MercadoLibre reported mixed fourth-quarter results on Tuesday, with net income falling and missing analyst expectations even as top-line revenue outperformed forecasts. The Uruguay-headquartered e-commerce and fintech group said heightened investments - particularly in credit and logistics - pressured profit for the October-to-December period.
Net income for the quarter was $559 million, down 12.5% year-on-year and below the LSEG analyst consensus of $587 million. Despite the profit shortfall, shares rose in extended trading, gaining as much as 7% after the results before trimming those gains to trade roughly 2% higher. Earlier in the day, the stock had climbed about 3% during regular-hours trading ahead of the announcement.
Revenue increased around 45% from a year earlier to $8.8 billion, topping analysts' expectations of $8.5 billion. The company attributed the stronger-than-expected sales performance in part to growth in Brazil and Mexico, citing a 35% rise in gross merchandise value in those markets on a currency-neutral basis.
Operating income - earnings before interest and taxes (EBIT) - rose roughly 8% to $889 million, close to the estimate of $891 million. However, EBIT margin declined to 10.1% from 13.5% a year prior, reflecting a wider squeeze on profitability as the company absorbed higher operating and credit costs.
Leandro Cuccioli, MercadoLibre's senior vice president of investor relations, told Reuters the drop in profit was driven by margin compression related to the company's decision to step up investments intended to support long-term performance. He highlighted several specific initiatives: issuing more credit cards, which increases provisions; expanding free-shipping offerings; and plans to grow direct sales to customers, a format known as 1P.
The firm's credit portfolio expanded significantly, jumping about 90% year-on-year to $12.5 billion. Credit performance indicators showed a 15-to-90-day delinquency rate of 7.6%, slightly higher than the 7.4% recorded a year earlier. Separately, total payment volume processed in the acquiring business rose roughly 40%.
Investors and analysts have been weighing how MercadoLibre's heavier spending will affect near-term profits and how long it might take margins to recover. On that question, Cuccioli framed the opportunity as nascent, saying the company believes penetration of online purchases across its markets remains early-stage. "In soccer terms, we are still in minute 15 of the first half of the market development," he said.
Cuccioli also addressed the company's Venezuelan operations, which have been reported separately from consolidated results since 2017. He said those operations "have not changed much in the latest months." The executive noted that while Venezuela was once an important market for MercadoLibre and could become important again, it is currently not material to the company's broader operations.
Market reaction to the quarter reflected the mixed nature of the results: revenue strength and expanding card and payments volumes contrasted with compressed margins and a profit miss. The company remains focused on growth initiatives that management characterizes as investments for long-term performance while acknowledging short-term pressure on profitability.