Q2 2026 MercadoLibre Inc Earnings Call

August 5, 2026

Speaker #1: Hello, everyone. Good evening, and thank you for joining MERCADOLIBRE's conference call for the quarter ended June 30th, 2026. I'm Richard Cathcart, Senior Director of Investor Relations.

Richard Cathcart: Hello, everyone. Good evening, and thank you for joining MercadoLibre's conference call for the quarter ended 30 June 2026. I'm Richard Cathcart, senior director of investor relations, and I'm joined this evening by Ariel Szarfsztejn, our CEO; Martin de los Santos, our CFO; and Osvaldo Giménez, President of Fintech. Tonight's format will be slightly different. I'll start by handing over to Martin for a few high-level opening remarks, and then we'll head straight into the Q&A. Before we do that, I would like to remind you that management may make or refer to forward-looking statements and non-GAAP measures. Please refer to the disclaimer on screen, which is also available in our earnings materials on our investor relations website. Please note that this call is being recorded and a replay will be made available on our investor relations website as well.

Speaker #1: And I'm joined this evening by Ariel Sharfstein, our CEO, Martín de los Santos, our CFO, and Osvaldo Jiménez, President of FinTech. Tonight's format will be slightly different.

Speaker #1: I'll start by handing over to Martín for a few high-level opening remarks, and then we'll head straight into the Q&A. Before we do that, I would like to remind you that management may make or refer to forward-looking statements and non-GAAP measures, so please refer to the disclaimer on screen which is also available in our earnings materials on our investor relations website.

Speaker #1: Please note that this call is being recorded, and a replay will be made available on our investor relations website, as well. With that, I'll pass the call over to Martín de los Santos, our CFO.

Richard Cathcart: With that, I'll pass the call over to Martin de los Santos, our CFO.

Speaker #2: Good afternoon. And thank you for joining us. MERCADOLIBRE delivered another strong quarter in Q2 2026. Net revenue surpassed $10 billion for the first time, growing 50% year on year.

Martin de los Santos: Good afternoon and thank you for joining us. MercadoLibre delivered another strong quarter in Q2 2026. Net revenue surpassed $10 billion for the first time, growing 50% year on year. Income from operations was $683 million, with a margin of 6.7%, broadly in line with last quarter, and the result of a deliberate choice to continue prioritizing investment in long-term engagement, growth, and scale over near-term profitability. Before turning to a few details on this quarter's results, I want to spend a few minutes on what we've learned one year on from the decision we took last year to lower the free shipping threshold in Brazil. In Brazil, items per buyer grew 19% year on year in Q2, despite the fact that we've been adding large numbers of new buyers who typically start out purchasing far less than our average user.

Speaker #2: Income from operations was $683 million, with a margin of 6.7%, broadly in line with last quarter, and the result of a deliberate choice to continue prioritizing investment in long-term engagement, growth, and scale over near-term profitability.

Speaker #2: Before turning to a few details on this quarter's results, I want to spend a few minutes on what we've learned one year on from the decision we took last year to lower the free shipping threshold in Brazil.

Speaker #2: In Brazil, items per buyer grew 19% year on year in Q2, despite the fact that we've been adding large numbers of new buyers, who typically start out purchasing far less than our average user.

Speaker #2: That's a sign of changed behavior, not just a bigger audience. It shows existing users engaging more deeply with us, not simply more people showing up.

Martin de los Santos: That's a sign of changed behavior, not just a bigger audience. It shows existing users engaging more deeply with us, not simply more people showing up. Conversion in Brazil is up 1.1 percentage points year on year. This wasn't an incremental gain, it was a step change, and it has proven sustainable for a full year. The ratio of daily to monthly active users has inflected too, with daily actives growing faster every single quarter. Since the free shipping threshold was lowered and new buyer cohorts who joined after the change are a year on purchasing more items across more categories with higher retention than the cohorts that came before them. This is not an isolated case. Across our business, we see the same pattern. Users who engage more deeply with us become dramatically more valuable.

Speaker #2: Conversion in Brazil is up 1.1% points year on year. And this wasn't an incremental gain; it was a step change and it has proven sustainable for a full year.

Speaker #2: The ratio of daily to monthly active users has inflected too. With daily actives growing faster every single quarter since the free shipping threshold was lowered, and new buyer cohorts who joined after the change are a year on purchasing more items across more categories, with higher retention than the cohorts that came before them.

Speaker #2: This is not an isolated case. Across our business, we see the same pattern. Users who engage more deeply with us become dramatically more valuable.

Speaker #2: The clearest evidence is what we call ecosystemic users, those who use both our marketplace and Mercado Pago. Not just one or the other. These users generate meaningfully more GMV, purchase across a much wider range of categories, and engage far more deeply with our fintech products.

Martin de los Santos: The clearest evidence is what we call ecosystemic users, those who use both our marketplace and Mercado Pago, not just one or the other. These users generate meaningfully more GMV, purchase across a much wider range of categories, and engage far more deeply with our fintech products. Most importantly, they are dramatically more profitable. Contribution profit per ecosystemic user is multiples of the sum of a marketplace only user and a fintech only user. That is why we keep investing the way we do. We are changing behavior and building habits we believe will drive this business' profitability for years to come. With that strategic context in mind, I now would like to turn to three topics we believe are top of mind for investors, and where we think it is worth spending a few additional minutes. First, our credit business.

Speaker #2: Most importantly, they are dramatically more profitable. Contribution profit per ecosystemic user is multiples of the sum of a marketplace-only user and a fintech-only user.

Speaker #2: That is why we keep investing the way we do. We are changing behavior and building habits we believe will drive this business's profitability for years to come.

Speaker #2: With that strategic context in mind, I would now like to turn to three topics that we believe are top of mind for investors, and where we think it is worth spending a few additional minutes.

Speaker #2: First, our credit business. Our credit portfolio reached 16.4 billion dollars in Q2, growing 75% year on year. We have achieved this growth alongside solid asset quality, across the portfolio.

Martin de los Santos: Our credit portfolio reached $16.4 billion in Q2, growing 75% year on year. We have achieved this growth alongside solid asset quality across the portfolio, which reflects our disciplined approach to risk management as we scale and the shift towards lower risk users in recent years. Our 15 to 90-day NPL in Q2 was 7.0% for the total portfolio and 4.6% for the credit card specifically, both close to historical lows. NIM improved from 18% in Q1 2026 to 21% in Q2 2026, with gains in our three largest markets. This includes Brazil, where spreads in our consumer portfolio recovered as provisions normalized. NPLs in Brazil were broadly stable year on year. These results are not coincidental. They reflect the deliberate move up market in our consumer and merchant credit portfolios and the scaling of our credit card, which we only offer to lower risk users.

Speaker #2: Which reflects our disciplined approach to risk management as we scale, and the shift towards lower-risk users in recent years. Our 15 to 90-day MPL in Q2 was 7.0% for the total portfolio, and 4.6% for the credit card specifically, both close to historical lows.

Speaker #2: Improved from 18% in Q1 2026 to 21% in Q2 2026, with gains in our three largest markets. This includes Brazil, where spreads in our consumer portfolio recovered as provisions normalized. MPLs in Brazil were broadly stable year on year.

Speaker #2: This results are not coincidental. They reflect the deliberate move-up market in our consumer and merchant credit portfolios, and the scaling of our credit card, which we only offer to lower-risk users.

Speaker #2: This is highly synergistic with our marketplace, where we have a large base of high-quality engaged users to draw from as we continue to grow the book.

Martin de los Santos: This is highly synergistic with our marketplace, where we have a large base of high-quality engaged users to draw from as we continue to grow the book. Second, a quick word on margins. This quarter's EBIT margin of 6.7% was down 550 basis points year on year as we continue to prioritize long-term strategic investments over short-term profitability. These investments are consistent with the areas of focus we have described in previous quarters. On a sequential basis, our margin was broadly stable. This is a function of stronger profitability in credit, particularly in the Brazil consumer portfolio, where provisions normalized after a spike in Q1. This was offset by margin compression in acquiring, primarily in Mexico, and incremental investments in commerce. Finally, on cash flow. In Q2, we continued to see the underlying cash generation strength of the business.

Speaker #2: Second, a quick word on margins. This quarter's EBIT margin of 6.7% was down 550 basis points year on year, as we continue to prioritize long-term strategic investments over short-term profitability.

Speaker #2: These investments are consistent with the areas of focus we have described in previous quarters. On a sequential basis, our margin was broadly stable. This is a function of stronger profitability in credit, particularly in the Brazil consumer portfolio, where provisions normalized after a spike in Q1.

Speaker #2: This was offset by margin compression in acquiring, primarily in Mexico, and incremental investments in commerce. Finally, on cash flow. In Q2, we continued to see the underlying cash generation strength of the business.

Speaker #2: We generated 240 million dollars in adjusted free cash flow for the quarter, even after absorbing higher capital expenditure of 441 million dollars, and investing 2.1 billion dollars into the growth of our credit book.

Martin de los Santos: We generated $214 million in adjusted free cash flow for the quarter, even after absorbing higher capital expenditure of $441 million and investing $2.1 billion into the growth of our credit book. Our credit book continues to be very profitable. It also plays a key role in engagement across the ecosystem. It's this overall strength, strong cash generation, robust profitability, and a healthy balance sheet that gives us the confidence to keep investing at the pace we are. With that, we'll open it up for your questions.

Speaker #2: Our credit book continues to be very profitable, and it also plays a key role in engagement across the ecosystem. It's this overall strength, strong cash generation, robust profitability, and a healthy balance sheet that gives us the confidence to keep investing at the pace we are.

Speaker #2: With that, we'll open it up for your questions.

Speaker #1: Thank you. We will now begin the analyst question-and-answer session. To join the session queue, you may press star, then 1, on your telephone keypad.

Operator 2: Thank you. We will now begin the analyst question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. Please limit yourself to one question. If you have any further questions, you may re-enter the question queue. The first question comes from Irma Sgarz with Goldman Sachs. Please go ahead.

Operator: Thank you. We will now begin the analyst question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. Please limit yourself to one question. If you have any further questions, you may re-enter the question queue. The first question comes from Irma Sgarz with Goldman Sachs. Please go ahead.

Speaker #1: You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2.

Speaker #1: Please limit yourself to one question, and if you have any further questions, you may re-enter the question queue. The first question comes from Irmas Garth with Goldman Sachs.

Speaker #1: Please go ahead.

Speaker #3: Yes, hi. Thank you very much for the opportunity to ask my question, and thanks also for all the detail in the shareholder letter on the engagement metrics across the ecosystem; very interesting.

Irma Sgarz: Yes. Hi. Thank you very much for the opportunity to ask my question. Thanks also for all the detail in the shareholder letter on the engagement metrics across the ecosystem. Very interesting detail that you provided there. However, I'll just be obliged to ask you about margin for one second. There was a bit more quarter over quarter gross margin compression than we had perhaps expected. Thank you for also laying out the sources that drove this in the shareholder letter. Now, when I think through each of those, the first one I think was well mapped. The second and the third one felt a little bit more incrementally new. My question would be somewhat twofold. Firstly, how much scope do you see to adjust pricing to pass these cost pressures through to consumers?

Speaker #3: Detail that you provided there. However, I'll just be obliged to ask you about margin. For one second, there was a bit more quarter-over-quarter gross margin compression than we had perhaps expected.

Speaker #3: So thank you for also laying out the sources that drove this in the shareholder letter. Now, when I think through each of those, the first one, I think, was well mapped.

Speaker #3: The second and the third one felt a little bit more incrementally new. So my question would be, somewhat twofold. Firstly, how much scope do you see to adjust pricing to pass these cost pressures through to consumers?

Speaker #3: I think there's some in acquiring, there's some related to memory cost, but you'd also do mention higher shipping costs that weren't fully offset by revenue, so I was wondering if that's gas prices or other pressures in the network.

Irma Sgarz: I think there's some in acquiring, there's some related to memory costs, but you also do mention higher shipping costs that weren't fully offset by revenue. I was wondering if that's gas prices or other pressures in the network, and whether you saw scope to pass that through to customers. Secondly, whether those two incremental headwinds either in nature or magnitude were something that you were already factoring in when you last spoke to us in early May, and you had sort of suggested that you were expecting a similar margin level consistent with Q1. Thank you.

Speaker #3: And whether you saw scope to pass that through to customers. And then secondly, whether those two incremental headwinds either in nature or magnitude were something that you were already factoring in when you last spoke to us in early May and you had sort of suggested that you were expecting a similar margin level consistent with one queue.

Speaker #3: Thank you.

Speaker #4: Hi, Irma is Martin here. How are you? Thank you for your question. I think the best way to answer your question is to look at sequential margins as you can see is pretty much in line with Q1.

Martin de los Santos: Hi, it's Martin here. How are you? Thank you for your question. I think the best way to answer your question is to look at sequential margins. As you can see, it's pretty much in line with Q1, but there are two things moving in opposite directions there. The first one was an improvement in margins in the credit business, as we discussed on the letter. Last quarter, there was a spike on provisions. It was a temporary spike. We explained that last quarter, and now it has come back to normal spreads. They're a very profitable business. That contributed to margins. That was offset, and I will go in order of importance. It was offset by some investments that we have made in Brazil in commerce.

Speaker #4: There are two things moving in opposite directions there. The first one was an improvement in margins in the credit business, as letter. Last quarter, there was a spike on provisions.

Speaker #4: It was a temporary spike. We explained that last quarter, and now it has come back to normal spreads. It's a very profitable business. So that contributed to margins.

Speaker #4: That was offset and I will go in order of importance. It was offset by some investments that we had made in Brazil in commerce we discussed this in the previous quarter, recall, where we lower certain take rates to in certain verticals we lower take rates and we offer discounts to consumers buying and paying with PIX.

Martin de los Santos: We discussed this in the previous quarterly call, where we lower certain take rates to, in certain verticals, we lower take rates and we offer discounts to consumers buying and paying with Pix. That was a strategic initiative that we did in Brazil. We have done that in the past, and it has proven to have positive results, but it generated some margin compression. In addition to that, there was some margin compression on the acquiring business. Two things there. One is the fact that the devices have an increase in cost of devices because of higher cost of chips in the industry. That's something that's there to stay, and we'll monitor that situation as well. There was a one-off charge because we, in Mexico, we restocked a significant volume in terms of devices, and that's because we are growing very fast in Mexico.

Speaker #4: That was a strategic initiative that we did in Brazil. We have done that in the past, and it has proven to have positive results, but it generated some margin compression.

Speaker #4: In addition to that, there was some margin compression on the acquiring business. Two things there. One is the fact that the devices have an increase in cost of devices because of higher cost of chips in the industry.

Speaker #4: So that's something that's there to stay. We would monitor that situation as well. And then there was a one-off charge because we in Mexico we restocked significant volume in terms of devices, and that's because we are growing very fast in Mexico.

Speaker #4: We see a big opportunity to continue growing, and as you know, as we sell those devices at a loss, we need to book the losses upfront.

Martin de los Santos: We see a big opportunity to continue growing. As you know, as we sell those devices at a loss, we need to book the losses up front. When we increase the stock, there's a one-off compressional margin. That will compensate throughout the rest of the year. The last point I think you are addressing is the cost of the energy cost. We've seen some cost increases in terms of logistics because of energy costs. Some of them we pass on to our users, and some we elected to absorb ourselves. There is some margin compression. It's not significant, but there's slight margin compression there as well.

Speaker #4: So when we increase the stock, there's a one-off compression of margin. So that will compensate throughout the rest of the year. And the last point that you're addressing is the cost of the energy cost.

Speaker #4: We've seen some costs increases in terms of logistics because of energy costs. Some of them we pass on to our users and some we elected to absorb ourselves.

Speaker #4: So there is some margin compression. It's not significant, but it's a slight margin compression there as well.

Speaker #2: And building on Martin's comment regarding POS devices and us not increasing the prices, that was driven by two things. On the one hand, the payback periods continue to be in line with what we expected, and therefore there was no need to do that.

Osvaldo Giménez: Building on Martin's comment regarding POS devices and us not increasing the prices, that was driven by two things. On the one hand, the payback periods continued to be in line with what we expected, and therefore, there was no need to do that. Also, our competitors did not raise their prices, so it didn't make sense given how fast we're growing and how fast we're gaining market share to raise our prices.

Speaker #2: And also our competitors did not raise their prices, so it didn't make sense given how fast we're growing and how fast we're gaining market share to raise our prices.

Speaker #4: Thank you.

Martin de los Santos: Thank you.

Speaker #1: The next question comes from Andrew Rubin with Morgan Stanley. Please go ahead.

Operator 2: The next question comes from Andrew Ruben with Morgan Stanley. Please go ahead.

Operator: The next question comes from Andrew Ruben with Morgan Stanley. Please go ahead.

Andrew Ruben: Hi. Thanks very much for the question. I'm interested in some dynamics around Brazil seller growth. You mentioned the acceleration to 29. I don't think you've mentioned that one before, just to level set what that was growing before the select discounts. More fundamentally, is there a profit drag from these new sellers? Maybe they were more likely to take up your promotions or maybe something structural about the new seller mix. Really what I'm trying to understand here is there an element of maturation on your platform where a new seller starts to sell more over time, the seller economics change over time, the way we think about buyer economics? Again, I think that was a new callout, the growth, so I'd like to understand how that plays in. Thank you.

Speaker #5: Hi. Thanks very much for the question. I'm interested in some dynamics around Brazil's seller growth. You mentioned the acceleration to 29. I don't think you've mentioned that one before, so just to level set what that was growing before the Select discounts.

Speaker #5: And more fundamentally, is there a profit drag from these new sellers? Maybe they were more likely to take up your promotions or maybe something structural.

Speaker #5: About the new seller mix, and really what I'm trying to understand here is: is there an element of maturation on your platform where a new seller starts to sell more over time, the seller economics change over time, and the way we think about buyer economics?

Speaker #5: Again, I think that was a new callout, the growth, so I'd like to understand how that plays in. Thank you.

Speaker #4: Hey, Andrew. Ariel here great to hear you. So yeah, I think what we did in Brazil with take rates goes back to the basics of e-commerce, right?

Martin de los Santos: Hey, Andrew. Ariel here. Great to hear you. Yeah, I think what we did in Brazil with take rates goes back to the basics of e-commerce, right? When consumers are deciding where to shop, they are basically looking for the broadest selection at the best possible price with the fastest shipping and the best financing. Clearly, getting the right selection is a key part of our strategy. That's why we've been doing 1P, that's why we've been doing CBT, and that's why this quarter, as we did back in 2024 and 2025, we decided to lower seller take rates. We've already proven that lever, and we've consistently seen that every time we lower take rates, we get an acceleration in effective or successful sellers in our platform.

Ariel Szarfsztejn: Hey, Andrew. Ariel here. Great to hear you. Yeah, I think what we did in Brazil with take rates goes back to the basics of e-commerce, right? When consumers are deciding where to shop, they are basically looking for the broadest selection at the best possible price with the fastest shipping and the best financing. Clearly, getting the right selection is a key part of our strategy. That's why we've been doing 1P, that's why we've been doing CBT, and that's why this quarter, as we did back in 2024 and 2025, we decided to lower seller take rates. We've already proven that lever, and we've consistently seen that every time we lower take rates, we get an acceleration in effective or successful sellers in our platform.

Speaker #4: So when consumers are deciding where to shop, they are basically looking for the broadest selection at the best possible price with the fastest shipping and the best financing.

Speaker #4: And clearly, getting the right selection is a key part of our strategy. That's why we've been doing one P, that's why we've been doing CBT, and that's why this quarter, as we did back in 2024 and 2025, we decided to lower seller take rates.

Speaker #4: We've already proven that lever and we've consistently seen that every time we lower take rates, we get an acceleration. In effective or successful sellers in our platform.

Speaker #4: Clearly, given everything that we've been improving in terms of value proposition in Brazil, the trend of growth in successful sellers has accelerated over the last year, and particularly over the last quarter with the initiative that we just mentioned.

Martin de los Santos: Clearly, given everything that we've been improving in terms of value proposition in Brazil, the trend of growth in successful sellers has accelerated over the last year, and particularly over the last quarter with the initiative that we just mentioned. In terms of unit economics and profitability coming from the acceleration of sellers, I would say there's nothing big to call out. While there are some programs in order to get seller to scale and so on, there's nothing really affecting our margins on that one.

Ariel Szarfsztejn: Clearly, given everything that we've been improving in terms of value proposition in Brazil, the trend of growth in successful sellers has accelerated over the last year, and particularly over the last quarter with the initiative that we just mentioned. In terms of unit economics and profitability coming from the acceleration of sellers, I would say there's nothing big to call out. While there are some programs in order to get seller to scale and so on, there's nothing really affecting our margins on that one.

Speaker #4: In terms of unit economics and profitability coming from the acceleration of sellers, I would say there's nothing big to call out. So while there are some programs in order to get seller to scale and so on, there's nothing really affecting our margins on that one.

Speaker #1: The next question comes from Bob Ford with Bank of America. Please go ahead.

Operator 2: The next question comes from Robert Ford with Bank of America. Please go ahead.

Operator: The next question comes from Robert Ford with Bank of America. Please go ahead.

Speaker #5: Thank you, and good evening, everybody. Ariel, in the letter to shareholders and in the comments, you touch on some very compelling engagement and ecosystemic behaviors.

Robert Ford: Thank you. Good evening, everybody.

Bob Ford: Thank you. Good evening, everybody.

Robert Ford: Ariel, in the letter to shareholders and in the comments, you touch on some very compelling engagement in ecosystemic behaviors. What's your early read on your new gamification and points program in Brazil? Could you also touch on some of the behavioral implications from your agentic shopping pilot in terms of search, conversion, frequency, ad click-through rates, and your ability to promote more ecosystemic behavior from the engagement that you get agentically? Thank you.

Bob Ford: Ariel, in the letter to shareholders and in the comments, you touch on some very compelling engagement in ecosystemic behaviors. What's your early read on your new gamification and points program in Brazil? Could you also touch on some of the behavioral implications from your agentic shopping pilot in terms of search, conversion, frequency, ad click-through rates, and your ability to promote more ecosystemic behavior from the engagement that you get agentically? Thank you.

Speaker #5: What's your early read on your new gamification and points program in Brazil? And could you also touch on some of the behavioral implications from your agentic shopping pilot in terms of search, conversion, frequency, ad click-through rates, and your ability to promote more ecosystemic behavior from the engagement that you get agentically?

Speaker #5: Thank you.

Speaker #4: Hey, Bob. So I think it's too early to comment on the gamification initiatives and points. We've already only rolled them out as an A/B for some time.

Ariel Szarfsztejn: Hey, Bob. I think it's too early to comment on the gamification initiatives and points. We've only rolled them out as an A/B for some time, so it's early to actually make a point. I would say the impact so far is positive. We see increased engagement coming from those users who do engage with the proposal, but nothing to share. On the bigger picture, I would say agentic, there are two big things we're doing in commerce with agentic. On the one hand is improving our search through AI, that's proving to have positive results, both in terms of conversion rates in the marketplace, items sold, and so on, but also on our advertising platform.

Speaker #4: So it's early to actually make a point. I would say the impact so far is positive. We see increased engagement coming from those users who do engage with the proposal, but nothing to share.

Speaker #4: On the bigger picture, I would say agentic there are two big things we're doing in commerce with agentic. On the one hand, is improving our search through AI, and that's proving to have positive results.

Speaker #4: Both in terms of conversion rates in the marketplace, items sold, and so on, but also on our advertising platform, the more AI we deploy to search, the better context we provide, the better ads we are able to pick, choose, and display to our consumers, and the more CTR that we get from those ads.

Ariel Szarfsztejn: The more AI we deploy to search, the better context we provide, the better ads we are able to pick, choose, and display to our consumers, and the more CTR that we get from those ads, so higher revenue. On the second initiative, which is our shopping assistant, we are just A/B testing that one, so nothing to really share in terms of engagement and results. We're very excited with the early results we're seeing on the shopping assistant, which is on live for some consumers in the marketplace. Taking a step back and picking up your point on engagement, I would say that we look at engagement with a broader view. The bigger and the more engaging our marketplace become, the better chances we have of building the largest digital bank in Latin America.

Speaker #4: So higher revenue. On the second initiative, which is our shopping assistant, we are just A/B testing that one. So nothing to really share in terms of engagement and results.

Speaker #4: But we're very excited with the early results. We're seeing on the shopping assistant, which is on live for some consumers in the marketplace. Taking a step back and picking up your point on engagement, I would say that we'll look at engagement from with a broader view so the bigger and the more engaging our marketplace become, the better chances we have of building the largest digital bank in Latin America.

Speaker #4: So, the bigger the marketplace and the better the marketplace, the better our Mercado Pago application works. Conversely, the better Mercado Pago becomes, the more appealing our marketplace becomes to our users, too.

Ariel Szarfsztejn: The bigger the marketplace and the better the marketplace, the better our Mercado Pago application works. Conversely, the better Mercado Pago becomes, the more appealing our marketplace becomes to our users, too. Basically because users find the best financing and payments alternative right at the place where they are already shopping. Basically, we see very few companies anywhere in the world who operate at this intersection of commerce and fintech at the scale that we do it in Latin America, and that's really creating a unique flywheel that is very difficult to replicate for any other player across the region. We are very satisfied, and that's why we've been so precise on highlighting engagement this quarter. We think this is a unique competitive advantage that we have.

Speaker #4: Basically, because users find the best financing and payment alternatives right at the place where they are already shopping. And we see very few companies anywhere in the world who operate at this intersection of commerce and fintech at the scale that we do in Latin America.

Speaker #4: And that's really creating a unique flywheel that is very difficult to replicate for any other player across the region. So we are very satisfied and that's why we've been so precise on highlighting engagement this quarter.

Speaker #4: We think this is a unique competitive advantage that we have and basically. Results that every single one of the investments that we have been making both across commerce and fintech is playing on favor of making that flywheel turn faster and faster.

Ariel Szarfsztejn: Basically, the results that every single one of the investments that we have been making, both across commerce and Fintech, is playing in favor of making that flywheel turn faster and faster.

Speaker #1: The next question comes from Marcello Santos with JP Morgan. Please go ahead.

Operator 2: The next question comes from Marcelo Santos with J.P. Morgan. Please go ahead.

Operator: The next question comes from Marcelo Santos with J.P. Morgan. Please go ahead.

Speaker #2: Hi, good evening. Thanks for taking my question. Could you discuss a bit how they ramp up of credit card in Argentina is going? Are you happy with the early results?

Marcelo Santos: Good evening. Thanks for taking my question. Could you discuss a bit how the ramp-up of credit card in Argentina is going? Are you happy with the early results? Is it progressing well? Just anything would be great. Thank you.

Speaker #2: Is it progressing well? Just anything would be great. Thank you.

Speaker #4: Hi Marcello. We are very excited with how the credit card in Argentina is going. As we know, we only started issuing cards three quarters ago in roughly around September last year.

Ariel Szarfsztejn: Hi, Marcelo. We are very excited with how the credit card in Argentina is going. As we know, we only started issuing cards three quarters ago, roughly around September last year, and we have seen a lot of demand, and we are seeing a significant adoption and use. It's significant, for example, how much people are using the card to pay on the MercadoLibre platforms. It's contributing to the amount of payments with Mercado Pago, means of payments within the platform. It's still early to talk about payback periods because it's only nine months in the first cohort. However, we are glad to see that the payments are in line to what we expected when we started issuing the card, so there have been no surprises there.

Osvaldo Giménez: Hi, Marcelo. We are very excited with how the credit card in Argentina is going. As we know, we only started issuing cards three quarters ago, roughly around September last year, and we have seen a lot of demand, and we are seeing a significant adoption and use. It's significant, for example, how much people are using the card to pay on the MercadoLibre platforms. It's contributing to the amount of payments with Mercado Pago, means of payments within the platform. It's still early to talk about payback periods because it's only nine months in the first cohort. However, we are glad to see that the payments are in line to what we expected when we started issuing the card, so there have been no surprises there.

Speaker #4: And we have seen a lot of demand and we are seeing a significant adoption and use and it's significant, for example, how much people are using the card to pay on the Mercado Libre platforms.

Speaker #4: It's contributing to the amount of payments with Mercado Pago means of payments within the platform. Still early to talk about payback period because it's only nine months in the first cohort.

Speaker #4: However, we are glad to see that the payments are in line with what we expected when we started issuing the cards, so there have been no surprises there.

Speaker #4: And even in an environment where some other financial institutions are concerned about the credit cycle in Argentina, we are very happy with the issues we have had in Argentina we think that given our penetration in the market where the majority of the country use Mercado Pago every day or every month and every day, we have been able to cherry-pick those users which we deem to be less risky.

Ariel Szarfsztejn: Even in an environment where some other financial institutions are concerned about the credit cycle in Argentina, we are very happy with the issues we have had in Argentina. We think that given our penetration in the market, where the majority of the country use Mercado Pago every day or every month and every day, we have been able to cherry-pick those users which we deem to be less risky. In general, I would say we are very happy and that this strengthens both the marketplace and Mercado Pago and the presence Mercado Pago has in Argentina.

Osvaldo Giménez: Even in an environment where some other financial institutions are concerned about the credit cycle in Argentina, we are very happy with the issues we have had in Argentina. We think that given our penetration in the market, where the majority of the country use Mercado Pago every day or every month and every day, we have been able to cherry-pick those users which we deem to be less risky. In general, I would say we are very happy and that this strengthens both the marketplace and Mercado Pago and the presence Mercado Pago has in Argentina.

Speaker #4: So in general, I would say we are very happy and that this strengthens both the marketplace and Mercado Pago and the presence of Mercado Pago has in Argentina.

Speaker #2: Okay. Thank you very much.

Marcelo Santos: Okay. Thank you very much.

Speaker #1: The next question comes from Rodrigo Gastin with Itaú BBA. Please go ahead.

Operator 2: The next question comes from Rodrigo Castin with Itaú BBA. Please go ahead.

Operator: The next question comes from Rodrigo Castin with Itaú BBA. Please go ahead.

Speaker #5: Yeah. Good evening, guys. Just a quick question here on the credit cycle in Brazil. Investors quite concerned about the potential deterioration during the second half of the year in 2027.

Rodrigo Castin: Yeah. Good evening, guys. Just a quick question here on the credit cycle in Brazil. Investors are quite concerned about the potential deterioration during the H2 of the year in 2027. Just trying to understand here two parts of my question. Number one, if you understand that so far so good, in other words, when you look at most of the products at the NPL of these products, so far no

Rodrigo Gastim: Yeah. Good evening, guys. Just a quick question here on the credit cycle in Brazil. Investors are quite concerned about the potential deterioration during the H2 of the year in 2027. Just trying to understand here two parts of my question. Number one, if you understand that so far so good, in other words, when you look at most of the products at the NPL of these products, so far no important deterioration or signs of deterioration? That's the first part. The second one is what can you guys proactively do to protect yourselves from an eventual deterioration of the credit cycle, something that you cannot control. What you were doing here? That would be my question. Thank you very much.

Speaker #5: So just trying to understand here two part of my question. So number one, if you understand that so far so good, in other words, when you look at the most of the products at the NPL of this product, so far no important deterioration or signs of deterioration, that's the first part.

Rodrigo Castin: important deterioration or signs of deterioration? That's the first part. The second one is what can you guys proactively do to protect yourselves from an eventual deterioration of the credit cycle, something that you cannot control. What you were doing here? That would be my question. Thank you very much.

Speaker #5: And the second one is what can you guys proactively do to protect yourselves from an eventual deterioration in the credit cycle, something that you cannot control?

Speaker #5: So what you were doing here, that would be my question. Thank you very much.

Speaker #4: Hi Rodrigo. Yes, I confirm that so far we are not seeing any deceleration or deterioration of the credit booking in Brazil. If you look at NPLs, they are roughly in line to what they were a year ago and they are even better.

Ariel Szarfsztejn: Hi, Rodrigo. Yes, I confirm that so far we are not seeing any deceleration or deterioration of the credit booking in Brazil. If you look at NPLs, they are roughly in line to what they were a year ago, and they are even better. NPLs are even better than they were last quarter. They are, I would say, nearly bottoms of NPLs that we have had. We don't see any deterioration. I think that we have been very, I would say, conservative in terms of whom we issue credits to. With regards to what we expect for the future, I would say that we have been through a downgrade cycle in the past in Brazil, and we have been through, right now, about adverse macro conditions in Argentina, and in both cases, we have been cautious.

Osvaldo Giménez: Hi, Rodrigo. Yes, I confirm that so far we are not seeing any deceleration or deterioration of the credit booking in Brazil. If you look at NPLs, they are roughly in line to what they were a year ago, and they are even better. NPLs are even better than they were last quarter. They are, I would say, nearly bottoms of NPLs that we have had. We don't see any deterioration. I think that we have been very, I would say, conservative in terms of whom we issue credits to. With regards to what we expect for the future, I would say that we have been through a downgrade cycle in the past in Brazil, and we have been through, right now, about adverse macro conditions in Argentina, and in both cases, we have been cautious.

Speaker #4: NPLs are even better than they were last quarter. So they are, I'd say, nearly bottoms of NPLs that we have had. So we don't see any deterioration.

Speaker #4: I think that we have been very I would say conservative in terms of whom we issue credits to. And with regards to what we expect for the future, I would say that we have been through a down credit cycle in the past in Brazil and we have been through right now about adverse macro conditions in Argentina.

Speaker #4: And in both cases, we have been cautious, and when we thought that we had to curtail the number of available lines or the lines of credit, we have done so.

Ariel Szarfsztejn: When we thought that we had to curtail the number of available lines or the lines of credit, we have done so. At this point, we are confident that the models are working better than they were in the past.

Osvaldo Giménez: When we thought that we had to curtail the number of available lines or the lines of credit, we have done so. At this point, we are confident that the models are working better than they were in the past.

Speaker #4: At this point, we are confident that the models are working better than they were in the past.

Speaker #6: Just to add on Osi's comment, I think, taking a step back, what you see in terms of credit and deterioration is actually the opposite.

Martin de los Santos: Just to add on Ossi's comment. I think taking a step back, what you see in terms of credit and deterioration, it's actually the opposite. If you look at across the region, across products, we are almost at our all-time low NPLs for every single product and region. I think that's a testament to, A, our risk management policies and how we are able, and we are prioritizing risk at the moment of issuance. B, the power of our technology, right? We are a tech company, and we've deployed lots of technology in underwriting, and the combination of the two has been vital for us to be successful.

Ariel Szarfsztejn: Just to add on Ossi's comment. I think taking a step back, what you see in terms of credit and deterioration, it's actually the opposite. If you look at across the region, across products, we are almost at our all-time low NPLs for every single product and region. I think that's a testament to, A, our risk management policies and how we are able, and we are prioritizing risk at the moment of issuance. B, the power of our technology, right? We are a tech company, and we've deployed lots of technology in underwriting, and the combination of the two has been vital for us to be successful.

Speaker #6: I mean, if you look across the region, across products, we are almost at our all-time low NPLs for every single product and region. And I think that's a testament to A, our risk management policies and how we are able and we are prioritizing risk at the moment of issuance.

Speaker #6: And B, the power of our technology, right? We are a tech company and we've deployed lots of technology in underwriting and the combination of the two has been vital.

Speaker #6: For us to be successful.

Speaker #1: The next question comes from Pedro Pinto with Brandesco BBI. Please go ahead.

Operator 2: The next question comes from Pedro Pinto with Bradesco BBI. Please go ahead.

Operator: The next question comes from Pedro Pinto with Bradesco BBI. Please go ahead.

Speaker #5: Hi everyone. Thanks for taking my question. My question is about now that we completed one year since the implementation of the lower free shipping threshold in Brazil, which has been pretty effective in GMV acceleration in Brazil.

Pedro Pinto: Hi, everyone. Thanks for taking my question. My question is about now that we completed one year since the implementation of the lower free shipping threshold in Brazil, which has been pretty effective in GMV acceleration in Brazil, very clearly mentioned in the letter. Now the comps get tougher. Would you guys plan additional investments to continue consolidating the market? What would be the next frontier for Brazil Commerce at this point? I don't know if it's quick commerce, social commerce, pharmacy category. What should we expect as a priority strategy-wise for Brazil Commerce from this point onwards for momentum to persist.

Speaker #5: Very clearly, I mentioned in the letter, now that the comps get tougher, would you guys plan additional investments to continue consolidating the market? What would be the next frontier for Brazil commerce at this point?

Speaker #5: I don't know if it's quick commerce, social commerce, pharmacy category, what should we expect as a priority strategy-wise for Brazil commerce from this point onwards for momentum to persist?

Speaker #7: Hi Pedro, it's Martin here. How are you? We are, as we described in the letter. I think the results of lowering the free shipping threshold in Brazil after one year are amazing.

Martin de los Santos: Hi, Pedro, it's Martin here. How are you? As we described in the letter, I think the results of the lowering the free shipping threshold in Brazil after one year are amazing. We are seeing tremendous growth. If you look at items growing at 56%, they were growing 26 or half of that rate a year ago. Engagement with the platform is incredible in terms of, the number that are most amazing is conversion. We have been growing significantly in terms of traffic, and on top of that, we grew our conversion by 1.1 point year on year. At the scale of Mercado Libre, that's enormous in terms of volume. Also, vibrancy and frequency on our platform, daily active users growing much faster than monthly active users.

Speaker #7: I mean, we are seeing tremendous growth. If you look at items growing at 56%, they were growing 26%, or half of that rate, a year ago.

Speaker #7: Engagement with the platform is incredible in terms of the number that are most amazing is conversion. I mean, we have been growing significantly in terms of traffic, but on top of that, we grew our conversion by 1.1 point year on year.

Speaker #7: At the scale of Mercado Libre, that's enormous in terms of volume. But also, vibrancy and frequency on our platform, daily active users growing much faster than monthly active users.

Speaker #7: We're getting more users are also buying on more verticals or becoming more engaged in different verticals within the ecosystem, buying more times with more frequency.

Martin de los Santos: We're getting more users are also buying on more verticals or becoming more engaged in different verticals within the ecosystem, buying more times with more frequency. In Brazil, frequency of purchase increased by 20%, number of transactions, number of items for users. All the metrics that we wanted to influence were there. Of course, like you said, comps become tougher, we don't make investment decisions based on comps, obviously. We make them based on the merits of the areas where we're investing. We're making sure that those are strategic to our marketplace. They contribute to engagement and to growth, and they contribute to strengthening our market position, our leadership position to capture this long-term opportunity that we have in front of us.

Speaker #7: In Brazil, frequency of purchase increased by 20%—number of transactions per number of items per user. So all the metrics that we wanted to influence were there.

Speaker #7: Of course, like you said, comps become tougher, but we don't make investment decisions based on comps, obviously. We make them based on the merits of the areas where we're investing.

Speaker #7: We're making sure that those are strategic to our marketplace. They contribute to engagement and to growth, and they contribute position and leadership position to capture these long-term opportunities that we have in front of us.

Speaker #7: Yeah, so just complementing Martin here. So, A, I would say that we've not seen a step change from one day to the other—that they would lower our free shipping threshold and then steady metrics in terms of engagement, conversion, and so on.

Ariel Szarfsztejn: Yeah. Just complementing Martin here. A, I would say that we've not seen a steep change from one day to the other. The day we lowered our free shipping threshold and then steady metrics in terms of engagement, conversion, and so on. The different effects that we've seen across our marketplace have been consistently improving quarter after quarter. With that, you can see the numbers from Q2, right? The result from this quarter already compare with a lot of the changes that we've implemented last year, and we're still growing very nicely. Picking up on Martin's point, we are not optimizing for growth. It's not that we will deploying one thing or the other in the future just for the sake of keeping growth high. We will just find whatever we think is needed in order to continue improving the value proposition for our consumers.

Speaker #7: The different effects that we've seen across our marketplace have been consistently improving quarter after quarter. And with that, you can see the numbers from Q2, right?

Speaker #7: The results from this quarter are already compared with most of the— a lot of the changes that we've implemented last year. And we're still growing very, very nicely.

Speaker #7: So picking up on Martin's point, we are not optimizing for growth. So it's not that we will deploying one thing or the other in the future just for the sake of keeping growth high.

Speaker #7: We will just find whatever we think is needed in order to continue improving the value proposition for our consumers. Of course, there are things that we like and we might test and so on, but it's not that we are making a step change in investments or strategies just for the sake of compounding versus last year changes.

Ariel Szarfsztejn: Of course, there are things that we like and we might test and so on, but it's not that we are making a steep change in investments or strategies just for the sake of compounding versus last year changes.

Speaker #5: It is very clear. Thank you, Ariel. Thank you, Martin.

Pedro Pinto: It is very clear. Thank you, Ariel. Thank you, Martin.

Speaker #1: The next question comes from Deepak Madhivanan with Canter Fitzgerald. Please go ahead.

Operator 2: The next question comes from Deepak Mathivanan with Cantor Fitzgerald. Please go ahead.

Operator: The next question comes from Deepak Mathivanan with Cantor Fitzgerald. Please go ahead.

Speaker #8: Hey guys. Thanks for taking the questions. Just wanted to follow up on EBIT margin. EBIT margin came in pretty much as you anticipated sequentially in two Q.

Deepak Mathivanan: Guys, thanks for taking the questions. Just wanted to follow up on EBIT margin. EBIT margin came in pretty much as you anticipated sequentially in Q2. It does seem like some of the investments were offset by improvements in NIM on the consumer credit side. Can you comment about the sustainability of margins at these levels in H2? Are you committed to making trade-off if potentially operating environment somewhat changes and becomes unfavorable? Then, perhaps a related one on AI cost. You rolled out Claude to employees last quarter. Can you talk about the usage and how the spend is ramping? What are some of the ways you're seeing benefit in the early days? Thank you so much.

Speaker #8: It does seem like some of the investments were offset by improvements in NIMO on the consumer credit side. Can you comment about the sustainability of margins at these levels in the second half?

Speaker #8: Are you committed to making trade-offs if the operating environment potentially changes and becomes unfavorable? And then, perhaps a related one on AI cost: you rolled out Claude to employees last quarter.

Speaker #8: Can you talk about the usage and how the spend is ramping? What are some of the ways you're seeing benefit in the early days?

Speaker #8: Thank you so much.

Speaker #7: Hi Martin here. I think if you look at margin sequentially, as I mentioned before, the main driver of margin improvement was the improvement that we saw on the portfolio of consumer credits in Brazil.

Martin de los Santos: It's Martin here. I think if you look at margin sequentially, as I mentioned before, the main driver of margin improvement was the improvement that we saw on the portfolio of consumer credits in Brazil. In addition to that, we've seen some scale, very strong scale in terms of growth in Brazil that enabled us to dilute fixed costs. As you've probably seen over the past several years, we have been diluting OpEx very nicely. In this particular quarter, we diluted OpEx by 2.5 points quarter-on-quarter. That's also contributing too. We elected to reinvest that margin into other areas of the business, as I explained before. I think the philosophy continues to be the same. We have some areas of the business that are delivering very strong profits and are growing very fast.

Speaker #7: And in addition to that, we've seen some scale is very strong scale in terms of growth in Brazil that enabled us to dilute fixed cost as you probably seen over the past several years, we have been diluting OPEX very nicely.

Speaker #7: And in this particular quarter, we diluted OPEX by two and a half points quarter on quarter. So that's also contributing to and we elected to reinvest that margin into other areas of the business as I explained before.

Speaker #7: And I think the philosophy continues to be the same. I mean, we will have some areas of the business that are delivering very strong profits and are growing very fast.

Speaker #7: If you look at our credit portfolio growing at 75% year on year, our advertising business growing 70 plus percent year on year, the acquiring business as well.

Martin de los Santos: If you look at our credit portfolio growing at 75% year-on-year, our advertising business growing 70-plus percent year-on-year, the acquiring business as well. We are continuing to deliver scale because of the growth that we are delivering consistently. We are electing to reinvest in areas of the business, as we discussed before, lowering the free shipping threshold, 1P, CBT, and so on. That philosophy will continue to be the same. Going forward, we invest in a very disciplined manner. We have engagement and growth targets for each initiative that we take on. More important than that, we have a clear path to profitability to those initiatives, and we measure against those, and we lever, we graduate the intensity of investments based on those results. That's the first part of your question. You ask about AI.

Speaker #7: We are continuing to deliver scale because of the growth that we are delivering. Consistently, so we are electing to reinvest in areas of the business as we discussed before lowering the free shipping threshold one PCBT and so on.

Speaker #7: So that philosophy will continue to be the same and going forward. We invest in a very disciplined manner. We have engagement and growth targets for each initiative that we take on.

Speaker #7: And more important than that, we have a clear path to profitability for those initiatives. And we measure against those, and we graduate the intensity of investments based on those results.

Speaker #7: So that's the first part of your question. Then, you ask about AI. We are very excited about AI. I mean, obviously, we are investing—more than a year ago, I think we invested about $80 million on AI this quarter compared to a year ago.

Martin de los Santos: We are very excited about AI. Obviously, we are investing more than a year ago. I think we invested about $80 million on AI this quarter compared to a year ago, but we are seeing very strong results. Let me break it down in a couple of ways. Consumer-facing, we have several initiatives that are paying out very nicely. We talked about the Mercado Pago AI agent, the seller assistant on Mercado Libre. Those continue to scale very nicely. In this quarter, we saw some of the latter, the app orchestrator that is increasing the engagement with our users, it grew by 66%, the usage of that tool. That is a way to get more sellers to our advertising platform, and it's helping us to grow the advertising business by 73% year-on-year.

Speaker #7: But we're seeing very strong results. I mean, if you look at it I mean, let me break it down in a couple of ways.

Speaker #7: Consumer-facing, we have several initiatives that are paying out very nicely. I mean, we talked about the Mercado Pago AI agent, the seller assistant on Mercado Libre.

Speaker #7: Those continue to scale very nicely. This quarter, we disclosed on the letter the ads orchestrator that is increasing the engagement with our users. It grew by 66%.

Speaker #7: The usage of that tool that is a way to get more is helping us to grow the advertising business by 73% year on year.

Martin de los Santos: I think Ari mentioned the AI tools that we deploy on our search engine in the five largest countries. It's important to mention that, of course, that increased the price, the cost, because we have to pay in advance now. When you put together the incremental volume that we sold, plus the incremental conversion and advertising, it more than pays the cost of that initiative. It is an initiative that has a positive return on that investment. That's a good example of AI contributing to profits. On the productivity side, I think in the past, we talked about customer service. As an example, 4 years ago, we used to have 10,000 reps on customer service. Today, we have 7,000 reps, even though the business grew by 3x in that period of time.

Speaker #7: We I think Ari mentioned the AI tool that we deploy on our search engine the five largest countries. And it's important to mention that, of course, that increased the price the cost because we had to pay a lens now.

Speaker #7: But when you put together the incremental volume that we sell plus the incremental conversion and advertising, it more than pays the cost of that initiative.

Speaker #7: So those initiative that has a positive return on that investment. So that's a good example of AI contributing to profits. Then on the productivity side, I think in the past we talked about customer service as an example.

Speaker #7: Four years ago, we used to have 10,000 reps in customer service. Today, we have 7,000 reps, even though the business has grown by 3x in that period of time.

Speaker #7: And that's because 90% of the interactions are done without a human participating on the issue. In product development, obviously, that's tremendous productivity gains. We have 20,000 developers that are using AI a year ago.

Martin de los Santos: That's because 90% of the interactions are done without a human participating on the issue. In product development, obviously, that's tremendous productivity gains. We have 20,000 developers that are using AI. 1 year ago, they were coding, they were helped by AI. Today, human-written code is the exception. All of the code or the majority of the code is done by AI. You can see that also flowing through our P&L. Product development scaled from 8.4% of revenues to 7.2% of revenues year on year, even though it has this incremental cost of AI within. We are very optimistic about it. We are seeing the results. We manage it with discipline. We are focusing on cost as well. The cost per token continues to come down, we are seeing very positive results in terms of investment on AI at MercadoLibre.

Speaker #7: They were coding and were helping they were helped by AI today human written code is an exception. All of the code the majority of the code is done by AI.

Speaker #7: And you can see that also flowing through our P&L. Product development scale from 8.4% of revenue to 7.2% of revenues year on year even though it has this incremental cost of AI with it.

Speaker #7: So we are very, very optimistic about it. We are seeing the results. We manage it with discipline. We are focusing on cost as well.

Speaker #7: Cost per token continues to come down. But we're seeing very positive results in terms of investments on AI and Mercado Libre.

Speaker #1: The next question comes from Danny Eiger with XC. Please go ahead.

Operator 2: The next question comes from Dani Eiger with XP. Please go ahead.

Operator: The next question comes from Dani Eiger with XP. Please go ahead.

Speaker #9: Hi. Thanks for taking my question. I'd just like to hear a little bit more about how you're seeing your affiliates program, what you're doing to scale it, current gaps that you see, and if you can expect any heavier investments in this front going forward.

Danniela Eiger: Hi, thanks for taking my question. I'd just like to hear a little bit more about how you're seeing your affiliates program, what you're doing to scale it, current gaps that you see, and if you can expect any heavier investments in this front going forward. Thanks.

Dani Eiger: Hi, thanks for taking my question. I'd just like to hear a little bit more about how you're seeing your affiliates program, what you're doing to scale it, current gaps that you see, and if you can expect any heavier investments in this front going forward. Thanks.

Speaker #9: Thanks.

Speaker #7: Hey Danny, this is Ariel. So, the affiliates channel is actually scaling very, very nicely and becoming more efficient simultaneously. So, we think it's actually working. The affiliates GMV share grew across every market in Q2, including Mexico, where we dialed down some of the couponing that we were redeploying in the past.

Martin de los Santos: Hey, Dani. This is Ariel. The affiliates channel is actually scaling very nicely and becoming more efficiently simultaneously. We think it's actually working. The affiliate GMV share grew across every market in Q2, including Mexico, where we dialed down some of the couponing that we were deploying in the past. Buyer quality is also a very important metric that we look at when we are evaluating the program. Affiliate buyers

Ariel Szarfsztejn: Hey, Dani. This is Ariel. The affiliates channel is actually scaling very nicely and becoming more efficiently simultaneously. We think it's actually working. The affiliate GMV share grew across every market in Q2, including Mexico, where we dialed down some of the couponing that we were deploying in the past. Buyer quality is also a very important metric that we look at when we are evaluating the program. Affiliate buyers show materially higher platform retention than non-affiliate buyers. The channel is not only driving one-time purchases, it's also acquiring users who come back later to our platform, and that's really exciting as well.

Speaker #7: So buyer quality is also a very important metric that we'll look at when we are evaluating the program. Affiliate buyers show materially higher platform retention than non-affiliate buyers.

Ariel Szarfsztejn: Show materially higher platform retention than non-affiliate buyers. The channel is not only driving one-time purchases, it's also acquiring users who come back later to our platform, and that's really exciting as well. This is exactly what we wanted to achieve when we launched and accelerated the investment in affiliate back in Q2 2025. A year on, we can see that unit economics and sales and marketing as a percentage of sales are broadly flat. Simultaneously, we are making a lot of progress in the product, in engagement, in the number of affiliates, and so on. We're happy. Economics are improving. Seller co-funding for affiliate is growing. Extremely excited and positive on the outlook for the different markets.

Speaker #7: So the channel is not only driving one-time purchases, it's also acquiring users who come back later to our platform. And that's really exciting as well.

Speaker #7: So this is exactly what we wanted to achieve when we launched and accelerated the investments in affiliate back in Q2 2025. And a year on, we can see that unique economics and sales and marketing as a percentage of sales are broadly flat, but simultaneously, we are making a lot of progress in the product, in the engagement, in the number of affiliates and so on.

Ariel Szarfsztejn: This is exactly what we wanted to achieve when we launched and accelerated the investment in affiliate back in Q2 2025. A year on, we can see that unit economics and sales and marketing as a percentage of sales are broadly flat. Simultaneously, we are making a lot of progress in the product, in engagement, in the number of affiliates, and so on. We're happy. Economics are improving. Seller co-funding for affiliate is growing. Extremely excited and positive on the outlook for the different markets.

Speaker #7: So we're happy economics are improving seller co-founding for affiliate is growing. So extremely excited and positive on the outlook for the different markets.

Speaker #9: Perfect. Thanks.

Danniela Eiger: Perfect. Thanks.

Dani Eiger: Perfect. Thanks.

Speaker #1: The next question comes from Craig Maurer with FT Partners. Please go ahead.

Operator 2: The next question comes from Craig Maurer with FT Partners. Please go ahead.

Operator: The next question comes from Craig Maurer with FT Partners. Please go ahead.

Speaker #10: Yeah. Thanks for taking the question. I wanted to just ask quickly about Mexico. Two points. In terms of direct contribution margin compressing for Mexico, roughly half of that was from acquiring.

Craig Maurer: Yeah. Thanks for taking the question. I wanted to just ask quickly about Mexico, two points. In terms of direct contribution margin compressing from Mexico, roughly half of that was from acquiring. How much of that was the device cost pressure related to memory chip inflation that will eventually grow over versus deliberate customer acquisition cost investment? Second, in terms of GMV decelerating with the tax reform headwind, is that headwind fully in the run rate now? Was it fully in the run rate in Q2? That would be helpful to know as we think about modeling the back half of the year.

Speaker #10: How much of that was the device cost pressure related to memory chip inflation that will eventually grow over versus deliberate customer acquisition cost investment?

Speaker #10: And second, in terms of GMV, decelerating, with the tax reform headwind, is that headwind fully in the run rate now in was it fully in the run rate in second quarter?

Speaker #10: That would be helpful to know as we think about modeling the back half of the year.

Speaker #7: Hi, Craig. With regards to acquiring margin in Mexico, it was mostly related to both increasing the amount of devices we bought, increasing inventory, as we sell the devices at a loss whenever we buy inventory, we need to book the loss up forward.

Osvaldo Giménez: Hi, Craig. With regards to acquiring margin in Mexico, it was mostly related to both increasing the amount of devices we bought, increasing inventory. As we sell the devices at a loss, whenever we buy inventory, we need to book the loss up forward, and the rest was driven by, as you mentioned, the increase in the memory chips cost. I would say the majority of the compression in Mexico are related to those two issues and not to a decision to lower our prices, which we did not.

Speaker #7: And the rest was driven by, as you mentioned, the increase in the memory chips cost. So I would say the majority of the compression in Mexico are related to those two issues and not to a decision to lower our cost, which we did not.

Speaker #7: Our prices, which we did not. Hey, Craig. So on Mexico commerce and demand dynamics, I would say yes, the tax reform that we explained last quarter is definitely a headwind to our growth.

Ariel Szarfsztejn: Hey, Craig. On Mexico commerce and demand dynamics, I would say yes, the tax reform that we explained last quarter is definitely a headwind to our growth. That together with some headwinds coming from a weaker macroeconomic environment and the even lower consumption during the World Cup definitely pay some toll to our growth. Still, if you see our numbers, our growth rate was pretty robust. We continued gaining market share year-over-year, and we even gained more than our main competitor. Also when you compare our performance with traditional retailers, you can see how the structural growth opportunity in the country is playing to our favor, right? The market is growing. We are a large slice, and physical retail is clearly being challenged by e-commerce.

Speaker #7: And that together with some headwind coming from a weaker macroeconomic environment and the even lower consumption during the World Cup definitely pay some toll to our growth.

Speaker #7: But still, if you see our numbers, our growth rate was pretty robust. We continued gaining market share year over year. And we even gained more than our mate competitor.

Speaker #7: And also when you compare our performance with traditional retailers, you can see how the structural growth opportunity in the country is playing to our favor, right?

Speaker #7: So the market is growing. We are a large slice, and physical retail is clearly being challenged by e-commerce. Just to wrap up, I would say Mexico is perhaps the market where our ecosystem could play out the most in our favor in the long run.

Ariel Szarfsztejn: Just to wrap up, I would say Mexico is perhaps the market where our ecosystem could play out the most in our favor in the long run because of the lack of access to financial services and Mercado Pago's positioning as the leading digital bank and the leading fintech acquiring. I think we're driving digitalization in the country, and that's pushing the flywheel, which is strengthening both fintech and e-commerce. We remain optimistic with the market. Although we do see near-term challenges, which were a bit deeper in June and July with the World Cup, there's nothing that is actually impacting the huge secular trend of growth and opportunity that we see in Mexico, and more importantly, the long-term earnings power that we find in that market.

Speaker #7: Because of the lack of access to financial services and mercado pagos positioning as the leading digital bank and the leading fintech acquiring, I think we're driving digitalization in the country.

Speaker #7: And that's pushing the flywheel, which is strengthening both fintech and e-commerce. So, we remain optimistic with the market, although we do see near-term challenges, which were a bit deeper in June and July with the World Cup. There's nothing that is actually impacting the huge secular trend of growth and opportunity that we see in Mexico and, more importantly, the long-term earnings power that we find in that market.

Speaker #7: Thank you.

Craig Maurer: Thank you.

Speaker #1: The next question comes from Josh Beck with Raymond James. Please go ahead.

Operator 2: The next question comes from Josh Beck with Raymond James. Please go ahead.

Operator: The next question comes from Josh Beck with Raymond James. Please go ahead.

Speaker #11: Thank you for taking the question. I wanted to go back to the AI cost because I think you've shared a little bit more than we've generally heard on the earnings call.

Josh Beck: Thank you for taking the question. I wanted to go back to the AI cost because I think you shared a little bit more than we've generally heard on the earnings call. I think you said the cost of tokens was up $80 million year-over-year. You're saving, I think, almost 1% maybe of revenues in terms of product development. It certainly seems like if you just look at those two dimensions, that it's already quite ROI positive. I'm just kind of curious, as we look forward, could this be a trend that continues and maybe provides more ROI and benefit to the P&L? That's one question on the AI cost. The other one is on the credit card NIM, the breakdown you gave on credit card versus other was very helpful.

Speaker #11: So I think you said the cost of tokens was up $80 million, year over year, but you're saving, I think, almost a percent, maybe of revenues in terms of product development.

Speaker #11: So it certainly seems like if you're just look at those two dimensions that it's already quite ROI positive. So I'm just kind of curious, as we look forward, could this be a trend that continues and maybe provides kind of more ROI and benefit to the P&L?

Speaker #11: So that's kind of one question on the AI cost. The other one is on the credit card NIML. The breakdown you gave on credit card versus other was very helpful.

Speaker #11: I'm just curious, maybe if you were to double-click on the most mature credit card portfolios, maybe what they look like, and how we should maybe kind of think about the evolution of the credit card NIML in the years ahead.

Josh Beck: I'm just curious, maybe if you were to double-click on the most mature credit card portfolios, maybe what they look like and how we should maybe think about the evolution of the credit card NIM in the years ahead. Thank you.

Speaker #11: Thank you.

Speaker #7: Thank you for your question. Let me just clarify the product development scale that you're seeing. And I mentioned before, I think it was one point year on year.

Martin de los Santos: Thank you for your question. Let me just clarify the product development scale that you are seeing, that I mentioned before, I think it was one point year-on-year. Most of that doesn't come from AI, just to be clear, okay? We have been scaling product development for many years now, and that trend continues as we become more productive and more efficient in the way we manage our product development. What I tried to explain is that even though we include the majority of the AI cost within that line, that line continues to scale, just to be clear. When we look at the AI investment that we are making, we can see the productivity gains throughout our workforce. We can see certain initiatives where we can measure the actual return on investment. The examples of that was customer service or the initiative on AI applied to search.

Speaker #7: Most of that doesn't come from AI, just to be clear, okay? We have been scaling product development for many years now. And that trend continues as we become more productive and more efficient in the way we manage our product development.

Speaker #7: But I tried to explain is that even though we include the majority of the AI cost within that line, that line continues to scale, just to be clear.

Speaker #7: Then, when we look at the AI investment that we're making, we can see the productivity gains throughout our workforce. We can see certain initiatives where we can measure the actual return on investment.

Speaker #7: The example to that was customer service or the initiative on AI applied to search. And there are initiatives where we're experimenting. But we are very optimistic.

Martin de los Santos: There are other initiatives where we are experimenting. We are very optimistic. We think that given the way we manage technology, the data that we have, and the position that we have as a technology company, we should be able to take this new technology and scale it, and it will help us significantly to scale our revenue generation. Plus, it will make us a lot more efficient in the way we manage our business.

Speaker #7: We think that given the way we manage technology, the data that we have, and the position that we have, as a technology company, we should be able to take this new technology and scale it and will help us significantly to scale our revenue generation plus it will make us a lot more efficient in the way we manage our business.

Speaker #7: So let me take one step back on AI to make just one complementary comment to Martin. So although we care about the bill and we proactively manage every single cost lever in order to make it more efficient, I think strategically we think of AI as an opportunity and accelerator of our wide bigger opportunity for our business and less as a cost line to optimize, right?

Ariel Szarfsztejn: Let me take one step back on AI to make just one complementary comment to Martin. Although we care about the bill and we proactively manage every single cost lever in order to make it more efficient, I think strategically, we think of AI as an opportunity, an accelerator of our wide, bigger opportunity for our business and less as a cost line to optimize. Right? AI is accelerating the secular shift that we already are trying to capture. Discovery is becoming more personalized, transactions are becoming more frictionless, credit becomes more tailored to any given consumer, we can underwrite better and so on. We are convinced that the 27 years of proprietary data that we have accumulated across commerce, payments, credit, logistics, position ourselves in a good place in order to capture the opportunity that AI is bringing.

Speaker #7: So AI is accelerating the secular shift that we already are trying to capture discovery is becoming more personalized, transactions are becoming more frictionless, credit becomes more tailored to any given consumer.

Speaker #7: We can underwrite better and so on. And we are convinced that the 27 years of proprietary data that we have accumulated across commerce, payments, credit, and logistics position us in a good place to capture the opportunity that AI is bringing.

Speaker #7: So this is like fuel that we are applying to an organization that is already wired into technology and into the idea of using every single lever technological lever out there in order to make the most.

Ariel Szarfsztejn: This is like fuel that we are applying to an organization that is already wired into technology and into the idea of using every single lever, technological lever out there in order to make the most. In parallel, I would say to Martin's point, AI is definitely contributing to cost efficiency. 2026 is probably the first year in many, many years in which we are not growing our engineering team. That is also coming from the fact that AI is driving developer productivity up consistently.

Speaker #7: In parallel, I would say to Martin's point, AI is definitely contributing to cost efficiency, 2026 is probably the first year in many, many years in which we are not growing our engineering team.

Speaker #7: And that's also because that's also coming from the fact that AI is driving developer productivity at up consistently.

Speaker #3: And Josh, going to your question on credit cards, you ask about our older portfolios and cohorts and basically what we continue to see mostly in Brazil, which is the one market where we started first, is that each cohort typically reaches NIML, NIML break-even after 12 to 18 months.

Martin de los Santos: George, going to your question on credit cards, you ask about our older portfolios and cohorts, and basically what we continue to see, mostly in Brazil, which is the one market where we started first, is that each cohort typically reaches NIM or NIM at break-even after 12 to 18 months. That has been pretty consistent, and then they continued improving profitability. What we are doing now as we accelerate issuance is basically invest more. That's why you see some compression on the NIM of the credit card portfolio between last year and this year. It was nearly break-even a year ago and -2.5% now. That is driven mostly by the fact that we were able to accelerate the speed of issuance. A year ago, we issued 1.6 million cards in the quarter, and this quarter we issued 2.6 million cards in Brazil.

Osvaldo Giménez: George, going to your question on credit cards, you ask about our older portfolios and cohorts, and basically what we continue to see, mostly in Brazil, which is the one market where we started first, is that each cohort typically reaches NIM or NIM at break-even after 12 to 18 months. That has been pretty consistent, and then they continued improving profitability. What we are doing now as we accelerate issuance is basically invest more. That's why you see some compression on the NIM of the credit card portfolio between last year and this year. It was nearly break-even a year ago and -2.5% now. That is driven mostly by the fact that we were able to accelerate the speed of issuance. A year ago, we issued 1.6 million cards in the quarter, and this quarter we issued 2.6 million cards in Brazil.

Speaker #3: That has been pretty consistent. And then they continue improving profitability. So what we are doing now as we accelerate issuance is basically invest more that's why you see some compression on the NIML of the credit card portfolio between last year and this year.

Speaker #3: It was nearly break-even a year ago, and minus 2.5% now. But that is driven mostly by the fact that we were able to accelerate the speed of issuance.

Speaker #3: A year ago, we issued 1.6 million cards in the quarter. And this quarter, we issued 2.6 million cards in Brazil. And therefore, we are confident that we are investing, and we have certainty about the payback we will get.

Martin de los Santos: Therefore, we are confident that we are investing and the payback, we have certainty about the payback we will get. Beyond the payback in the card itself, what we are seeing is that whenever we issue cards, we see a lift in net promoter scores from those users. They are more likely to be ecosystemic users and to have higher engagement and higher profitability in the platform. Also, it's one of the key contributors to us becoming basically gaining principality with those users as a key indicator for becoming one of the largest digital banks in the region. We are excited with how the credit card is evolving in Brazil. On top of that, I would say that what we're seeing in Mexico is that paybacks are even better than in Brazil because the economics of the industry works better than in Brazil.

Osvaldo Giménez: Therefore, we are confident that we are investing and the payback, we have certainty about the payback we will get. Beyond the payback in the card itself, what we are seeing is that whenever we issue cards, we see a lift in net promoter scores from those users. They are more likely to be ecosystemic users and to have higher engagement and higher profitability in the platform. Also, it's one of the key contributors to us becoming basically gaining principality with those users as a key indicator for becoming one of the largest digital banks in the region. We are excited with how the credit card is evolving in Brazil. On top of that, I would say that what we're seeing in Mexico is that paybacks are even better than in Brazil because the economics of the industry works better than in Brazil.

Speaker #3: And beyond the payback in the card itself, what we are seeing is that whenever we issue cards, we see a lift in net promoter scores from the those users they are more likely to be ecosystemic users and to have higher engagement and higher profitability in the platform.

Speaker #3: And also, it's one of the key contributors to us becoming basically gaining principality with those users as a key indicator for becoming one of the largest digital banks in the region.

Speaker #3: So we are excited with how the credit card is evolving in Brazil. And on top of that, I would say that what we're seeing in Mexico is that paybacks are even better than in Brazil because the economics of the industry works better than in Brazil.

Speaker #3: And it's still early to tell about Argentina, but the initial impression is also very, very, very good, as we were saying just a few minutes ago.

Martin de los Santos: It's still early to tell about Argentina, but the initial impression is also very good, as we were saying just a few minutes ago.

Osvaldo Giménez: It's still early to tell about Argentina, but the initial impression is also very good, as we were saying just a few minutes ago.

Speaker #5: Thank you.

Josh Beck: Thank you.

Speaker #1: The next question comes from Kyle Prado with UBS. Please go ahead.

Operator 2: The next question comes from Kyle Prieto with UBS. Please go ahead.

Operator: The next question comes from Kyle Prieto with UBS. Please go ahead.

Kyle Prieto: Hi, everyone. Good evening. Thanks for the opportunity. I have one question. This is more a follow-up on the credit side. I would like to double click on the asset quality of your credit group, please. We saw definitely an improvement in provisioning levels this quarter, with the cost of risk reducing Q on Q. We saw good trends on the short-term NPL as well. On the other side, as your duration is short, it is quite tricky to look only to the short-term NPL in our view. Actually, at the same time, the 90-day NPL had a quite meaningful deterioration this quarter. My question is, how should we read that if this improvement in cost of risk was much more seasonal and it should be higher sequentially?

Speaker #4: Good evening. Thanks for the opportunity to ask one question. This is more a follow-up on the credit side. I would like to double-click on the asset quality of your credit book, please.

Speaker #4: We saw definitely an improvement in provisioning levels this quarter. With the cost of risk reducing Q1Q, we saw good trends on the short-term NPLs as well.

Speaker #4: But on the other side, as your duration is short, it's quite tricky to look only at the short-term NPL, in our view. So actually, at the same time, the 90-day NPL had quite a meaningful deterioration this quarter.

Speaker #4: So my question is, how should we read that if these improvements in cost of risk were much more seasonal, and it should be higher sequentially?

Speaker #4: And how would you describe your growth appetite towards the second half of the year, especially in Brazil as well? Thank you.

Kyle Prieto: How would you describe your growth appetite for H2 of the year, especially in Brazil as well? Thank you.

Speaker #7: One second, please.

Martin de los Santos: One second, please. We're going.

Speaker #3: In general, I would say our NIMLs are super healthy. NPLs are at the lowest point for 15 to 90 days. When it comes to 90 days, I would say that there are a few things to keep in mind.

Osvaldo Giménez: In general, I would say our NIMs are super healthy. NPLs are at the lowest point for 15 to 90 days. When it comes to 90 days, I would say that there are a few things to keep in mind. In general, this metric mixes all products, so you're not seeing one specific product, and so the signal is not so clear, and it moves basically up and down to some degree, depending on how fast we are growing. When we originate a lot, the ratio improves automatically, and when we slow down, it deteriorates a little bit. Part of what is happening is that there was a change at the pace we were issuing at the end of last year, and some early years, borrowers defaulted a little bit higher than we expected.

Speaker #3: In general, this metric mixes all products, so you're not seeing one specific product. The signal is not so clear, and it moves basically up and down to some degree depending on how fast we are growing.

Speaker #3: When we originate the lot, the duration improves automatically. And when we slow down, it deteriorates a little bit. And so part of what is happening is that there was a change at the place we were issuing at the end of last year.

Speaker #3: And some early years borrowers defaulted a little bit higher than we expected. But then there was a slowdown at the pace we were issuing that product because of that deterioration.

Osvaldo Giménez: There was a slowdown at the pace we were issuing that product because of that deterioration. You see a little bit of a jump in the over 90 days. It's not something that I would be concerned about. Again, that is a very small number, and the other bucket, the 15 to 90 days, is significantly more relevant in terms of profitability.

Speaker #3: And so you see a little bit of a jump in the over 90 days. But it's not something that I would be concerned about.

Speaker #3: Again, that is a very small number. And the other bucket, the 15 to 90 days, is significantly more relevant in terms of profitability.

Speaker #7: If I may complement also, keep in mind that some of the products that are growing very fast now are relatively short-term duration, and those products tend to have higher NPLs. Because, remember, the good payers get out of the portfolio fairly quickly.

Martin de los Santos: If I may complement also, keep in mind that some of the products that are growing very fast now are relatively short-term duration. Those products tend to have higher NPLs because remember, the good payers get out of the portfolio fairly quickly, and the defaulters stay for 360 days. There might be also some distortion because of that. Again, as Osvaldo mentioned, nothing to worry about. The health of the portfolio continues to be very profitable, so I wouldn't make a big issue out of it.

Speaker #7: And the defaulters stay for 360 days. So there might be also some distortion because of that. But again, as Osvaldo mentioned, nothing to worry about.

Speaker #7: Our margins continue to be at the health of the portfolio continue to be very profitable. So I wouldn't put a big issue, make a big issue out of it.

Speaker #1: The next question comes from Neha Agarwal with HSBC. Please go ahead.

Operator 2: The next question comes from Neha Agarwala with HSBC. Please go ahead.

Operator: The next question comes from Neha Agarwala with HSBC. Please go ahead.

Speaker #6: Hi. Thank you for taking my question. Could we talk about a bit of impact from the lower policy rates expected in Brazil for your different business segments?

Neha Agarwala: Hi, thank you for taking my question. Could we talk about a bit of impact from the lower policy rates expected in Brazil for your different business segments? What kind of impact can we expect from lower rates?

Speaker #6: What kind of impact can we expect from lower rates?

Osvaldo Giménez: Hi, Neha. I'll say that both on the acquiring and credit business, there is no significant impact by the little bit of a change in the rates in Brazil. Typically, the market, our competitors, and ourselves adjust those rates depending on what's happening with the policy rates. There is a marginal improvement in the credit you have already issued because you price them with a higher rate. It's really, I would say, marginal. Once we get to the new standard, basically, we adjust prices. There is probably a little bit more of an impact on the marketplace because typically we don't adjust so frequently the parcelado seguro prices on the marketplace. On the margin, that is an improvement to the take rate in the marketplace.

Speaker #3: Hi, Neha. I would say that both on the acquiring and credit business, there is no significant impact by the little bit of a change in the rates in Brazil.

Speaker #3: Typically, the market or competitors—or ourselves—adjust those rates depending on what's happening with the policy rates. There is a marginal improvement in the credit.

Speaker #3: You have already issued because you price them with a higher rate. But it's really, I would say, marginal. But once we get to the new standard, basically, we adjust prices.

Speaker #3: There is probably a little bit more of an impact on the marketplace because typically we don't adjust so frequently the parcelados sin juros prices on the marketplace.

Speaker #3: So on the margin, that is an improvement to the take rate in the marketplace.

Speaker #7: Right. Typically, in the marketplace, when interest rates come down, we improve margins a little bit. And when they go up, we lose margins because we don't adjust every single time the rates change.

Martin de los Santos: Right. The marketplace, typically, when interest rates come down, we improve a little bit margins, and when they go up, we lose margins because we don't adjust every single time the rates change.

Speaker #1: The next question comes from Marvin Fong with BTID. Please go ahead.

Operator 2: The next question comes from Marvin Fong with BTIG. Please go ahead.

Operator: The next question comes from Marvin Fong with BTIG. Please go ahead.

Speaker #8: Hi, great. Thanks for taking my question. I apologize if these were asked before I didn't jump in between calls here. But I appreciate all the great information you provided about ecosystemic users, just would love some additional color without being too specific.

Marvin Fong: Hi. Great. Thanks for taking my question. I apologize if I've been jumping between calls here. I appreciate all the great information you provided about ecosystemic users. I just would love some additional color. Without being too specific, could you give us an idea of what percentage of your users in Brazil or perhaps across your entire marketplace are in fact ecosystemic users? Would just love to get an idea of how much future growth is possible there. Second question, just on cross-border, could you just update us on your strategy there to improve the profitability and cost efficiency of that product? I know you have the facility in China that you opened up. How much has that been utilized, and might you open additional facilities in low-cost regions? Thank you.

Speaker #8: But could you give us an idea of what percentage of your users in Brazil or perhaps across your entire marketplace are, in fact, ecosystemic users?

Speaker #8: We'd just love to get an idea of how much future growth is possible there. And then, second question, just on cross-border—could you just kind of update us on your strategy there to improve the profitability and cost efficiency of that product?

Speaker #8: I know you have the facility in China that you opened up. How much has that been utilized? And why don't you open additional facilities in low-cost regions?

Speaker #8: Thank you.

Speaker #7: Hi, it's Martin here. Thanks for your question. Regarding ecosystemic users, we wanted to make sure that it's clear to the market. The fact that we have a two-sided ecosystem generates this opportunity to bring users that are active on both platforms.

Martin de los Santos: Hi, it's Martin here. Thanks for your question. Regarding ecosystemic users, we wanted to make sure that it's clear to the market the fact that we have a two-sided ecosystem generates this opportunity to bring users that are active on both platforms, and we wanted to give some color to the market regarding the importance of that, right? When we see ecosystemic user has 70% more GMV on the marketplace and 90% more TPV, double the asset under management. Very much engaged, and that results in better profitability. We also mentioned that the rate of growth of those

Speaker #7: And we wanted to give some color to the market regarding the importance of that, right? When we see an ecosystemic user has 70% more GMV on the marketplace and 90% more TPV, double the assets under management.

Speaker #7: They're very much engaged, and that results in better profitability. We also mentioned that the rate of growth of those types of users is the highest among any kind of users.

Osvaldo Giménez: Type of users is the highest of any kind of users. I think it's growing 37% year on year. We don't disclose the actual share of users. We just want to make sure that those are important users to us, growing very fast. A lot of the investments that we're making are aiming to get more of the users, both on the commerce side and the Fintech side, to become ecosystemic users.

Speaker #7: I think it's growing 37% year on year. And but we don't disclose the actual share of users, which is what I make sure that it's clear that those are important users to us, growing very fast.

Martin de los Santos: We don't disclose the actual share of users. We just want to make sure that those are important users to us, growing very fast. A lot of the investments that we're making are aiming to get more of the users, both on the commerce side and the Fintech side, to become ecosystemic users.

Speaker #7: And a lot of the investments that we're making are aiming to get more of the users, both on the commerce side and the fintech side, to become ecosystemic users.

Speaker #7: Hey, Marvin. So on cross-border trade, we are extremely satisfied with the trajectory we're seeing. CBT, GMB is growing approximately at 60% year over year with triple digits growth in Brazil, Argentina, and other markets.

Ariel Szarfsztejn: Hey, Marvin. On cross-border trade, we are extremely satisfied with the trajectory we are seeing. CBT GMV is growing approximately at 60% year over year, with triple digits growth in Brazil, Argentina, and other markets, and above average growth in Mexico, our largest market for CBT by far. More interestingly, the volume coming from our Chinese fulfillment center is growing 170% quarter over quarter. Basically, we built the capacity, and we see that the volume is following. Basically with CBT, we're providing a better service and more choice to our consumers, right? CBT is adding more selection and attractive prices, and users always want to get that. The more supply we get, the more demand we get, and with that demand, our platform becomes more attractive in order to get more supply. Positive on that effect.

Speaker #7: And above-average growth in Mexico, our largest market for CBT by far. More interestingly, the volume coming from our Chinese fulfillment center is growing 170% quarter-over-quarter.

Speaker #7: So basically, we built the capacity and we see that the volume is following. And basically, with CBT, we're providing a better service and more choice to our consumers, right?

Speaker #7: So CBT is adding more selection at attractive prices, and users always want to get that. And the more supply we get, the more demand we get.

Speaker #7: And with that demand, our platform becomes more attractive in order to get more supply. So positive on that effect. And simultaneously, the warehouse in China has enabled us to improve delivery speed, reduce cancellation, which is also driving NPS positively.

Ariel Szarfsztejn: Simultaneously, the warehouse in China has enabled us to improve delivery speed, reduce cancellation, which is also driving NPS positively and pushing retention and repurchase up. Simultaneously on unit economics, which is another dimension that you asked for, we continue to see sequential improvements in our margins, and that has been consistent for a few quarters now. Basically, it's driven by the combination of scale, which is helping us dilute some of our costs, but also going through the learning curve that is allowing us to tackle every dimension of the business to really get to understand what the levers are in order to make it work. As I was saying at the beginning, very satisfied, encouraged, but still early days for CBT, and we have many things to continue doing.

Speaker #7: And pushing retention and repurchase up. Simultaneously, on unit economics—which is another dimension that you asked for—we continue to see sequential improvements in our margins.

Speaker #7: And that has been consistent for a few quarters now. Basically, it’s driven by the combination of scale, which is helping us dilute some of our costs, but also by going through the learning curve that is allowing us to tackle every dimension of the business to really get to understand what the levers are in order to make it work.

Speaker #7: So, as I was saying at the beginning, we are very satisfied and encouraged, but it's still early days for CBT. We have many things to continue doing.

Speaker #1: The next question comes from Joao Suarez with City. Please go ahead.

Operator 2: The next question comes from João Soares with Citi. Please go ahead.

Operator: The next question comes from João Soares with Citi. Please go ahead.

Speaker #8: Hi, thanks for taking the question. I just wanted to double-click on the credit card profitability trajectory, and I appreciate the color in the e-mail by credit product.

João Soares: Hi. Thanks for taking the question. I just wanted to double click on the credit card profitability trajectory. I appreciate the color and the NIM by credit product. I think it's really helpful. I think it's still not clear to me where this. I know, Osy, you're still in a significant card issuance phase, but given the level where it is right now, above $7 billion, and of course, the yields or the spreads on this product should be extremely robust right now. Is it fair to say that we are reaching a level where we could expect a profitability inflection? Any color in terms of where you're seeing this and whether there's room to even accelerate more. Any color regarding where we should start seeing maybe the NIIs and the NIMs for this product in the next couple of years would be extremely helpful.

Speaker #8: It's really helpful. I think it's still not clear to me where this stands. I know you're still in a significant card issuance phase, but given the level where it is right now—above $7 billion—and, of course, the yields, the spreads on this product should be extremely robust right now.

Speaker #8: So is it fair to say that we are reaching a level where we could expect a profitability inflection? I think any color in terms of where you're seeing this, and whether there's room to even accelerate more, would be helpful.

Speaker #8: So any color regarding where we should start seeing maybe the NIIs and the e-malls for this product in the next couple of years would be extremely helpful.

Speaker #8: Just the curve, right, in the strategy.

João Soares: Just the curve, right, and the strategy.

Speaker #2: Hi, Joao. As we mentioned, we are super excited with how the credit card is evolving. And we continue to see the same patterns as before in terms of reaching profitability for each given cohort.

Osvaldo Giménez: Hi, João. As we mentioned, we are super excited with how the credit card is evolving, and we continue to see the same patterns as before in terms of reaching profitability for each given cohort. Now, when it comes to your question regarding reaching a turning point, I think that is mostly related with the history of the size of each cohort, basically. We have been accelerating the pace of issuance. If we're to look at cohorts that are older than 3 years, those are a rather small part of the portfolio. The majority of the portfolio has been issued, I would say, in the last 2 years. That's why we need more time for the average of the portfolio to mature.

Speaker #2: Now, when it comes to your question regarding reaching a turning point, I think that is mostly related to the history of the size of each cohort, basically.

Speaker #2: We have been accelerating the pace of issuance. So, if we were to look at cohorts that are older than three years, those are rather small parts of the portfolio.

Speaker #2: And the majority of the portfolio has been issued, I would say, in the last two years. And that's why we need more time for the average of the portfolio to mature.

Speaker #2: As we are confident in how we are issuing, we have been able to accelerate the pace of issuance. And that, in some way, slows down the average maturity of the portfolio.

Osvaldo Giménez: As we are confident of how we are issuing, we have been able to accelerate the pace of issuance, and that in some way slows down the average maturity of the portfolio. I'd say it's mostly a combination of how fast we continue to issue, and then how each portfolio evolves.

Speaker #2: So, I'd say it's mostly a combination of how fast we continue to issue, and then how each portfolio evolves.

Speaker #7: And maybe just to, if you step back, I think it's important to realize the strategic importance of the credit card, right? It's not the profitability that you're seeing on the P&L.

Ariel Szarfsztejn: Maybe just to, if you step back, I think it's important to realize the strategic importance of the credit card, right? The profitability that you're seeing on the letter is only the credit card, but as we mentioned also on the letter, people who use the credit card have 2 to 3 times more chances of becoming ecosystemic. They tend to buy more on Mercado Libre, they tend to bring more of their financial life into Mercado Pago. The credit card on itself has a clear path to profitability, as Osvaldo mentioned. On top of that, and probably more important than that, is a strategic product both for Mercado Pago as well as Mercado Libre. Just on the side of that.

Speaker #7: It's only the credit card. But as we mentioned also in the letter, people who use the credit card have a two to three times higher chance of becoming ecosystemic.

Speaker #7: So, they tend to buy more on Mercado Libre. They tend to bring more of their financial life into Mercado Pago. So the credit card, on itself, has a clear path to profitability, as Osvaldo mentioned.

Speaker #7: But on top of that, and probably more important than that, is in a strategic product, both for Mercado Pago as well as Mercado Libre.

Speaker #7: So, just on the side of that.

Operator 2: This concludes the question and answer session. I would like to turn the conference back over to Ariel Schwerinski for any closing remarks. Please go ahead.

Operator: This concludes the question and answer session. I would like to turn the conference back over to Ariel Schwerinski for any closing remarks. Please go ahead.

Speaker #1: Let's conclude the question. And as a session, I would like to turn the conference back over to Ariel Shorstein for any closing remarks. Please go ahead.

Speaker #5: So, I want to take this opportunity to go back to one of the things I mentioned at the beginning of the call. We are building something quite unique globally: an ecosystem of commerce and financial services that compounds on itself.

Ariel Schwerinski: I want to take this opportunity and go back to one of the things I was saying at the beginning of the call. We are building something quite unique globally, an ecosystem of commerce and financial services that compounds on itself. The bigger and the more engaging our marketplace become, the better our chances of building the largest digital bank in Latin America, the bigger our advertising business will become. Simultaneously, the better Mercado Pago becomes, the more appealing our marketplace becomes too, for our consumers. Mercado Libre and Mercado Pago have become a daily habit for Latin Americans across the region, the opportunity that we have ahead of us is even bigger. These are not two businesses running in parallel. This is one flywheel, each side making the other one more valuable.

Ariel Szarfsztejn: I want to take this opportunity and go back to one of the things I was saying at the beginning of the call. We are building something quite unique globally, an ecosystem of commerce and financial services that compounds on itself. The bigger and the more engaging our marketplace become, the better our chances of building the largest digital bank in Latin America, the bigger our advertising business will become. Simultaneously, the better Mercado Pago becomes, the more appealing our marketplace becomes too, for our consumers. Mercado Libre and Mercado Pago have become a daily habit for Latin Americans across the region, the opportunity that we have ahead of us is even bigger. These are not two businesses running in parallel. This is one flywheel, each side making the other one more valuable.

Speaker #5: The bigger and the more engaging our marketplace become, the better our chances of building the largest digital bank in Latin America. And the bigger that the our advertising business, we will become.

Speaker #5: And simultaneously, the better Mercado Pago becomes, the more appealing our marketplace becomes too for our consumers. Mercado Libre and Mercado Pago have become a daily habit for Latin Americans across the region.

Speaker #5: But the opportunity that we have ahead of us is even bigger. These are not two businesses running in parallel; this is one flywheel, each side making the other one more valuable.

Speaker #5: As we said in the letter, we invest in it carefully, with discipline. And only when we see that the economics are working, if we get that flywheel right, the result is structurally higher engagement, loyalty, and scale.

Ariel Szarfsztejn: As we said in the letter, we invest in it carefully with discipline, and only when we see that the economics are working. If we get that flywheel right, the result is structurally higher engagement, loyalty, and scale, and that is what will maximize our long-term profitability. The underlying philosophy with which we are operating has not changed in almost three decades, investing in eliminating friction in what deepens user engagement and letting it compound. Our conviction in this approach, the evidence supporting it, and the ecosystem behind it, are all stronger than they have ever been. We are convinced that this is the right way to create the very best long-term proposition for our consumers, and through this, to maximize shareholder value in the long run as well. Thank you very much, and looking forward to connecting with you in the next quarter.

Speaker #5: And that is what will maximize our long-term profitability. So the underlying philosophy with which we are operating has not changed. In almost three decades, investing in eliminating friction in what deepens user engagement and letting it compound—our conviction in this approach, the evidence supporting it, and the ecosystem behind it—are all stronger than they have ever been.

Speaker #5: We are convinced that this is the right way to create the very best long-term proposition for our consumers, and through this, to maximize shareholder value in the long run as well.

Speaker #5: Thank you very much, and I look forward to connecting with you in the next quarter.

Operator 2: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Q2 2026 MercadoLibre Inc Earnings Call

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