MELI

MercadoLibre remains a best-in-class operator: FY2025 revenue grew 34.3% to $20.3B, extending a remarkable run from $5.71B in 2021 — a ~3.6x in four years — while ROE held at 29.6% and operating cash flow surged to $12.1B. The combined commerce + Mercado Pago flywheel is clearly intact, gross profit rose 34.3% in lockstep with revenue, and the company still self-funds heavy investment ($2.27B R&D, $1.34B capex) without diluting shareholders (50.7M shares, flat YoY). On business quality alone this is a buy-tier franchise.

The problem is that the bottom line has decoupled from the top line. Net income grew only 4.5% to $2.00B and diluted EPS only 4.5% to $39.40, even as revenue grew 34%. The 10-K explains why: management's own gross-profit margin fell from 46.1% to 44.5% on a lower free-shipping threshold in Brazil, a mix shift toward lower-margin first-party (1P) goods, and rising Mercado Pago funding costs; net margin compressed to 9.8%. Crucially, segment disclosures flag large increases in 'provision for doubtful accounts' ($873M in Brazil alone) tied to the rapidly scaling credit-card and consumer-lending book. So a chunk of the operating income (+21.7%) is being consumed below the line by financing costs, taxes and credit losses — and the balance sheet now carries 5.32x liabilities/equity and $9.19B long-term debt (+60.9%), much of it fintech funding that imports credit and duration risk.