DLocal (DLO): Q2 2025 Earnings Review

Yesterday, DLocal reported its Q2 2025 results.

The stock is up over 20% after a significant beat across the board, and I couldn’t be happier as a shareholder.

In this article, I’ll break down everything you need to know from the Earnings Report.

Financial and Business Highlights

• Total Payment Volume (TPV) came in at a record $9.2B, +53% YoY and +14% QoQ (growing >50% YoY for the 3rd consecutive quarter). On a constant currency basis, TPV growth was even stronger at +65% YoY.

• Revenue reached $256.5M, beating the consensus estimate of $229.7M. This represents +50% YoY growth and +18% QoQ, a stunning acceleration from +18% YoY in the previous quarter. In constant currency, revenue growth hit an impressive +63% YoY.

“Our core markets, particularly Brazil and Mexico, rebounded to deliver solid performance, while the rest of our geographies are growing even faster. This underscores our increased business diversification, and the resilience of our larger markets.”

LatAm: +24% QoQ and +46% YoY, with QoQ comparison explained by strong performance across diverse markets, with notable contribution of Brazil, Mexico and Argentina.

Africa & Asia: flat QoQ and +65% YoY. The QoQ comparison is affected by Egypt. Excellent performance of Other A&A markets, particularly South Africa.

• Gross margin was 39%, stable QoQ but slightly down YoY from 40.8%.

• Adjusted EBITDA was $70.1M, easily topping the $55.8M estimate. That’s a 64% YoY increase, with an Adjusted EBITDA margin of over 27% (stable QoQ and up from 25% YoY).

Efficiency also improved meaningfully, with Adj. EBITDA / Gross Profit at 71%, up from 68% QoQ and 61% YoY.

• GAAP EPS came in at $0.14, ahead of the $0.12 estimate.

However, this was impacted by the Argentine peso devaluation and related expatriation costs, as DLocal reduced its AR bond position by more than 80% and reallocated those funds to U.S. Treasuries. As a result of this one-off event, Net Income declined 7% YoY, while adjusted Net income rose 20.3% QoQ and 34.1% YoY.

“This move reduces the expected volatility and increases our funds available for general corporate purposes. These are all very positive outcomes over the long run, despite the negative impact on this quarter's bottom line.”

• Free Cash Flow totaled $48M, up 22% QoQ and 156% YoY.

Importantly, these incredible results came despite the ongoing investment cycle, making them even more impressive.

“We believe there are efficiency and scalability gains ahead of us from our ongoing AI and automation initiatives, which are a core part of where the technology resources from our investment cycle are being allocated.”

• Net take rate increased from 1.05% in Q1 to 1.07% in Q2, largely due to a higher share of pay-ins and the recovery of processing costs from the previous quarter.

These positive effects were partially offset by lower FX fees in Argentina as a result of spread compression.

Management’s guidance implies a continued, though modest, downtrend, with the year expected to close above 1.00%.

• Operating expenses were $43M, up 10% QoQ and 9% YoY, showing clear signs of operating leverage.

• Cash & equivalents of ~$254M, even after paying an extraordinary dividend in June, which reflects the company’s very healthy levels of cash generation.

DLocal significantly RAISED its full-year guidance:

• Revenue of ~$1.01B* vs. $958.2M est.

• Adj. EBITDA of ~$274M* vs. $240.9M est.

*midpoint

I continue to be impressed by how detailed DLocal’s updates have become. Under Pedro Arnt’s leadership, the company has significantly improved its communication, offering greater transparency across all fronts.

Growth remains weighted toward larger global players, but it is not concentrated in just a handful of accounts. Instead, the top 20 merchants are collectively driving the upside, highlighting both the depth of DLocal’s relationships with key clients and the potential for continued wallet-share gains.

In this context, Revenue NRR reached a remarkable 145% in Q2, up from 113% in Q1.

• New licenses: Secured regulatory approvals in the UAE, Turkey, and the Philippines, expanding market reach.

New Product launches during the quarter:

• SmartPix in Brazil: A hybrid solution that integrates Brazil’s open banking framework with the Pix instant payments network, replicating many of the features and convenience of card-on-file payments. SmartPix adds credit card-like functionality and tokenization capabilities to Pix transactions, enhancing both merchant flexibility and consumer experience.

I’m not sure if you’re aware, but Pix is by far the most widely used payment method in Brazil. Its adoption is so widespread that even here in Portugal, some supermarkets now accept Pix because of the large Brazilian community.

• Buy Now, Pay Later integrations: Rolled out market-leading BNPL solutions to merchants in several markets, enabling them to offer consumer credit without assuming underwriting risk. DLocal earns revenue through profit-sharing agreements with BNPL providers.

“We do not take credit risk ourselves and are able to revenue share on the credit yields made by our BNPL partners.”

Corporate Governance changes:

• Announced Guillermo Lopez Perez as the new CFO. He brings 20 years of payments industry experience, including senior finance roles at American Express, Visa (CFO of Continental Europe), Tink, and FutureSpace. His background spans open banking, fintech, and real-time fraud detection.

Governance enhancements:

• Transitioning toward a majority-independent board and actively recruiting additional independent directors with complementary expertise.

• Formation of Nominating & Corporate Governance and Compensation Committees to strengthen oversight and align with best practices.

• Cancellation of treasury shares currently on the balance sheet, reflecting the company’s ability to deliver strong growth while returning excess capital to shareholders through dividends or buybacks.

---

Earnings Call Highlights

In his opening remarks, Pedro Arnt once again framed the quarter’s performance within the broader structural tailwinds driving DLocal’s growth trajectory. He highlighted three core growth vectors, each underpinned by the company’s positioning in high-growth, underpenetrated payment ecosystems.

1. Massive Addressable Market with Low Digital Penetration

DLocal operates across markets representing trillions of dollars in TPV, where digital adoption and card penetration remain relatively low. These markets are expected to sustain double-digit annual growth through 2030, providing a long runway for expansion. The structural underpenetration creates a dual advantage: organic market growth and a large share of untapped opportunity for localized payment solutions.

2. Share-of-Wallet Expansion Among Existing Merchants

Pedro Arnt also noted significant potential to grow wallet share with current merchants by:

• Expanding into additional geographies alongside them.

• Integrating more alternative payment methods (APMs).

• Unlocking new payment verticals not yet served.

This approach leverages DLocal’s role as a long-term growth partner, embedding deeper into merchant operations over time.

3. Early-Stage S-Curve Adoption for Merchant Base Growth

DLocal is still in the early innings of the adoption curve for payment localization in emerging markets. The CEO described a consistent pattern: merchants typically start in developed markets, enter emerging markets via international acquiring (with limited reach and higher friction), and only later localize payments to remove barriers and boost conversions. As these merchants mature, they expand into additional emerging and frontier markets, repeating the cycle. DLocal’s model positions it to capture merchants at the inflection point of this curve, creating a more diversified and stickier revenue base.

The strategy is visible in the company’s metrics.

DLocal now serves almost 760 merchants. Among its top 50 clients, average country coverage has increased from 8 to 11, and payment method coverage from 35 to 48 over the past 18 months.

Geographic concentration is declining, with the top three markets now representing 47% of revenue, down 8 percentage points since 2023, as revenue from the rest of the portfolio has grown almost three times faster over the last four quarters. Management expects merchant diversification to follow a similar trajectory as these relationships scale.

Essentially, Pedro Arnt reinforced that DLocal’s growth is not dependent on a single lever but rather a multi-pronged strategy that compounds over time, capturing more merchants, in more markets, with more payment options, while benefiting from the secular expansion of digital commerce in underpenetrated geographies.

Stablecoins: Opportunity or Threat?

In a previous article, I discussed how stablecoins could represent both a risk and an opportunity for DLocal, and why I believed the company was uniquely positioned to benefit from their growing adoption.

During the earnings call, Pedro Arnt effectively validated that view.

“We continue to make progress on our stablecoin solutions, where we believe we are uniquely positioned to take advantage of the opportunity. With our broad EM presence, highly developed pay-out and pay-in infrastructure, local FX capabilities, and years of experience with stablecoins, we are a perfect on- and off-ramp provider for stablecoin players and merchants looking to leverage this technology. Our partnerships with Circle and BVNK are some examples of the advances we are making in this space.”

Management pushed back against the idea that stablecoins pose a structural threat to the business. Instead, they see them as a net positive, pointing to DLocal’s established capabilities in facilitating settlement in stablecoins to accelerate cross-border flows. The company is particularly well-positioned in the most complex and margin-rich segments of the stablecoin value chain, fiat-to-stable and stable-to-fiat conversions, where its local liquidity access and competitive FX infrastructure provide a strong edge.

To capture this opportunity, DLocal has already built a dedicated salesforce and product team focused exclusively on stablecoins. Pedro Arnt noted that, unless fiat currencies were to disappear entirely, a scenario he considers highly unlikely, there will remain significant demand for infrastructure that connects stablecoins to local payment ecosystems. This, he believes, is a niche where DLocal holds a clear competitive advantage.

Take Rates Trend and Product Innovation Pipeline

Management reiterated its long-term view that take rates will gradually trend lower over time, driven primarily by merchants moving into higher-volume tiers and exerting downward pressure on fees. This is partially offset by DLocal’s own cost reductions from acquirers and processors. While the structural trajectory remains downward, recent quarters have shown a slower, more gradual decline than previously anticipated. The shift toward higher-margin frontier markets and the rollout of new value-added services are helping to moderate the pace of compression and may set a higher floor for take rates than originally expected.

Looking ahead, DLocal’s guidance midpoint implies a slight sequential decline in Q3, in line with the long-term downward trend. For FY25, take rates are still expected to remain above 100 basis points (1.00%). Short-term fluctuations will depend on factors outside the company’s control, such as the mix between pay-ins and payouts, the share of local-to-local versus cross-border transactions, and overall merchant and geographic composition.

On the product front, beyond the already-launched BNPL Fuse Platform, SmartPix, and stablecoin/crypto solutions, management hinted at a potential fourth offering in development: solutions for offline global merchants. This would extend DLocal’s reach beyond its traditional digital-first client base and open new revenue streams. The company has begun developing point-of-sale (POS) processing capabilities in response to demand from digital companies serving offline markets, such as ISVs, payment providers with smart POS devices, and SMB ERP vendors.

“We’ve begun to develop the capabilities at DLocal not only to process payments online but also to handle payments at POS terminals in the physical world. It’s still in the early stages. There are already contracts tied to this, and once they go live, we will announce them.”

While this move reflects a reactive, opportunity-driven expansion rather than a major strategic pivot, it positions DLocal to tap into the largest payments segment in emerging markets: physical commerce. Collectively, these initiatives aim to deepen merchant relationships, broaden the addressable market, and partially offset take rate compression by introducing higher-value services with stronger monetization potential.

Tariff Risks

On tariffs, DLocal noted that the current environment of shifting trade policies warrants close monitoring. Recent examples, such as Mexico’s increase in the de minimis threshold for e-commerce imports, could impact merchant volumes, though no negative effects have been observed so far. The primary concern is that new tariffs or retaliatory measures could slow cross-border commerce, which represents DLocal’s largest merchant category. Management emphasized that the risk lies in potential GMV headwinds, not in take rates, and stressed that no such impact has yet appeared in the company’s metrics. Digital-specific taxes, if implemented, were also cited as a potential risk to monitor.

---

Final Thoughts

Overall, I couldn’t be happier as a shareholder of DLocal.

Pedro Arnt is proving to be exactly the right leader for this company, a factor that has always been central to my investment thesis.

Everything remains firmly on track, and even in the midst of an investment cycle, the company is delivering exceptional results. I believe this quarter will be the catalyst for a long-awaited sentiment shift, setting the stage for a well-deserved re-rating of the stock. I also expect operating leverage to strengthen meaningfully over the medium term, further enhancing earnings power.

The structural appeal of the business is unchanged: a massive and expanding TAM, favorable secular trends, attractive margins, robust FCF generation, and strong competitive advantages.

Even after this 20%+ post-earnings rally, I still see DLocal as one of the most attractive opportunities in the market and trust Pedro Arnt to lead it toward becoming a true payments giant.

Thanks for reading and for your continued support, it truly means a lot.

---

Don’t forget to subscribe for more content like this.

Disclaimer: As of this writing, M. V. Cunha holds a position in DLocal (DLO) at $10.09/share.