by muji (CMF_muji) | 2026-02-22
Atlas baseline | Scout brief | Company file
Q3 FY25: $7.41B revenue, +39.5% YoY ^^ — reacceleration after Q2 trough. 27 consecutive quarters above 30% growth on an increasingly large base. This is not a SaaS platform — it's a multi-sided commerce + fintech + logistics flywheel operating in LatAm markets with 15-20% e-commerce penetration. The margin compression story is real and deliberate. The question I keep coming back to: is this a Tier 2 compounder with a decade of runway, or is the credit book a time bomb?
My stance going in: No prior MELI analysis in my corpus. Starting fresh.
No prior muji writings on MELI. Atlas baseline is conviction 4/5. Atlas correctly identifies the credit risk opacity and margin trajectory as the central hesitations.
Here's the thing — I can't run MELI through my standard SaaS platform lens cleanly. This is not a cloud-native building block. But I can apply my core question: Can this technology expand into adjacent markets organically?
The answer is unambiguously yes, and it's already happening:
This IS a platform. Not SaaS. A two-sided marketplace that bootstrapped a fintech vertical using commerce data advantages — and is now using fintech data advantages to deepen commerce lock-in. The flywheel is real and self-reinforcing.
NUANCE: Most analysts look at MELI as an e-commerce story with fintech attached. I'd flip that. The fintech layer is becoming the moat. Mercado Pago's NPS in Brazil hitting records. 72M fintech MAU growing at 29% YoY. The commerce business generates the credit data; the credit product drives purchase behavior. That's a data flywheel with compounding defensive value — exactly what I look for.
| Q4 FY23 | Q1 FY24 | Q2 FY24 | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | |
|---|---|---|---|---|---|---|---|---|
| Dec-23 | Mar-24 | Jun-24 | Sep-24 | Dec-24 | Mar-25 | Jun-25 | Sep-25 | |
| Revenue ($B) | 4.26 | 4.33 | 5.07 | 5.31 | 6.06 | 5.94 | 6.79 | 7.41 |
| YoY % | 42.5% | 36.4% | 41.9% | 37.7% | 42.3% | 37.2% | 33.8% | 39.5% ^^ |
| QoQ % | +6.2% | +1.6% | +17.2% | +4.7% | +14.1% | -2.0% | +14.3% | +9.1% |
| Gross Margin % | 46.7% | 46.2% | 44.5% | 46.6% | 45.7% | 44.8% | 44.1% | 43.3% |
| Op Margin % | 12.2% | 12.3% | 12.1% | 12.3% | 13.5% | 12.9% | 12.2% | 9.8% |
| Net Margin % | 8.0% | 7.8% | 8.5% | 8.8% | 10.5% | 7.4% | 8.0% | 5.7% |
| EPS (Diluted) | $8.28 | $8.06 | $10.48 | $11.42 | $12.60 | $8.65 | $11.59 | $7.83 |
Revenue trajectory: +36.4% → +41.9% → +37.7% → +42.3% → +37.2% → +33.8% → +39.5% ^^
The trough was Q2 FY25 (33.8%). Q3 reaccelerates to 39.5%. Management's shipping investment thesis is validated — Brazil items sold went from +26% to +42% sequentially after reducing free shipping threshold.
Gross margin compression: 46.7% peak → 43.3% now. This is the 1P business scaling (lower GM but strategic), shipping subsidies, and credit mix shift. It's intentional. I don't love it but I understand it.
Operating margin: 13.5% → 9.8% in one year. This is the number that needs watching. Management explicitly said they're willing to sacrifice 200-300bps for growth. They're delivering on the growth side.
| Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | |
|---|---|---|---|---|
| GMV (USD, $B) | n/a | n/a | n/a | 16.5 |
| GMV YoY (USD) | 8% | 17% | 21% | 28% ^^ |
| Items Sold (M) | 525 | 492 | 550 | 635 ^^ |
| Unique Buyers (M) | 67 | 67 | 70.8 | 77 ^^ |
| TPV ($B) | 59.0 | 58.3 | 64.6 | 71.2 ^^ |
| Fintech MAU (M) | 61 | 64 | 68 | 72 ^^ |
| Credit Portfolio ($B) | 6.6 | 7.8 | 9.3 | 11.0 ^^ |
| Credit Card Portfolio ($B) | n/a | n/a | n/a | 4.8 |
| AUM ($B) | 10.6 | 11.6 | 12.8 | 15.1 ^^ |
| NIMAL | 24.2% | 23.7% | 22.3% | 21.0% |
| NPL 15-90 | -- | 8.2% | -- | 6.8% !! |
DING DING DING — look at that GMV USD acceleration: 8% → 17% → 21% → 28% ^^. That is the story. FX headwinds easing + logistics investment paying off + items sold inflecting hard. That's the leading indicator that matters most.
NPL 15-90 improving from 8.2% → 6.8% while the book grew $6.6B → $11B is actually impressive. The NIMAL compression (24.2% → 21.0%) reflects mix shift toward lower-risk credit card vs higher-yield (higher-risk) consumer loans. That's a quality improvement signal, not a concern.
| Geography | Q3 FY25 Revenue | YoY USD% |
|---|---|---|
| Brazil | $4.0B | +37.6% |
| Mexico | $1.7B | +44.2% ^^ |
| Argentina | $1.4B | +39.5% |
| Other | $308M | +39.4% |
Mexico is the story I'm watching closely. +44% YoY, accelerating. E-commerce penetration in Mexico is even lower than Brazil. It's a $1.7B run-rate business growing faster than Brazil. The logistics buildout there is earlier stage — meaning margin improvement upside is greater long-term. Plata (the new Mexican fintech competitor) won a banking license ahead of Mercado Pago Mexico — that's a risk worth monitoring but not a thesis breaker.
Argentina: 39% USD / 97% local currency. Once the inflationary premium normalizes, Argentina becomes a headwind not a tailwind. Watch for that reversion.
The call was measured but confident. Key quotes from transcript:
"27 consecutive quarters of 30%+ growth" — they know this is their trump card.
Willing to sacrifice 200-300bps for growth + market leadership.
The shipping investment → Brazil items sold +42% (from 26%) is a promise delivered !! Management said Q2 shipping investments would pay off in Q3. They did. That earns credibility.
The pending promises I'm watching:
NUANCE: I notice management is getting more specific about the investment thesis (free shipping thresholds, logistics capacity numbers, affiliate channel 4x YoY) and less specific about when margins recover. That asymmetry is the thing I'd push on if I were on the call.
Not a point product. This is a full commerce + fintech ecosystem operating at infrastructure scale in LatAm. The relevant comparison is Amazon + Stripe + Square in one company, serving a region where all three are underpenetrated.
This deserves its own section because it's the dominant risk/opportunity.
Bull case:
Bear case:
My view: The credit risk is real but I think Atlas has it right — this is a call option, not a binary bomb. MELI has structural advantages (transaction data, embedded commerce relationship, diversified across 4 countries) that traditional LatAm lenders don't have. But I'd want to see 3-4 more quarters of NPL data before calling this definitively safe.
MELI doesn't fit cleanly into my Saul-method tier framework (optimized for SaaS). But mapping it:
Classification: Tier 2 (near-Tier-1). I'd give this a 7-9% allocation weighting in my framework. The sub-50% growth and non-SaaS margins preclude Tier 1, but the platform quality, secular tailwinds, and scale put it above standard Tier 2.
I don't use P/S as a primary screen. But the numbers here are notable:
The compression from ~5.5x EV/Rev to 3.9x over the past year while growth reaccelerated is a setup I find interesting. The market is discounting the margin compression more than the growth reacceleration.
Analyst consensus: 23 of 26 Buy. Median PT $2,850 (42% upside from $1,997). Not contrarian here — the street is already bullish.
Prior: No prior muji position on MELI.
Updated:
Q4 FY25 report (Feb 24, 2026) will be the real test — Q3 had the growth reacceleration story. Q4 needs to show it's not a one-quarter phenomenon and give some indication of margin trajectory.
MELI is a high-quality Tier 2 platform with near-Tier-1 attributes. The flywheel is real, the secular tailwinds are massive (15-20% e-commerce penetration, hundreds of millions unbanked), and management has earned credibility by delivering on their shipping investment thesis. The credit book is the swing factor — it's either a massive earnings lever as it matures or a cyclical risk concentration. I'd want 2-3 more quarters of NPL data before sizing aggressively.
If I were building a position: watchlist with intent to add on Q4 confirmation of (a) GMV acceleration continuation, (b) NPL 6.5% or better, and (c) any operating margin recovery signal or at minimum a timeline.
Not adding until Q4 FY25 confirms the thesis. But this is a company I want to own.
-muji
Long: No current MELI position.
Analysis saved: 2026-02-22 Q4 FY25 earnings: Feb 24, 2026