MercadoLibre, Inc. MELI is prioritizing long-term market expansion over near-term margin optimization. During the first quarter of 2026, operating margin fell to 6.9% from 12.9% a year earlier, while net income margin declined to 4.7% from 8.3%. Management made it clear that this was not an accidental cost overrun but the result of funding initiatives that are already producing stronger demand, engagement and scale. Net revenues and financial income surged 49% year over year, the fastest pace in nearly four years. Instead of maximizing near-term profitability, management is stepping up investments across its commerce and fintech businesses.
Management believes Latin America still offers a significant growth opportunity. For instance, the average Latin American makes just seven online purchases a year compared with 41 in the United States. To capture this opportunity, MercadoLibre is investing heavily in lowering free shipping thresholds, expanding its fulfillment network, scaling first-party selection, growing cross-border trade and accelerating its credit card business across Brazil, Mexico and Argentina.
The lower free-shipping threshold in Brazil has reduced shipping monetization and weighed on gross margin, but it has also driven stronger buyer acquisition and purchasing frequency. Brazil's FX-neutral gross merchandise volume growth accelerated to 38% in the first quarter from 35% in the preceding quarter, while items sold surged 56%, up from 45% in the fourth quarter and 42% in the third quarter of 2025. Brazil also added a record 17 million unique active buyers year over year, helping MercadoLibre's total unique active buyers increase 26%.
Fintech adds another layer of pressure. MercadoLibre's credit portfolio jumped 87% year over year to $14.6 billion, while it issued 2.7 million credit cards during the quarter. Credit card payment volume rose 90%, and monthly active credit card users increased 68%. However, newly issued cards require higher upfront provisions before they become profitable, putting pressure on current earnings. Even so, management said improving performance of older credit card cohorts in Brazil and healthy repayment trends give it the confidence to continue expanding its credit card business in Mexico and Argentina.
Management emphasized that improving margins in the short term would be relatively easy by slowing investments. However, it believes doing so would sacrifice a much larger opportunity. MercadoLibre is choosing to maintain a bold investment posture to strengthen its ecosystem, expand its user base and build durable competitive advantages that can support stronger profitability over time.
What the Latest Metrics Say About MercadoLibre
MercadoLibre, which competes with Amazon.com, Inc. AMZN and Sea Limited SE, has seen its shares tumble 9.7% over the past six months compared with the industry’s 2.9% decline. While shares of Amazon have jumped 3.5%, those of Sea Limited have fallen 10% in the aforementioned period.
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From a valuation standpoint, MercadoLibre's forward 12-month price-to-earnings (P/E) ratio stands at 36.53, higher than the industry’s ratio of 21.94. The stock is also trading above its 12-month median level of 34.46.
MercadoLibre is trading at a premium to Amazon (with a forward 12-month P/E ratio of 25.98) and Sea Limited (21.99).
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The Zacks Consensus Estimate for MercadoLibre’s current financial-year sales and earnings per share implies year-over-year growth of 39.7% and 4%, respectively. For the next fiscal year, the consensus estimate indicates a 26.6% rise in sales and 47% growth in earnings.
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MELI currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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