MercadoLibre Revenue Jumps 45% While Free Shipping Pushes Operating Income Down 6%
The Latin American e-commerce company says it is choosing to give up near-term margin to build shopping habits, with operating income at $676 million.
MercadoLibre, which runs an online marketplace and the Mercado Pago financial services platform across Latin America, reported third-quarter revenue and financial income of $10,750 million, up 45% from a year earlier, while income from operations fell 6% to $676 million. The company said the margin squeeze reflects a deliberate choice to spend on free shipping, new warehouse capacity and Brazilian affiliate marketing.
Growth up, operating profit down
Revenue rose 41% excluding currency effects. Operating margin was 6.3%, which the company said was 40 basis points (0.40 percentage points) below the second quarter.
Net income rose 6% to $448 million, or $8.83 per share. A lower tax rate and smaller foreign-exchange losses of $72 million, against $102 million a year earlier, more than offset the weaker operating result.
Gross merchandise volume rose 38% to about $23 billion, and total payment volume rose 53% to about $109 billion. The credit portfolio grew 62% to almost $18 billion. Adjusted free cash flow was $285 million, after $503 million of capital spending.
Where the margin went
Compared with the second quarter, the company cited a net shipping headwind of 60 basis points and higher sales and marketing spend of 40 basis points. Shipping charges rose 60 basis points, against a 100 basis point increase in shipping costs.
The company pointed to three causes: less revenue per shipment from more free shipping and smaller orders, higher energy prices, and a shipping network expansion that added almost 20% to fulfillment square meters from the second quarter. It said adding capacity before peak season is a yearly pattern.
Sales and marketing rose to 11.6% of net revenue after what the company called a tactical decision to invest more in its affiliates program in Brazil.
Paying for a shopping habit
The shareholder letter frames the trade-off plainly: the company is investing part of today's margin to move commerce and financial services online. Its buyers make 12 purchases a year, against more than 50 online purchases for consumers in more developed markets.
Lowering Brazil's free-shipping threshold in June 2025 accelerated growth but cut net shipping margin by around 200 basis points as a share of merchandise volume since the first quarter of 2025. In Brazil, items per buyer grew 16% in the quarter.
Management hosted a video and conference call at 5:00 p.m. Eastern on Wednesday to take investor questions.
The company said its structural profit drivers, including lower cost per shipment and a credit book that scales profitably, improved again this quarter, and that the benefit reaches reported margins gradually.
Sources
- 8-K Filing — MERCADOLIBRE INC (MELI) — SEC EDGAR
- Exhibit meli-20260930xex991.htm — MERCADOLIBRE INC 8-K exhibit — SEC EDGAR
- MercadoLibre Earnings: Rapid Revenue Growth but Ongoing Cost Pressure From Aggressive Investments | Morningstar — morningstar.com
- MercadoLibre Stock Moves Lower After Mixed Q3 Results — benzinga.com
- MercadoLibre falls on earnings miss, margin pressure — Yahoo Finance
- Can MELI's Cross-Platform Users Unlock Outsized Profit Growth? — Yahoo Finance
- MercadoLibre: Q3 Earnings Snapshot | wfaa.com — Associated Press
