StoneCo Q3 Earnings Call Highlights

Key Points

• StoneCo cut its 2026 outlook, lowering adjusted gross profit guidance to BRL 6.1–6.2 billion and adjusted basic EPS to BRL 9.1–9.5. It withdrew its 2027 targets, citing uncertainty around interest rates and credit conditions.
• Retention initiatives showed early signs of progress: payment-volume growth accelerated, market share stabilized, and the active merchant base reached 5.1 million. However, client retention offers may weigh on near-term revenue.
• The credit portfolio grew 78% year over year to BRL 4.1 billion, but management is revising credit models for a tougher economy and expects provisions to remain elevated longer. StoneCo also repurchased more than BRL 200 million of shares and reaffirmed its plan to distribute BRL 2 billion in excess capital in 2026.

StoneCo NASDAQ: STNE lowered its 2026 profit outlook and withdrew its previously communicated 2027 targets, citing persistently high interest rates, higher-than-expected credit losses and the near-term cost of retaining merchants.

The payments and financial services company reported gradual improvements in transaction volume and credit performance during the third quarter, but profitability remained under pressure as loan-loss provisions and operating costs rose, executives said on the earnings call.

CEO Mateus Scherer said the company expects adjusted gross profit of BRL 6.1 billion to BRL 6.2 billion for 2026, down from its previous range of BRL 6.6 billion to BRL 7 billion. It also cut its adjusted basic earnings per share forecast to BRL 9.1 to BRL 9.5, from BRL 10.8 to BRL 11.4.

StoneCo left its assumption for a mid-teens effective tax rate unchanged. For the first nine months of 2026, it reported adjusted gross profit of BRL 4.5 billion and adjusted basic EPS of BRL 6.9, results Scherer said were below the company’s expectations at the start of the year.

Uncertain Rates Cloud 2027 Outlook

Scherer said StoneCo was not comfortable providing updated 2027 guidance amid limited visibility into interest rates and credit conditions. The company will decide whether to issue a new outlook when it reports full-year results.

During the analyst question-and-answer session, Scherer pointed to a roughly 250-basis-point move in the yield curve after the election as an example of the volatility complicating forecasts. He said StoneCo has an interest-rate sensitivity of approximately BRL 200 million to BRL 250 million for every 100-basis-point move in rates.

Despite withdrawing the targets, Scherer said the company’s priorities remain improving retention, reducing churn, growing credit cautiously and increasing efficiency. He also said transaction-volume growth and the broader economic environment had been weaker than assumed in the company’s earlier multiyear plan.

Retention Efforts Show Early Signs

StoneCo began addressing higher client churn after finding that its expanding product range had made offers and operations more difficult for customers to navigate, Scherer said. The company has simplified offers, made pricing more transparent and changed sales incentives to place greater weight on retention.

Those efforts can pressure near-term revenue because the company makes client-by-client offers intended to maximize long-term value, he said. Total payment volume growth accelerated during the quarter, while overall market share stabilized and StoneCo gained modest share within its segment, according to Scherer.

CFO Diego Salgado said growth was led by Pix QR-code transactions. Card payment volume still declined year over year, primarily because of debit transactions, although the annual decline was easing and credit-card volume was approaching flat.

StoneCo’s active client base reached 5.1 million merchants, led by its Ton micro-merchant brand and a growing number of banking-only clients, Salgado said. Deposits also continued to grow as customers made greater use of the company’s banking services.

Credit Growth Continues as Risk Outlook Shifts

The credit portfolio reached BRL 4.1 billion, up 78% from a year earlier and 9% from the previous quarter, Salgado said. Government-backed loans nearly doubled quarter over quarter, while the credit-card portfolio exceeded BRL 500 million.

Loan-loss provisions totaled BRL 197 million in the quarter. Cost of risk declined to 20.1% from 21.5% in the second quarter, helped by the portfolio’s changing mix. Salgado said first-payment defaults had returned to historical levels, and newer collection and renegotiation tools were showing early benefits.

Loans more than 90 days past due increased as earlier delinquencies in the dedicated desk rolled forward, while the 15-to-90-day delinquency measure improved, he said. Scherer said the company had tightened policies on larger loans and directed more growth toward government-backed programs after judicial recovery filings affected the dedicated desk.

Salgado said StoneCo is revising its credit models for a tougher economic backdrop, which could result in higher provisions than previously expected. Management still expects cost of risk to reach the mid-to-high teens over the medium term, but now believes the decline will take longer.

Buybacks and Costs Remain in Focus

StoneCo repurchased more than BRL 200 million of shares during the quarter and maintained its commitment to distribute BRL 2 billion in excess capital during 2026. Salgado said the slower third-quarter buyback pace reflected temporary liquidity needs associated with a legal-entity restructuring.

The CFO said the company moved capital from its Cayman holding company to entities in Luxembourg and Switzerland, in part to reduce exposure to potential tax disputes and establish Switzerland as a capital hub. StoneCo’s capital ratio stood at approximately 27%, above its 17% internal hurdle, while adjusted return on equity reached 23.5%.

Salgado said costs rose partly because of software investments, including artificial intelligence, and higher transaction, operational and risk-management expenses. Scherer identified cost control as a central priority for 2027 and beyond.

About StoneCo (NASDAQ:STNE)

StoneCo Ltd. is a Brazilian financial technology company that provides payment processing and business management solutions, primarily to merchants in Brazil. Its services are designed to help businesses accept and manage payments across in-person and online channels. The company's offerings include payment terminals, digital payment tools, financial services and software for managing business operations. Through brands such as Stone, Pagar.me and Linx, StoneCo serves businesses ranging from smaller merchants to larger retailers.

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