StoneCo Q1 Earnings Call Highlights

Key Points

• StoneCo’s Q1 2026 results were mixed but broadly in line with expectations, with revenue up 6% year over year to BRL 3.6 billion and adjusted net income up 3%. Adjusted EPS rose 15% to BRL 2.19, helped by share buybacks, even as gross margin compressed to 41.6% due to higher credit-loss provisions and operating costs.
• Payments growth remained soft, as TPV increased only 3% year over year to BRL 137 billion amid weak small-business conditions and elevated churn. Management said churn is concentrated in newer 2025 clients and is responding by simplifying product bundles, improving pricing transparency, and adjusting sales incentives to support retention.
• Credit expansion continued, but asset quality worsened, with the loan portfolio up 14% sequentially to BRL 3.2 billion and credit revenue up 25%. However, delinquencies rose, forcing BRL 166 million in credit-loss provisions and pushing cost of risk to 21.9%, though StoneCo expects gradual improvement over time.

StoneCo NASDAQ: STNE reported first-quarter 2026 results that management described as broadly in line with expectations for a softer first half, as the Brazilian financial technology company worked through elevated merchant churn, weaker small-business conditions and higher credit provisions.

Chief Executive Officer Mateus Scherer said three factors shaped the quarter: a macro environment weighing on smaller merchants, typical first-quarter seasonality and a credit portfolio that continued to grow profitably despite nonperforming loans coming in above the company’s expectations. Scherer said StoneCo is focused on improving retention, re-accelerating total payment volume, or TPV, and maintaining disciplined capital allocation.

“The quarter was broadly consistent with the softer first half dynamics we had anticipated,” Scherer said. He added that the period marked “the beginning of a transition phase” between capital distributions tied to the Linx divestiture and the operational momentum management expects to build in the second half of the year.

Revenue rises, EPS benefits from buybacks

Chief Financial Officer Diego Salgado said total revenue and income reached BRL 3.6 billion in the quarter, up 6% from a year earlier. He attributed the increase primarily to continued expansion in credit revenues and healthy profitability in payments, partly offset by lower floating revenues from deposits.

Adjusted gross profit was BRL 1.5 billion, broadly stable year over year, as revenue growth was offset mainly by higher credit-loss provisions and increased operating costs. Gross profit margin fell to 41.6% from 44.4% in the first quarter of 2025.

Adjusted net income rose 3% year over year to BRL 549 million, while adjusted basic earnings per share increased 15% to BRL 2.19. Salgado said EPS outperformed net income because of StoneCo’s ongoing share repurchase program.

The company said it has distributed BRL 3.6 billion to shareholders year to date, representing a 27% distribution yield. That total includes an extraordinary dividend paid May 4 using proceeds from the Linx divestiture and about BRL 600 million in ordinary share buybacks. Scherer said StoneCo still expects to repurchase at least another BRL 1.4 billion in shares this year.

TPV growth remains soft as churn weighs on payments

StoneCo reported TPV of BRL 137 billion in the quarter, up 3% year over year. Salgado said growth reflected pressure from the microeconomic environment for smaller merchants, relatively stronger digital sales in areas where StoneCo has less exposure, and elevated churn identified in the prior quarter.

Scherer said the churn pressure is not broad-based. The company’s legacy customer base continues to perform in line with historical churn levels, he said, while the pressure has been more concentrated among clients onboarded during 2025. During that period, StoneCo expanded its product offering to include areas such as instant settlement, investments and credit cards, but Scherer said bundles and pricing became too complex.

“That created friction for some clients, and we are addressing it directly,” Scherer said. He said StoneCo is reviewing its offerings, simplifying bundles and moving toward a cleaner and more transparent pricing structure.

Management said early volume indicators have improved, with TPV growth showing improvement in April, though Scherer cautioned it is too early to call a definitive trend. In response to analyst questions, he said the company is adjusting sales-force incentives to better align origination with client retention and long-term value creation.

New client metrics introduced

StoneCo also changed how it reports active clients, consolidating prior payment and banking disclosures into a single metric: merchants that generated revenue over the past 30 days across payments, banking or credit solutions.

Under that definition, total active clients were 4.7 million in the first quarter, up 13% year over year but down 5% sequentially. Salgado said the sequential decline largely reflected conscious actions to focus on more engaged and revenue-generating clients.

The company also introduced average revenue per active client, or ARPAC, which was BRL 247 per month in the quarter, down 3% sequentially and 11% from a year earlier. Scherer said the year-over-year decline was driven mainly by client mix, including the addition of clients using lower-ARPAC products such as banking-only solutions. He said clients using multiple products, including payments, banking and credit, have ARPAC “significantly higher” than the company average.

Credit portfolio grows, but provisions increase

StoneCo’s total credit portfolio reached BRL 3.2 billion, up 14% sequentially. Merchant solutions, mostly working-capital offerings, totaled BRL 2.9 billion, while the credit card portfolio reached BRL 400 million. Credit revenues rose 25% sequentially to BRL 297 million, and portfolio yield increased to 3.3% from 3.1% in the fourth quarter and 2.6% a year earlier.

Credit quality weakened during the quarter. Salgado said models for micro, small and medium-sized merchants on StoneCo’s automated desk lost efficiency, with newer cohorts performing worse than historical averages. Nonperforming loans 15 to 90 days past due increased by nearly 60 basis points, while loans more than 90 days past due rose to 7% from 5.2% in the prior quarter.

StoneCo provisioned BRL 166 million for credit losses in the quarter, bringing cost of risk to 21.9%. The company maintained a coverage ratio of 229%.

Scherer said the increase in delinquencies reflected a tougher credit environment across Brazil, model underperformance beginning late in the fourth quarter and isolated cases in the dedicated desk. Management said StoneCo responded by increasing pricing, tightening risk selection, deploying new models and reducing maximum ticket sizes in the dedicated desk. The company has also started disbursing secured working-capital products.

Salgado said StoneCo expects cost of risk to decline gradually toward the mid- to high-teens over time, though some early delinquencies from the first quarter will continue to flow through the income statement in coming months.

Deposits and guidance remain in focus

Retail deposits ended the quarter at BRL 10.1 billion, up 22% year over year but down 9% sequentially, which Salgado attributed to first-quarter seasonality. Average daily retail deposits grew 7% sequentially and 26% year over year.

Salgado said deposits are becoming a more important funding source. He said StoneCo has reduced its total cost of funding from 100% of CDI in early 2025 to about 87% more recently, helped by client deposits. He also described deposit growth as an important natural hedge against interest-rate fluctuations.

Management said full-year 2026 guidance remains unchanged, with performance expected to be weighted toward the second half as credit revenues compound and commercial initiatives improve retention. However, Salgado said higher interest rates are now one of the most challenging factors in the forecast, noting that StoneCo had previously assumed year-end rates of 12.5%, while the current expectation is closer to 14%.

“I think today we’re probably closer to the bottom of the guidance that we provided, but there is still a long way to go,” Salgado said.

About StoneCo NASDAQ: STNE

StoneCo Ltd., commonly known as Stone, is a Brazilian financial technology company that provides integrated digital payment solutions and related financial services to merchants. Through its cloud-based platform, Stone enables businesses of all sizes to accept a variety of payment methods, including point-of-sale (POS) terminals, mobile card readers and e-commerce gateways. In addition to payment acceptance, the company offers value-added services such as working capital loans, digital banking products and automated billing tools designed to help merchants manage cash flow and streamline operations.

Since its founding in 2012 by André Street and Eduardo Pontes, Stone has focused on serving over half a million merchants across Brazil's retail, restaurant and services sectors.

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