at MercadoLibre]

A vertical, so becoming more engaged in different verticals within the ecosystem, buying more times with more frequency. In Brazil, frequency of purchase increased by 20%, number of transactions, number of items for users. All the metrics that we wanted to influence were there. Of course, like you said, comps become tougher, but we don't make investment decisions based on comps, obviously. We make them based on the merits of the areas where we're investing. We're making sure that those are strategic to our marketplace, they contribute to engagement and to growth, and they contribute to strengthening our market position, our leadership position to capture this long-term opportunity that we have in front of us.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Just complementing Martin here. A, I would say that we've not seen a steep change from one day to the other, that they will lower our free shipping threshold and then steady metrics in terms of engagement conversion and so on. The different effects that we've seen across our marketplace has been consistently improving quarter after quarter. With that, you can see the numbers from Q2, right? The result from this quarter are already compare with a lot of the changes that we've implemented last year, and we're still growing very nicely. Picking up on Martin's point, we are not optimizing for growth, it's not that we will deploying one thing or the other in the future just for the sake of keeping growth high.

[Ariel Szarfsztejn, CEO at MercadoLibre]

We will just find whatever we think is needed in order to continue improving the value proposition for our consumers. Of course, there are things that we like and we might test and so on, it's not that we are making a steep change in investments or strategies just for the sake of compounding versus last year changes.

[Pedro Pinto, Analyst at Bradesco BBI]

It is very clear. Thank you, Ariel. Thank you, Martin.

[Operator]

The next question comes from Deepak Mathivanan with Cantor Fitzgerald. Please go ahead.

[Deepak Mathivanan, Analyst at Cantor Fitzgerald]

Guys, thanks for taking the questions. Just wanted to follow up on EBIT margin. EBIT margin came in pretty much as you anticipated sequentially in 2Q. It does seem like some of the investments were offset by improvements in NIMAL on the consumer credit side. Can you comment about the sustainability of margins at these levels in second half? Are you committed to making trade-off if potentially operating environment somewhat changes and becomes unfavorable? Perhaps a related one on AI costs. You rolled out Claude to employees last quarter. Can you talk about the usage and how the spend is ramping? What are some of the ways you're seeing benefit in the early days? Thank you so much.

[Martin de los Santos, CFO at MercadoLibre]

It's Martin here. I think if you look at margin sequentially, as I mentioned before, the main driver of margin improvement was the improvement that we saw on the portfolio of consumer credits in Brazil. In addition to that, we've seen some scale, it's very strong scale in terms of growth in Brazil that enabled us to dilute fixed cost. As you've probably seen over the past several years, we have been diluting OpEx very nicely. In this particular quarter, we diluted OpEx by two and a half points quarter-on-quarter. That's also contributing too. We elected to reinvest that margin into other areas of the business, as I explained before. I think the philosophy continues to be the same. We have some areas of the business that are delivering very strong profits and are growing very fast.

[Martin de los Santos, CFO at MercadoLibre]

If you look at our credit portfolio growing at 75% year-on-year, our advertising business growing 70%+ year-on-year, the acquiring business as well. We are continuing to deliver scale because of the growth that we are delivering consistently. We are electing to reinvest in areas of the business, as we discussed before, lowering the free shipping threshold, 1P, CBT, and so on. That philosophy will continue to be the same. Going forward, we invest in a very disciplined manner. We have engagement and growth targets for each initiative that we take on. More important than that, we have a clear path to profitability to those initiatives, and we'll measure against those, and we lever, we graduate the intensity of investments based on those results. That's the first part of your question. You ask about AI.

[Martin de los Santos, CFO at MercadoLibre]

We are very excited about AI. Obviously, we are investing more than a year ago. I think we invested about $80 million on AI this quarter compared to a year ago. We are seeing very strong results. Let me break it down in a couple of ways. Consumer-facing, we have several initiatives that are paying out very nicely. We talked about the Mercado Pago AI agent, the seller assistant on Mercado Libre. Those continue to scale very nicely. In this quarter, we saw some in the letter, the ads orchestrator that is increasing the engagement with our users, it grew by 66%, the usage of that tool. That is a way to get more sellers to our advertising platform, and it's helping us to grow the advertising business by 73% year-over-year.

[Martin de los Santos, CFO at MercadoLibre]

I think Ariel mentioned the AI tools that we deploy on our search engine in the five largest countries. It's important to mention that, of course, that increased the price, the cost, because you have to pay in a lens now. When you put together the incremental volume that we solve, plus the incremental conversion and advertising, it more than pays the cost of that initiative. It's an initiative that has a positive return on that investment. That's a good example of AI contributing to profits. On the productivity side, I think in the past we talked about

[Martin de los Santos, CFO at MercadoLibre]

Customer service, as an example, four years ago, we used to have 10,000 reps in customer service. Today, we have 7,000 reps, even though the business grew by 3x in that period of time. That's because 90% of the interactions are done without a human participating on the issue. In product development, obviously, that's tremendous productivity gains. We have 20,000 developers that are using AI. A year ago, they were coding, they were helped by AI. Today, human-written code is the exception. The majority of the code is done by AI, and you can see that also flowing through our P&L. Product development scaled from 8.4% of revenues to 7.2% of revenues year-over-year, even though it has this incremental cost of AI within it. We are very, very optimistic about it. We are seeing the results. We manage it with discipline.

[Martin de los Santos, CFO at MercadoLibre]

We are focusing on cost as well. The cost per token continues to come down. We are seeing very positive results in terms of investments on AI at MercadoLibre.

[Operator]

The next question comes from Danni Eiger with XP. Please go ahead.

[Danni Eiger, Analyst at XP]

Hi. Thanks for taking my question. I'd just like to hear a little bit more about how you're seeing your affiliates program, what you're doing to scale it, current gaps that you see, and if you can expect any heavier investments in this front, going forward. Thanks.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Hey, Danni, this is Ariel. The affiliates channel is actually scaling very, very nicely and becoming more efficiently, simultaneously. We think it's actually working. The affiliate GMV share grew across every market in Q2, including Mexico, where we dialed down some of the couponing that we were deploying in the past. Buyer quality is also a very important metric that we look at when we are evaluating the program. Affiliate buyers show materially higher platform retention than non-affiliate buyers. The channel is not only driving one-time purchases, it's also acquiring users who come back later to our platform, and that's really exciting as well. This is exactly what we wanted to achieve when we launched and accelerated the investments in affiliate back in Q2 2025.

[Ariel Szarfsztejn, CEO at MercadoLibre]

A year on, we can see that unit economics and sales and marketing as a percentage of sales are broadly flat. Simultaneously, we are making a lot of progress in the product, in engagement, in the number of affiliates, and so on. We're happy economics are improving. Seller co-funding for affiliate is growing. Extremely excited and positive on the outlook for the different markets.

[Danni Eiger, Analyst at XP]

Perfect. Thanks.

[Operator]

The next question comes from Craig Maurer with FT Partners. Please go ahead.

[Craig Maurer, Analyst at FT Partners]

Yeah, thanks for taking the question. I wanted to just ask quickly about Mexico, two points. In terms of direct contribution margin compressing from Mexico, roughly half of that was from acquiring. How much of that was the device cost pressure related to memory chip inflation that will eventually grow over versus deliberate customer acquisition cost investment? Second, in terms of GMV decelerating with the tax reform headwind, is that headwind fully in the run rate now? Was it fully in the run rate in second quarter? That would be helpful to know as we think about modeling the back half of the year.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

Hi, Craig. With regards to acquiring margin in Mexico, it was mostly related to both increasing the amount of devices we bought, increasing inventory. As we sell the devices at a loss, whenever we buy inventory, we need to book the loss up forward. The rest was driven by, as you mentioned, the increase in the memory chips cost. I would say the majority of the compression in Mexico are related to those two issues and not to a decision to lower our prices, which we did not.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Hey, Craig. On Mexico commerce and demand dynamics, I would say yes, the tax reform that we explained last quarter is definitely a headwind to our growth. That together with some headwinds coming from a weaker macroeconomic environment and the even lower consumption during the World Cup definitely pay some toll to our growth.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Still, if you see our numbers, our growth rate was pretty robust. We continued gaining market share year-over-year, and we even gained more than our main competitor. Also when you compare our performance with the original retailers, you can see how the structural growth opportunity in the country is playing to our favor, right? The market is growing. We are a large slice, and physical retail is clearly being challenged by e-commerce. Just to wrap up, I would say Mexico is perhaps the market where our ecosystem could play out the most in our favor in the long run because of the lack of access to financial services and Mercado Pago's positioning as the leading digital bank and the leading fintech acquiring. I think we're driving digitalization in the country, and that's pushing the flywheel, which is strengthening both fintech and e-commerce.

[Ariel Szarfsztejn, CEO at MercadoLibre]

We remain optimistic with the market. Although we do see near-term challenges, which were a bit deeper in June and July with the World Cup, there's nothing that is actually impacting the huge secular trend of growth and opportunity that we see in Mexico, and more importantly, the long-term earnings power that we find in that market.

[Craig Maurer, Analyst at FT Partners]

Thank you.

[Operator]

The next question comes from Josh Beck with Raymond James. Please go ahead.

[Josh Beck, Analyst at Raymond James]

Thank you for taking the question. I wanted to go back to the AI costs, because I think you shared a little bit more than we've generally heard on the earnings call. I think you said the cost of tokens was up $80 million year-over-year, but you're saving, I think, almost 1% maybe of revenues in terms of product development. It certainly seems like if you just look at those two dimensions, that it's already quite ROI positive. I'm just kind of curious, as we look forward, could this be a trend that continues and maybe provides more ROI and benefit to the P&L? That's one question on the AI costs. The other one is on the credit card NIMAL, the breakdown you gave on credit card versus other was very helpful.

[Josh Beck, Analyst at Raymond James]

I'm just curious, maybe if you were to double-click on the most mature credit card portfolios, maybe what they look like and how we should maybe think about the evolution of the credit card NIMAL in the years ahead. Thank you.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Thank you for your question. Let me just clarify the product development scale that you're seeing, that I mentioned before. I think it was one point year-on-year. Most of that doesn't come from AI, just to be clear. We have been scaling product development for many years now, and that trend continues as we become more productive and more efficient in the way we manage our product development. What I tried to explain is that even though we include the majority of the AI costs within that line, that line continues to scale, just to be clear. When we look at the AI investment that we're making, we can see the productivity gains throughout our workforce. We can see certain initiatives where we can measure the actual return on investment. The examples of that was customer service or the initiative on AI applied to search.

[Ariel Szarfsztejn, CEO at MercadoLibre]

There are other initiatives where we're experimenting. We are very optimistic. We think that given the way we manage technology, the data that we have, and the position that we have as a technology company, we should be able to take this new technology and scale it, and it will help us significantly to scale our revenue generation. Plus, it will make us a lot more efficient in the way we manage our business. Let me take one step back on AI to make just one complimentary comment to Martin. Although we care about the bill and we proactively manage every single cost lever in order to make it more efficient, I think strategically, we think of AI as an opportunity, an accelerator of our wide, bigger opportunity for our business and less as a cost line to optimize.

[Ariel Szarfsztejn, CEO at MercadoLibre]

AI is accelerating the secular shift that we already are trying to capture. Discovery is becoming more personalized, transactions are becoming more frictionless, credit becomes more tailored to any given consumer, we can underwrite better, and so on. We are convinced that the 27 years of proprietary data that we have accumulated across commerce, payments, credit, logistics, position ourselves in a good place in order to capture the opportunity that AI is bringing. This is like fuel that we are applying to an organization that is already wired into technology and into the idea of using every single lever, technological lever out there in order to make the most. In parallel, I would say to Martin's point, AI is definitely contributing to cost efficiency. 2026 is probably the first year in many years in which we are not growing our engineering team.

[Ariel Szarfsztejn, CEO at MercadoLibre]

That's also coming from the fact that AI is driving developer productivity up consistently.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

Josh, going to your question on credit cards, you ask about our older portfolios and cohorts. Basically, what we continue to see, mostly in Brazil, which is the one market where we started first, is that each cohort typically reaches NIMAL or NIMAL breakeven after 12 to 18 months. That has been pretty consistent.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

We continue improving profitability. What we are doing now, as we accelerate issuance, is basically invest more. That's why you see some compression on the NIM of the credit card portfolio between last year and this year. It was nearly break-even a year ago, and -2.5% now. That is driven mostly by the fact that we were able to accelerate the speed of issuance. A year ago, we issued 1.6 million cards in the quarter, this quarter we issued 2.6 million cards in Brazil. Therefore, we are confident that we are investing, and the payback, we have certainty about the payback we will get. Beyond the payback in the card itself, what we are seeing is that whenever we issue cards, we see a lift in net promoter scores from those users.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

They are more likely to be ecosystemic users and to have higher engagement and higher profitability in the platform. Also, it's one of the key contributors to us becoming, basically, gaining principality with those users as a key indicator for becoming one of the largest digital banks in the region. We are excited with how the credit card is evolving in Brazil. On top of that, I would say that what we're seeing in Mexico is that paybacks are even better than in Brazil because the economics of the industry works better than in Brazil. It's still early to tell about Argentina, but the initial impression is also very good, as we were saying just a few minutes ago.

[Josh Beck, Analyst at Raymond James]

Thank you.

[Operator]

The next question comes from Kyle Friedel with UBS. Please go ahead.

[Kyle Friedel, Analyst at UBS]

Hi, everyone. Good evening. Thanks for the opportunity. I have one question. This is more a follow-up on the credit side. I would like to double-click on the asset quality of your credit book, please. We saw definitely an improvement in provision levels this quarter, with the cost of risk reducing Q on Q. We saw good trends on the short-term NPL as well. On the other side, as your duration is short, it's quite tricky to look only to the short-term NPL in our view. Actually, at the same time, the 90-day NPL had quite a meaningful deterioration this quarter. My question is, how should we read that if this improvement in cost of risk was much more seasonal, and it should be higher sequentially? How would you describe your growth appetite towards the second half of the year, especially in Brazil as well? Thank you.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

One second, please. In general, Kyle, I would say our NIMALs are super healthy. NPLs are at the lowest point for 15-90 days. When it comes to 90 days, I would say that there are a few things to keep in mind. In general, this metric mixes all products. You're not seeing one specific product, the signal is not so clear, and it moves basically up and down to some degree, depending on how fast we are growing. When we originate a lot, the ratio improves automatically, and when we slow down, it deteriorates a little bit. Part of what is happening is that there was a change at the pace we were issuing at the end of last year, and some early years, borrowers defaulted a little bit higher than we expected.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

There was a slowdown at the pace we were issuing that product because of that deterioration. You see a little bit of a jump in the over 90 days, but it's not something that I would be concerned about. Again, that is a very small number, and the other bucket, the 15-90 days, is significantly more relevant in terms of profitability.

[Martin de los Santos, CFO at MercadoLibre]

If I may complement also, keep in mind that some of the products that are growing very fast now are relatively short-term duration, and those products tend to have higher NPLs because remember, the good payers get out of the portfolio fairly quickly, and the defaulters stay for 360 days. There might be also some distortion because of that. Again, as Osvaldo mentioned, nothing to worry about. The health of the portfolio continues to be very profitable, so I wouldn't make a big issue out of it.

[Operator]

The next question comes from Neha Agarwal with HSBC. Please go ahead.

[Neha Agarwal, Analyst at HSBC]

Hi, thank you for taking my question. Could we talk about a bit of impact from the lower policy rates expected in Brazil for your different business segments? What kind of impact can we expect from lower rates?

[Ariel Szarfsztejn, CEO at MercadoLibre]

Hi, Neha. I would say that both on the acquiring and credit business, there is no significant impact by the little bit of a change in the rates in Brazil. Typically, the market, our competitors, and ourselves adjust those rates depending on what's happening with the policy rates. There is a marginal improvement in the credit you have already issued because you priced them with a higher rate. It's really, I would say, marginal. Once we get to the new standard, basically, we adjust prices. There is probably a little bit more of an impact on the marketplace because typically we don't adjust so frequently the parcelado sem juros prices on the marketplace. On the margin, that is an improvement to the take rate in the marketplace.

[Martin de los Santos, CFO at MercadoLibre]

Right. The marketplace, typically, when interest rates come down, we improve a little bit margins, and when they go up, we lose margins because we don't adjust every single time the rates change.

[Operator]

The next question comes from Marvin Fong with BTIG. Please go ahead.

[Marvin Fong, Analyst at BTIG]

Hi. Great. Thanks for taking my question. I apologize if these are asking for it and jumping between calls here. I appreciate all the great information you provided about ecosystemic users. I just would love some additional color, without being too specific, but could you give us an idea of what percentage of your users in Brazil or perhaps, across your entire marketplace are, in fact, ecosystemic users, which is one, to get an idea of how much future growth is possible there. Then second question, just on cross-border, could you just update us on your strategy there to improve the profitability and cost efficiency of that product? I know you had the facility in China that you opened up. How much has that been utilized, and might you open additional facilities in low-cost regions? Thank you.

[Martin de los Santos, CFO at MercadoLibre]

Hi, it's Martin here. Thanks for your question. Regarding ecosystemic users, we wanted to make sure that it's clear to the market the fact that we have a two-sided ecosystem generates this opportunity to bring users that are active on both platforms. We wanted to give some color to the market regarding the importance of that, right? When we see an ecosystemic user has 70% more GMV on the marketplace and 90% more TPV, double the assets under management. Very much engaged, and that results in better profitability. We also mentioned that the rate of growth of those type of users is the highest of any kind of users. I think it's growing 37% year-on-year. We don't disclose the actual share of users. We just want to make sure that those are important users to us, growing very fast.

[Martin de los Santos, CFO at MercadoLibre]

A lot of the investments that we're making are aiming to get in more of the users, both on the commerce side and the fintech side to become ecosystemic users.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Hey, Marvin. On cross-border trade, we are extremely satisfied with the trajectory we are seeing. CBT GMV is growing approximately at 60% year-over-year, with triple-digits growth in Brazil, Argentina, and other markets, and above average growth in Mexico, our largest market for CBT by far. More interestingly, the volume coming from our Chinese fulfillment center is growing 170% quarter-over-quarter. Basically, we built the capacity, and we see that the volume is following. Basically with CBT, we're providing a better service and more choice to our consumers, right? CBT is adding more selection at unattractive prices, and users always want to get that. The more supply we get, the more demand we get. With that demand, our platform becomes more attractive in order to get more supply. Positive on that effect.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Simultaneously, the warehouse in China has enabled us to improve delivery speed, reduce cancellation, which is also driving NPS positively and pushing retention and repurchase up. Simultaneously, on unit economics, which is another I mentioned that you asked for, we continue to see sequential improvements in our margins, that has been consistent for a few quarters now. Basically, it's driven by the combination of scale, which is helping us dilute some of our costs, but also going through the learning curve that is allowing us to tackle every dimension of the business to really get to understand what the levers are in order to make it work. As I was saying at the beginning, very satisfied, encouraged, but still early days for CBT, and we have many things to continue doing.

[Operator]

The next question comes from João Soares with Citi. Please go ahead.

[João Soares, Analyst at Citi]

Hi. Thanks for taking the question. I just wanted to double click on the credit card profitability trajectory. I appreciate the color and the NIM by credit product, and it's really helpful. I think that it's still not clear to me where this I know, Ozzy, you're still in a significant card issuance phase, but given the level where it is right now, above $7 billion, of course, the yields, the spreads on this product should be extremely robust right now. Is it fair to say that we are reaching a level where we could expect a profitability inflection? Any color in terms of where you're seeing this and whether there's room to even accelerate more. Any color regarding where we should start seeing maybe the NIMALs for this product in the next couple of years would be extremely helpful. Just the curve, right, in the strategy.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

Hi, João. As we mentioned, we are super excited with how the credit card is evolving, and we continue to see the same patterns as before in terms of reaching profitability for each given cohort. When it comes to your question regarding reaching a turning point, I think that is mostly related with the history of the size of each cohort, basically. We have been accelerating the pace of issuance. If we're to look at cohorts that are older than three years, those are rather a small part of the portfolio. The majority of the portfolio has been issued, I would say, in the last two years. That's why we need more time for the average of the portfolio to mature.

[Osvaldo Gimenez, President of Fintech at MercadoLibre]

As we are confident of how we are issuing, we have been able to accelerate the pace of issuance, and that, in some way, slows down the average maturity of the portfolio. I'd say mostly a combination of how fast we continue to issue, and then how each portfolio evolves.

[Ariel Szarfsztejn, CEO at MercadoLibre]

Maybe just to, if you step back, I think it's important to realize the traditional importance of the credit card, right? The profitability that you're seeing on the letter is only the credit card. As we mentioned also on the letter, people who use the credit card have two to three times more chances of becoming ecosystemic. They tend to buy more on Mercado Livre, they tend to bring more of their financial life into Mercado Pago. The credit card on itself has a clear path to profitability, as Osvaldo mentioned. On top of that, and probably more important than that, is it a strategic product both for Mercado Pago as well as Mercado Livre. Just on the side of that.

[Operator]

This concludes the question and answer session. I would like to turn the conference back over to Ariel Szarfsztejn for any closing remarks. Please go ahead.

[Ariel Szarfsztejn, CEO at MercadoLibre]

I want to take this opportunity and go back to one of the things I was saying at the beginning of the call. We are building something quite unique globally, an ecosystem of commerce and financial services that compounds on itself. The bigger and the more engaging our marketplace become, the better our chances of building the largest digital bank in Latin America, and the bigger our advertising business will become. Simultaneously, the better Mercado Pago becomes, the more appealing our marketplace becomes, too, for our consumers. Mercado Libre and Mercado Pago have become a daily habit for Latin Americans across the region, but the opportunity that we have ahead of us is even bigger. These are not two businesses running in parallel. This is one flywheel, each side making the other one more valuable.

[Ariel Szarfsztejn, CEO at MercadoLibre]

As we said in the letter, we invest in it carefully, with discipline, and only when we see that the economics are working. If we get that flywheel right, the result is structurally higher engagement, loyalty, and scale, and that is what will maximize our long-term profitability. The underlying philosophy with which we are operating has not changed in almost three decades, investing in eliminating friction in what deepens user engagement and letting it compound. Our conviction in this approach, the evidence supporting it, and the ecosystem behind it, are all stronger than they have ever been. We are convinced that this is the right way to create the very best long-term proposition for our consumers, and through this, to maximize shareholder value in the long run as well. Thank you very much, and looking forward to connecting with you in the next quarter.

[Operator]

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Participants

Executives

• Richard Cathcart, Senior Director of Investor Relations
• Martin de los Santos, CFO
• Osvaldo Gimenez, President of Fintech
• Ariel Szarfsztejn, CEO

Analysts

• Irma Sgarz, Analyst at Goldman Sachs
• Andrew Ruben, Analyst at Morgan Stanley
• Robert Ford, Analyst at Bank of America
• Marcelo Santos, Analyst at JPMorgan
• Rodrigo Gastim, Analyst at Itaú BBA
• Pedro Pinto, Analyst at Bradesco BBI
• Deepak Mathivanan, Analyst at Cantor Fitzgerald
• Danni Eiger, Analyst at XP
• Craig Maurer, Analyst at FT Partners
• Josh Beck, Analyst at Raymond James
• Kyle Friedel, Analyst at UBS
• Neha Agarwal, Analyst at HSBC
• Marvin Fong, Analyst at BTIG
• João Soares, Analyst at Citi