Philip A. Fisher | February 22, 2026
I have spent many years searching for what I call the "fortunate and able" company — one that owes its growth not merely to being in the right industry at the right moment, but to management's sustained exercise of superior judgment and execution. MercadoLibre, as I examine it today, presents one of the most compelling cases of this distinction that I have encountered in some time. It operates across the most underpenetrated commercial and financial markets on earth, and it has built, through patient investment, a flywheel that competitors are finding extraordinarily difficult to replicate.
This review covers the third fiscal quarter of FY25 (quarter ending September 2025). Q4 FY25 results are expected February 24, 2026 — two days from now. This review is therefore both a backward look at Q3 and a preparation for what the next set of numbers should reveal.
Before I turn to the numbers, I must report what the broader investigation has revealed. Scuttlebutt — the mosaic assembled from competitors, customers, employees, and industry observers — often tells you more than the income statement.
Customer sentiment — marketplace: The evidence here is genuinely mixed, which is itself informative. TrustPilot carries a 1.3 score on 239 reviews, driven largely by international users encountering friction with login requirements and returns processes. However, the more meaningful signal is NPS — management reports record NPS in Brazil in Q3 FY25. Separately, roughly half of all orders in Brazil's major cities are now delivered within 24 hours. The pattern I observe is consistent with a company that is outstanding on logistics and price (the core value proposition) while still maturing on customer service scaffolding. For a platform at MELI's scale and market share, this is a normal profile — not a red flag.
Customer sentiment — Mercado Pago: Capterra and SoftwareAdvice reviews identify the Pago application as highly user-friendly for payment management, transfers, and investments, with the expected criticism of commission rates. The signal that matters most: for over 60% of SMEs operating on the platform, Mercado Pago represents their first access to credit and their primary source of financing. This is not a payments app that competes on features. It is financial inclusion infrastructure. That is a different, more durable competitive position. (Sources: Capterra, The Digital Banker)
Competitive landscape — the Shopee question: This is where the scuttlebutt deserves careful attention. Shopee has overtaken MercadoLibre by order volume in Brazil, though MELI retains higher GMV and revenue share (13.4% vs Shopee's 8.8% and Amazon's 7.9%). The Motley Fool's September 2025 analysis correctly identified Shopee as more formidable than Amazon because it competes on both commerce and fintech pillars, not commerce alone. Amazon has invested 10billioninBrazilwithaquarterdeployedinthelast18months.MercadoLibre′sresponse—slashingthefreeshippingthresholdfromR79 to R$19 in June 2025 — drove the items sold acceleration visible in Q3 (+39% YoY, +42% in Brazil). This is management acting from strength, not retreat. (Sources: Bloomberg, The Wolf of Harcourt Street, Motley Fool)
Employee sentiment: Glassdoor reviews show 3,647 submissions, generally positive. Employees cite excellent compensation for a LatAm company, constant intellectual challenge, and defined career paths. Work-life balance rates 3.6/5.0 — consistent with a high-performance culture that asks much of its people. Promotion bottlenecks mentioned by some, particularly in the US office. Overall, the employee signal supports the impression of a disciplined, demanding organization. I have found over many years that companies where employees respect management's competence, even under pressure, tend to sustain performance better than those where morale is inflated by comfort. (Source: Glassdoor)
Credit book — analyst concern: Multiple Nasdaq and Yahoo Finance analyses from late 2025 flag the credit portfolio's shift toward longer-duration credit cards as a meaningful risk. The analytical concern is that recently originated cohorts mask early stress — NPL 15-90 at 6.8% looks stable, but the portfolio has grown 83% YoY, and new cohorts take time to reach breakeven. NIMAL at 21% is high in absolute terms but was compressing sequentially due to rising Argentine funding costs. I treat this as an active, unresolved risk — not a disqualification, but a factor I will watch with particular care. (Sources: Nasdaq/Yahoo Finance, ainvest.com)
Point 1 — Market potential for sizable sales increase over several years: LatAm e-commerce penetration stands at approximately 15-20%, versus 25-30% in developed markets. Brazil's digital retail market is $180B+ with MELI at perhaps 6-7% penetration. Financial services penetration is even more nascent. The runway here is not a matter of years — it is a matter of decades. This point passes with distinction.
Point 2 — Management determination to develop new products and markets: The shift from marketplace to integrated commerce-fintech-logistics-advertising platform is one of the most ambitious product expansions I have observed in any company this size. Advertising revenue is approaching $1.9B annually. Mercado Credito is now the dominant SME lender in several markets. The fulfillment network expanded 41% YoY in capacity. Management is not riding the marketplace tailwind — they are building new tailwinds beneath themselves. Passes.
Point 3 — R&D effectiveness relative to company size: MELI does not report R&D separately in the manner a chemicals or semiconductor company would. However, the relevant proxy is engineering and product investment — evidenced by the affiliate channel growing 4x YoY, NPS records, and the logistics technology capabilities that allow 24-hour delivery at scale. The investments in AI-driven credit underwriting (enabling the credit book expansion while improving NPL ratios) are particularly notable. Passes, with the caveat that formal measurement is difficult.
Point 4 — Above-average sales organization: 75 million unique buyers in Q3, 7.8 million net adds in a single quarter. Affiliate channel growing 4x YoY. Marketing at ~11% of revenue is not low, but the affiliate model is increasingly efficient (affiliate revenue growing faster than marketing spend). The platform's network effects mean sellers recruit buyers recruit sellers — the "sales organization" is partly the platform itself. Passes.
Point 5 — Worthwhile profit margin: Gross margin of 43.3% in Q3 FY25. Operating margin of 9.8% — the lowest in at least 12 quarters. This is the central question of the earnings review. Management has explicitly framed the compression as deliberate: 200-300 basis points of margin sacrificed for market share investment. The key question — which I will address at length below — is whether this is the behavior of a management team investing rationally in a durable advantage, or one that is funding growth to sustain an unsustainable multiple. My reading, informed by the scuttlebutt, leans toward the former. But I withhold full conviction until the margin recovery becomes visible. Passes with qualification.
Point 6 — What is management doing to maintain/improve margins? Here I must be precise. Management is not currently working to improve margins — they have deliberately suppressed them. The question is whether they have the operational levers to recover margins when they choose to. The evidence suggests yes: gross margin has held at 43-44% even as operating investment ramped. The compression is below the gross line. When free shipping investment normalizes, when credit card cohorts reach maturity, and when advertising scales, the margin structure should improve. Management has stated that credit card cohorts older than two years in Brazil are now profitable. I have not independently verified this — it is a promise that remains in the Promise Tracker. Conditional pass.
Point 7 — Good labor relations: Glassdoor evidence is generally positive. No significant labor actions or public disputes. High-performance culture with expected work-life balance tensions. Passes.
Point 8 — Good executive relations (management depth): MELI's multi-country operation across 18+ markets with distinct regulatory, currency, and competitive environments requires exceptional management depth. The regional leadership structure — evidenced by Brazil, Mexico, and Argentina having meaningfully different strategic postures — suggests genuine depth below the CEO level. Argentina's fintech revenue (946M)now * exceeds * itscommercerevenue(495M) — a strategic outcome that required regional management to execute a complex pivot. Passes.
Point 9 — Depth of management team: As above — the complexity of operating across LatAm successfully, with each geography requiring distinct approaches, argues for genuine management depth. The CEO (Marcos Galperin) has led the company since 1999. This is continuity of exceptional duration. Passes.
Point 10 — Cost analysis and accounting controls: This is where I flag my most significant accounting concern. MELI's "adjusted FCF" of $718M for the nine months of FY25 versus simple FCF of $5.9B represents a $5.2B difference attributable to credit portfolio funding. Management's presentation of the credit portfolio as requiring a separate FCF framework is reasonable — it is analogous to a bank — but it significantly complicates the cash flow picture. Restricted cash has surged to $6.6B. For an investor attempting to assess true cash generation, the opacity is genuine. The corporation is partially a commerce business and partially a bank, and the bank's capital requirements are substantial and growing. I do not view this as a red flag for integrity, but it requires ongoing vigilance. Passes with noted complexity.
Point 11 — Unique competitive aspects: The integrated flywheel is MELI's defining characteristic. Marketplace generates transaction data → data enables superior credit underwriting → credit improves buyer purchasing power → higher GMV → more transaction data. Logistics integration (41% capacity growth YoY) creates a fulfillment advantage that cross-border competitors cannot easily replicate. Advertising is emerging as a third high-margin revenue stream. No competitor has all three. Passes with distinction.
Point 12 — Long-range profit outlook: Management is explicitly sacrificing short-term margins for long-range position. The language across four quarters has been consistent: deliberate investment, market leadership priority, temporary compression. The Q3 FY25 reacceleration (39.5% YoY revenue growth after a Q2 trough at 33.8%) validates that the investments — particularly in free shipping — are working. The long-range profit case rests on credit card cohort maturity, advertising scaling, and operational leverage as growth moderates. Passes — the long-range thesis is intact.
Point 13 — Growth without dilutive equity financing: Shares outstanding at 50.7 million, effectively flat. Revenue has grown from $1.7B (Q2 FY21) to a $29B+ annual run rate. This company has funded extraordinary growth without diluting shareholders. For the credit business, MELI uses debt rather than equity. Total debt is $7.8B, manageable against a $6.3B unrestricted cash position and $5.9B simple FCF run rate. Passes with distinction.
Point 14 — Management candor — "clamming up" under adversity: This is the nuanced point. During Q2 FY25, when growth decelerated to 33.8% and margins hit 12.2%, management maintained the investment narrative. The subsequent Q3 reacceleration vindicated that posture. However, on credit book risk — specifically the trajectory of NPLs in a potential recession scenario, and the exact timeline for margin recovery — management has been less forthcoming than I would prefer. "Deliberate and temporary" is not a timeline. An investor in the Fisher tradition must note this gap and watch whether it persists. Conditional pass.
Point 15 — Integrity: No evidence of self-dealing, related-party transactions of concern, or accounting manipulation. The company's multi-decade track record under consistent leadership, with no material fraud allegations, passes this point. Passes.
There is a distinction I have drawn throughout my career between companies that are "fortunate because they are able" and those that are simply "fortunate." The former creates its own tailwinds; the latter rides industry waves it did not generate.
MercadoLibre is, in my considered judgment, fortunate because it is able.
The LatAm e-commerce opportunity is large and open — any number of well-capitalized players could theoretically pursue it. Amazon has invested $10 billion in Brazil. Shopee has deployed aggressive subsidized shipping. Sea Limited's fintech arm is expanding. Yet in the quarter just reviewed, MELI grew revenue 39.5% on a $7.4 billion quarterly base — the 27th consecutive quarter above 30% growth. This is not the performance of a company riding a wave. This is the performance of a company generating the wave.
The free shipping decision is illustrative of management quality. Reducing the free shipping minimum from R79toR19 in June 2025 — at a moment when margins were already under pressure — required conviction. The payoff was immediate: Brazil items sold +42% YoY, GMV (USD) accelerating from 8% to 28% over four quarters. Management did not wait for competitive pressure to become existential. They acted preemptively. In my experience, this is the hallmark of management that is building for decades, not managing to quarterly expectations.
The revenue trajectory deserves particular attention:
| Quarter | Revenue | YoY% | GMV (USD) YoY |
|---|---|---|---|
| Q4 FY24 (Dec-24) | $6.06B | 37.4% | 8% |
| Q1 FY25 (Mar-25) | $5.94B | 37.0% | 17% |
| Q2 FY25 (Jun-25) | $6.79B | 33.8% | 21% |
| Q3 FY25 (Sep-25) | $7.41B | 39.5% | 28% |
The key divergence I observe is that GMV in USD is accelerating (8% → 28%) while FX-neutral GMV is decelerating. This means the reported USD growth is being liberated from FX headwinds — the Argentine peso's stabilization is allowing true economic performance to surface in the headline numbers. This is a bullish divergence, not a misleading one.
Items sold at 635 million growing 39% YoY on a base of 456 million a year prior — these are not small numbers. The volume growth outpacing value growth implies ongoing unit economics pressure (lower average order values), but also implies market share gains among price-sensitive segments that will grow with them over time.
Marcos Galperin has led this company since 1999. Twenty-six years is an extraordinary tenure. In my experience, founder-led companies of this duration tend to display one of two characteristics: either the founder has instilled an institutional culture that survives their direct management of each decision, or the company has become dependent on the founder's personal judgment in ways that create succession risk.
The evidence from MELI's regional diversity — Argentina's fintech pivot, Mexico's marketplace ramp, Brazil's credit card scaling — suggests the former. These are not decisions that a single person made from a Buenos Aires office. They required regional management executing a complex, multi-year strategic vision.
The two areas where I would press management further:
Credit portfolio opacity. The credit book grew from $6.6B to $11.0B in three quarters. NIMAL at 21% is healthy but compressing. NPL 15-90 at 6.8% is improving but the cohort maturation dynamics are opaque. Management should be more forthcoming about recession stress scenarios.
Margin recovery timeline. Four quarters of "deliberate and temporary" without a timeline is approaching the boundary of what I consider candid communication. Q4 FY25 (reporting in two days) should begin providing a clearer picture. If margins remain at 9-10% without explanation in Q4, this will become a Point 14 concern.
I would be failing in my responsibility to the reader if I did not address the credit book directly.
In nine months of FY25, the credit portfolio expanded from $6.6B to $11.0B. This is not organic growth — it is a deliberate decision to originate at accelerating velocity. The business model benefits are real: for 60%+ of MELI's SME customers, Mercado Credito is their only source of credit. The underwriting advantage — transaction data from years of marketplace activity — is genuine. The NIMAL of 21% is attractive by any standard.
However, a portfolio that has grown 67% in nine months has not been tested. The cohorts now representing the bulk of the book were originated during a period of relative economic stability. If Argentine or Brazilian macro conditions deteriorate meaningfully — currency stress, unemployment spikes — the NPL trajectory could move sharply. The 17.6% NPL >90 days already in the book is a number that deserves attention.
I do not view this as disqualifying. Banks and bank-adjacent companies carry this risk by their nature. But an investor who does not price this possibility into their assessment is not thinking carefully about the full range of outcomes.
I have written at length that the investor who sells a truly outstanding company because the stock appears somewhat overvalued in the near term will almost certainly come to regret it. At the same time, one must assess whether price bears any relationship to fundamental value.
At $1,997/share as of February 21, 2026:
For a company growing revenue at 39% YoY on a $29B+ annual run-rate, 3.9x EV/Revenue is not an obviously expensive price. Most high-quality US software companies with half this growth rate trade at higher multiples. The P/E of 53x looks elevated but reflects deliberately suppressed earnings. Management's own framing — 200-300 basis points of margin sacrificed for growth — implies normalized earnings materially above current levels.
I would not use this analysis to set a price target. That is not how I operate. What I can say is that at current prices, the long-term investor in MELI is not paying an obviously foolish price for one of the highest-quality growth businesses I have examined in years.
Prior beliefs: No prior Phil analysis on MELI. Starting fresh.
Updated beliefs established in this review:
This is one of the finest growth businesses I have examined. It operates in markets with extraordinary runway, it has built competitive moats that cross-subsidize each other, it is led by a founder-oriented management team with a 26-year track record, and it has grown 27 consecutive quarters above 30% on a base that now exceeds $29B annually.
The qualifications I place on this verdict are genuine: the credit portfolio's maturation dynamics are not fully visible, management's margin recovery timeline is opaque, and the competitive environment (Shopee, Amazon, Shein) is intensifying in ways that require continued investment to counter.
An investor who purchases MELI today and holds it through the inevitable periods of margin pressure, competitive noise, and currency volatility is likely to be rewarded generously over the next decade. An investor who trades around every quarter will almost certainly miss the compounding.
If the job has been correctly done, the time to sell is — almost never.
Thesis status: Intact. Conviction: High with specified qualifications.
Supplementary scuttlebutt sources: Trustpilot MELI | Capterra Mercado Pago | The Digital Banker | Bloomberg — competition | Motley Fool — Shopee | Glassdoor MELI | Nasdaq — credit risk