XP (XP) Q1 2026 Earnings Call Transcript

XP reported Q1 adjusted net income of BRL 1.3 billion, up 7% year over year, on gross revenue of $4.9 billion, up 8%, with ROE at 21.7% and BIS capital ratio at 20.7%. Management reiterated confidence in double-digit growth for 2026 despite March-April credit spread widening that pressured mark-to-market revenue and lifted SG&A efficiency 100 bps to 34.6%. The company also announced BRL 1 billion of new buybacks and BRL 500 million of dividends, while naming Gustavo Vallejo as the new CFO.

Analysis

XP’s quarter reads less like a cyclical slowdown and more like a temporary monetization gap between volumes and take rates. The important second-order signal is that the platform kept gathering assets while the revenue mix shifted toward more scalable, fee-based formats; that matters because it reduces dependency on market-beta-driven commissions and should cushion future earnings volatility. The CFO transition also looks strategically additive rather than disruptive: bringing in a banking-heavy operator implies management is leaning further into balance-sheet-enabled products, where cross-sell and funding advantages can compound over time.

The main near-term risk is that the credit-spread shock is not just a one-quarter P&L issue; it can delay DCM issuance, keep mark-to-market noise elevated, and suppress advisor sentiment until spreads actually compress. That creates a timing mismatch: retail inflows can stay healthy while revenue recognition lags, which is why the market may overestimate the durability of the current margin pinch. If spreads stabilize into Q3, XP likely gets a double tailwind from improved trading/issuance activity and operating leverage on a cost base that management says they can hold roughly flat versus revenue.

The contrarian read is that investors are focusing too much on the headline ROE/capital ratio and not enough on optionality from the fee-model migration. The current capitalization is probably above the minimum needed to support the business, so excess capital is effectively a flexibility asset that can be redeployed into buybacks if growth disappoints or into credit/banking expansion if conditions improve. That combination makes the equity less a pure broker-dealer proxy and more a self-funding compounder with embedded downside support from capital returns.

Key Decisions for Investors

• Long XP common over 3-6 months on weakness: entry is attractive while the market is still pricing a Q2/Q3 earnings air pocket from credit-spread volatility; target is a rerating once spreads stabilize and the fee-model mix becomes more visible.
• Pair trade: long XP / short a Brazil rates-sensitive market beta basket if available, or long XP versus a local financials ETF proxy, to isolate the company-specific fee-mix and buyback story from macro noise.
• Sell downside protection via XP cash-secured puts or put spreads expiring after Q3 earnings if implied volatility remains elevated; the thesis is that near-term revenue pressure is already well-telegraphed while capital returns provide a valuation floor.
• If you want a cleaner catalyst trade, wait for signs of spread compression and rising DCM issuance before adding size; that is the inflection point where operating leverage should show up fastest.
• Avoid chasing here if your mandate is short-duration momentum: the next 1-2 quarters may still look messy on top line optics, even if underlying franchise health remains intact.