MercadoLibre profit margins fall on higher spending

The biggest drag came from logistics. MercadoLibre has been widening free-shipping access in Brazil, a move that supports buyer engagement but also shifts mix toward smaller, lower-value baskets that generate less revenue per package. At the same time, the company added almost 20% more warehouse space in one quarter, creating a cost burden before the new capacity is fully utilized. That kind of investment can pay off over time, but near-term it tends to depress margins and leaves investors waiting for proof that volume can catch up.

Credit is adding to the pressure. MercadoLibre’s credit portfolio has climbed to almost $18 billion, up 62% from a year earlier, and provisions for doubtful accounts jumped 65% to $1.34 billion. Management said loan quality was steady, with 15- to 90-day late loans at 7% of the portfolio, but the accounting still works against current earnings: expected losses are booked upfront, while interest income arrives later. That means rapid expansion in fintech lending can temporarily weigh on profit even if the book performs as expected.

The company’s net income still rose 6%, but that was helped by a lower tax bill and smaller currency losses rather than stronger operating performance. That distinction matters for investors because it suggests earnings quality is weaker than headline profit growth implies, and because MercadoLibre offered no guidance to anchor margin recovery. With no formal outlook, the market is left to judge whether the company can absorb the cost of its logistics buildout and still preserve the premium multiple it has historically enjoyed.

The broader picture is a business still expanding faster than most global internet peers, but one that is entering a more demanding phase of execution. Fintech revenue growth also slowed, to 40% currency-neutral from 47% in the previous quarter, reinforcing the view that both major engines of the company are facing some moderation. For investors, the key question now is not whether MercadoLibre is growing — it clearly is — but whether it can keep scaling without sacrificing the margin profile that has underpinned its valuation.