When investors think about MercadoLibre (MELI -0.73%), the story has always sounded straightforward: a dominant e-commerce and fintech platform with enormous growth potential in Latin America. The company has been called the "Amazon" of the region, and for years, that comparison worked.
But the latest results suggest a more nuanced reality. Growth is still strong, yet profitability is under pressure, costs are climbing, and competition is intensifying. That doesn't break the thesis -- but it does make MercadoLibre a riskier stock than it was a year ago.
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MercadoLibre is growing nicely
Start with the positives. MercadoLibre is still expanding at a pace that most global tech companies would envy. In the second quarter of 2025, net revenue rose 34% year over year to $6.8 billion, driven by nearly 37% growth in gross merchandise value (GMV) on a forex-neutral basis. The company now counts more than 71 million unique buyers, a 25% increase from the prior year.
Its fintech arm, Mercado Pago, is also scaling impressively. The credit portfolio jumped 91% year over year to $9.3 billion, while short-term default rates improved from 8.2% a year ago to 6.7%. Customer adoption is broadening as well: Mercado Pago had 68 million monthly active users, many of whom are using it not just for e-commerce but also for everyday transactions, savings, and credit.
Those numbers reinforce a key point: MercadoLibre's ecosystem is sticky. The combination of marketplace, logistics, and payments keeps users engaged and competitors at bay. For a company operating in 18 countries in Latin America, that kind of scale is formidable.
MercadoLibre is doubling down on investment
At the same time, MercadoLibre is doubling down on reinvestment in key markets Brazil, Mexico and Argentina, estimating an investment of around $13 billion in 2025. Those dollars will go into the development of logistics hubs, technology upgrades, and expanding its payments infrastructure.
In the long run, these investments are essential. Faster deliveries make the marketplace more competitive, better payment rails deepen fintech adoption, and new technology supports the company's scale.
But in the short run, they add to costs -- and make MercadoLibre more exposed to macroeconomic volatility.
But margins are coming under pressure
But growth hasn't come without trade-offs. Profitability was the soft spot in Q2 2025. Net income of $523 million analyst expectations, and operating margin slipped to 12.2% from 14.3% a year earlier.
The culprit was primarily shipping. Facing mounting competition in Brazil -- particularly from Shopee and Temu -- MercadoLibre slashed its free-shipping threshold from 79 reais to 19 reais (roughly $3.40). The move worked, boosting volumes and engagement, but it also hurt margins. Moreover, logistics and shipping costs will likely remain elevated in the near term as the company works to defend its share.
While this move has largely helped the tech company keep customers coming back, it underscores a bigger risk: In markets where consumer purchasing power is limited, price sensitivity is high. If MercadoLibre has to lean on subsidies and free shipping continuously, it could put sustained pressure on its long-term profitability.
In other words, margins could remain depressed -- or even declining further in the coming quarters.
And there are other challenges ahead
Latin America itself adds another layer of complexity. Inflation, currency swings, and political shifts remain part of the equation. The Argentine peso continues to be a headwind, while Brazil and Mexico -- though offering scale -- are also highly competitive markets.
Speaking of competition, Shopee has overtaken MercadoLibre by order volume in Brazil, relying on subsidies and gamified shopping to win cost-conscious consumers. Temu, owned by PDD Holdings, is flooding the region with ultra-cheap goods shipped from China. Meanwhile, Nubank is expanding aggressively in digital finance, challenging Mercado Pago's dominance.
Put together, these pressures make MercadoLibre's execution even more critical. It's not enough to grow; the company must grow efficiently and defensively. The silver lining is that Latin America is a vast market, so many players can compete and still do well in the long run.
What it means for investors
So, is MercadoLibre still a solid growth stock? The answer is yes -- but with caveats.
- The opportunity remains massive. Latin America's e-commerce penetration is still relatively low compared to developed markets, and digital payments adoption has plenty of room to grow.
- The moat is intact. MercadoLibre's scale, logistics network, and fintech flywheel are powerful advantages.
- But the risks are higher. Margin pressure, rising reinvestment, and a more challenging competitive landscape make the path forward less predictable.
MercadoLibre isn't broken. But it's no longer the simple growth story it was five years ago.
For long-term investors, the company still represents one of the best ways to play Latin America's digital transformation. The difference now is that execution risk sits front and center -- and that means investors must actively track the company's performance in the coming quarters.
