MercadoLibre (MELI) Bets Big On Growth. Is The Payoff Worth The Wait?

MercadoLibre (MELI) reported $10 billion in quarterly revenue for the first time, yet its stock remains significantly lower than its peak. At the end of the quarter on August 5, management explained the company's focus on growth over profit. Revenue increased by 50% year-over-year, driven by a 44% increase in gross merchandise volume and a 56% rise in total payment volume.

A year after lowering Brazil's free shipping threshold, the number of items per buyer rose by 19% year-over-year, and conversion increased by 1.1 percentage points. Management believes this indicates existing customers are engaging more deeply with the platform. Those who use both the marketplace and Mercado Pago generated 70% more gross merchandise volume and 55% more items sold per user compared to those who shop on the marketplace alone.

However, this growth came at a cost. Operating income fell from $825 million to $683 million, and operating margin dropped from 12.2% to 6.7%, a 550 basis point decline. The company's credit book grew to $16.4 billion, up 75% year-over-year, while delinquency rates remained near historical lows and net interest margin improved from 18% to 21%.

Despite the growth, net income for the first half of 2026 fell 13% year-over-year to $883 million, as revenue increased by 50% to $19 billion. The company faces competition from Amazon, which has pushed MercadoLibre to compete harder on price. The quarter required significant capital expenditure, with $441 million in capital spending and $2.1 billion funneled into growing the credit portfolio, resulting in adjusted free cash flow of $214 million.

Hedge fund ownership dropped to 102 funds from 113 in the prior quarter, indicating some institutional money is pulling out. Short interest is currently low, at 1.60% of float, suggesting limited organized betting against the stock. The forward price-to-earnings ratio of 43.86 indicates that the market still expects substantial future growth.

MercadoLibre is pursuing two stories simultaneously: deepening engagement and scaling credit responsibly, while also maintaining a margin profile that disappoints investors. Whether the growth story will triumph remains to be seen.