Mercado 2Q25 Quick Interpretation: Overall, this quarter's performance of the Latin American internet giant Meli remains robust and exceeds expectations; however, the cost is a decline in gross margin and an expansion in expense ratio, leading to a noticeable drop in profit margin, with actual operations underperforming expectations by 5%.
Specifically:
1) Total revenue for the quarter (denominated in USD) increased by approximately 34% year-on-year, although slightly slowing quarter-on-quarter, it was about 3% higher than expected.
The growth drivers include significantly lowering the free shipping threshold in the Brazilian market for the e-commerce business (from R$79 to R$19); in the financial business, offering higher rebates based on user account balances to attract users.
These factors collectively resulted in a year-on-year narrowing of the gross margin by a full 1 percentage point and an expansion of the expense ratio by 1.1 percentage points. Consequently, operating profit for the quarter grew by less than 14% year-on-year, falling into the issue of revenue growth without profit growth.
2) In the e-commerce business, the number of active buyers and GMV for the quarter grew by approximately 25% and 21% year-on-year, respectively, with a slight acceleration quarter-on-quarter, both exceeding market expectations.
It is evident that the performance on the growth side is commendable, reflecting the benefits of lowering the free shipping threshold.
3) In the financial business, monthly active users grew by about 30% year-on-year, with total payment volume (TPV) and credit balance both experiencing strong growth in the mid-to-high double digits, exceeding expectations. The growth performance of the financial business is also very strong.
The indicator reflecting credit profitability—NIMAL (net interest margin after loss) was about 23% this quarter, with a slight increase quarter-on-quarter.
The anticipated market scenario of a decline in NIMAL due to an increased proportion of businesses with relatively small interest spreads, such as credit card business and premium user business, did not occur. $Mercadolibre(MELI.US)
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