StoneCo (STNE) Q1 2026 Earnings Transcript

StoneCo reported Q1 revenue of BRL 3.6 billion, up 6% year over year, with adjusted net income rising 3% to BRL 549 million and adjusted EPS up 15% to BRL 2.19. However, gross margin compressed 280 bps to 41.6% as credit loss provisions jumped to BRL 166 million, NPLs over 90 days rose to 7% from 5.2%, and management said cost of risk should normalize only gradually. The company kept 2026 guidance unchanged and highlighted BRL 3.6 billion of year-to-date capital returns, including BRL 0.6 billion of buybacks, with at least BRL 1.4 billion still authorized.

Analysis

StoneCo is transitioning from a pure growth/multiple story into a balance-sheet-and-capital-return story with an embedded operating repair optionality. The market is likely underestimating how much of the near-term equity support can come from buybacks and special distributions: at this pace, the company can materially shrink the float while still carrying ample capital above its internal minimum, which mechanically supports EPS even if top-line growth remains choppy.

The bigger issue is that credit is now the swing factor for sentiment, and the first-order miss is probably less important than the second-order signal: management is admitting the underwriting machine needs a reset. That usually depresses growth for 1-3 quarters, but it can also improve lifetime value if the new mix shifts toward secured and government-backed products, which should lower tail risk and reduce equity volatility. The trade-off is that headline yields may compress, so the stock likely rerates on lower loss variance rather than higher near-term revenue acceleration.

Consensus seems to be focused on the sequential soft spots in clients, ARPAC, and delinquency, but the more important setup is that these weaknesses may be setting a cleaner base for H2. If churn really normalizes and deposits keep rising, StoneCo gets a dual benefit: lower funding costs and a more stable monetization flywheel, which matters more in a higher-for-longer rate environment than short-term TPV noise. The main bearish case is that macro keeps pushing SME delinquencies higher and overwhelms the fix; if that happens, the market will stop treating provisions as temporary and start discounting a structurally lower ROE.

Key Decisions for Investors

• Long STNE on weakness over the next 2-6 weeks, sized as a catalyst-driven trade, not a core hold; target a re-rating into H2 execution with a 15-25% upside path if client churn and cost of risk stabilize.
• Pair trade: long STNE / short a higher-quality Latin fintech or bank proxy with less buyback support, to isolate idiosyncratic operating recovery versus macro noise; use a 1-3 month horizon.
• Sell downside on STNE via put spreads 10-15% below spot for 60-90 days if implied volatility stays elevated; thesis is that balance-sheet support and buybacks limit near-term downside absent a fresh credit shock.
• If STNE rallies hard on buyback headlines, take partial profits into strength and wait for the next quarterly print; the cleaner entry is after the market has priced in the provision reset but before H2 operating data confirms it.
• Avoid shorting STNE outright unless NPLs keep rising into the next print; the capital return program creates a strong technical bid that can punish thesis shorts before fundamentals fully roll over.