A Revenue Milestone, and an Appeal the Company Just Lost
Over these 12 quarters: share price $1,268 to $1,697 (+34%); operating income 0.00 to 0.00 US$ million; operating income margin 18.2% to 6.7%. One graph in actual numbers: bars are the quarter's operating income, over them the share price at quarter-end (left axis) and the operating income margin (right axis); each line is fitted to its own range, so read the timing, not the heights. Prices are adjusted for splits.
Net revenue and financial income crossed $10 billion in a single quarter for the first time, growing 49.8% year-over-year to $10,169 million - the 10-Q's own income statement confirms the press release's headline number. But the quarter's more consequential development sits in the footnotes, not the headline: the long-running Brazil-Argentina intercompany-services withholding-tax dispute which has grown every quarter since FY2025's initial $528 million provision just lost its appeal. On July 16, 2026, the Federal Regional Court of the Third Region denied the Company's appeal on the original case, and the provision for the disputed amounts has grown to $632 million as of June 30, 2026 (from $592 million three months ago and $528 million at FY2025 year-end) - a third consecutive quarter of growth in this single line item, now compounded by an adverse appellate ruling.
Operating income grew just 5.3pp slower than revenue's headline pace would suggest at first glance: income from operations was $683 million, a 6.7% margin, down from 12.2% a year ago - essentially flat with Q1 2026's own 6.9% margin, meaning the free-shipping-subsidy-and-credit-provisioning trade flagged last quarter hasn't reversed, it's just stopped getting materially worse quarter-over-quarter. Net income fell to $466 million (4.6% margin, from 7.7%) even as Adjusted EBITDA held up better, falling only 4.8% to $975 million - the gap between the two, as in Q1, traces mostly to depreciation and the provision for doubtful accounts, both add-backs to EBITDA but real cash costs of the credit-card ramp. Every one of the four country segments lost direct-contribution margin this quarter, covered in full below.
The one genuine improvement: Adjusted free cash flow turned positive again, to $214 million, reversing Q1's $(56) million outflow - though still down 59.0% from $522 million a year earlier, and thin relative to a $10 billion-revenue quarter.
The Prescription
The credit book keeps scaling faster than the business is proving it can absorb without margin cost: provision for doubtful accounts grew 84.9% year-over-year to $1,276 million, outpacing even this quarter's fast revenue growth, and now represents 12.55% of revenue (from 10.16% a year ago). NIMAL - net interest margin after losses - fell to 20.7% from 23.0%, a slower deterioration than Q1's drop but still a decline, not a stabilization. MercadoLibre should keep disclosing this ratio quarter over quarter rather than letting the dollar provision figure alone stand in for credit quality, since the dollar number will keep growing simply because the loan book is growing.
What it should stop doing: treating the Brazil-Argentina tax dispute as a single, static line item in the footnotes. This is now a multi-entity, multi-case exposure - the original case just lost on appeal, and in May 2026 the Company restructured its intercompany service agreements and opened two new writs of mandamus specifically to argue for a lower 10% withholding rate instead of the 15% rate the original case is now stuck with. That's a legitimate legal strategy, but it means readers are now tracking three overlapping pieces of the same dispute rather than one, and the Company's own disclosure doesn't yet total the maximum combined exposure across all of them in one place.
Key Financial Metrics
US$ billion; margin is operating income as a percent of net revenue, per quarter. Values are standalone quarters; 3 derived from annual, half-year or nine-month figures (Q4 2023, Q4 2024, Q4 2025).
Three months ended June 30, 2026 vs. three months ended June 30, 2025 - consolidated, reported in USD (MercadoLibre reports natively in dollars; no FX conversion is needed)
| Metric | Q2 2026 | Q2 2025 | YoY |
|---|---|---|---|
| Net revenues and financial income | $10,169M | $6,790M | +49.8% |
| Adjusted EBITDA» | $975M | $1,024M | -4.8% |
| Income from operations | $683M | $825M | -17.2% (margin -5.4pp to 6.7%) |
| Net income | $466M | $523M | -10.9% (margin -3.1pp to 4.6%) |
| Adjusted free cash flow (Company's own non-GAAP measure, derived quarter-standalone) | $214M | $522M | -59.0%, but positive again after Q1's outflow |
| Total cash, unrestricted (cash + short/long-term investments) | $7,445M | $9,030M | -17.6% |
Where Q2 2026's Revenue Went
Net revenue, and how much of it was left as operating profit and net income, in one view. Figures are the same standalone-quarter figures as the metrics table.
US$ billion, Q2 2026. Thin slices are drawn at a minimum height so they stay visible; the printed values and percentages are exact. Operating costs are net revenue less operating income; other items & tax are operating income less net income.
Key Operational Metrics
| Metric | Q2 2026 | Q2 2025 | YoY |
|---|---|---|---|
| Gross merchandise volume (GMV)» | $21,926M | $15,258M | +43.7% |
| Total payment volume (TPV)» | $100,952M | $64,602M | +56.3% - crossed $100 billion in a single quarter for the first time |
| Unique active buyers | 89M | 71M | +25.4% |
| Fintech monthly active users | 88M | 68M | +29.4% |
| Number of items sold | 795M | 550M | +44.5% |
| NIMAL (net interest margin after losses) | 20.7% | 23.0% | -2.3pp |
| Provision for doubtful accounts (% of revenue) | 12.55% | 10.16% | +2.39pp |
Commerce vs. Fintech: Two Businesses Growing at Different Rates
MercadoLibre's own income statement reports by country, not by Commerce/Fintech line - the segment split below comes from the Company's earnings materials rather than the audited financial statements, so treat the margin comparison with that caveat (only the country-level figures in the next section are drawn directly from the 10-Q's segment note).
| Commerce | Fintech (Mercado Pago) | |
|---|---|---|
| Net revenue, Q2 2026 | $5.8B | $4.4B |
| YoY growth (USD) | +50% | +49% |
| Key volume metric | GMV $21,926M (+43.7% reported) | TPV $100,952M (+56.3% reported) |
| User metric | 89M unique active buyers (+25.4%) | 88M monthly active users (+29.4%) |
The two businesses grew at almost identical reported rates this quarter (50% vs. 49%), which is a change from earlier periods, when Fintech consistently outgrew Commerce. What's actually driving Fintech's growth has shifted structurally: total payment volume surpassed $100 billion for the first time, but the credit portfolio - the piece of Fintech carrying the margin risk flagged above - grew 75% year-over-year to more than $16 billion, with 2.6 million new credit cards issued in the quarter (up from 1.6 million a year ago). Assets under management grew 68% to $23 billion, meaning users are entrusting more savings to the platform even as the Company is simultaneously underwriting more credit to them - a mechanically related pair of trends worth watching together, not in isolation, since both draw on the same balance sheet.
Four Countries, All Losing Margin at Once
| Segment | Revenue Q2 2026 | Revenue Q2 2025 | Direct contribution margin Q2 2026 | Direct contribution margin Q2 2025 | Margin change |
|---|---|---|---|---|---|
| Brazil | $5,530M (+59.2%) | $3,473M | 10.0% | 15.6% | -5.6pp |
| Mexico | $2,337M (+55.2%) | $1,506M | 13.1% | 17.8% | -4.7pp |
| Argentina | $1,839M (+20.4%) | $1,527M | 33.9% | 43.3% | -9.4pp |
| Other Countries | $463M (+63.0%) | $284M | 13.9% | 9.9% | +4.0pp |
| Total | $10,169M (+49.8%) | $6,790M | 15.2% | 22.1% | -6.9pp |
Three of the four segments lost margin, and the pattern matches Q1's read: Argentina compressed the most in percentage-point terms, from 43.3% to 33.9% - still by far the most profitable segment, but the softest read of the year so far, continuing pressure from the peso's translation effect on local costs. Brazil - the segment carrying both the free-shipping-subsidy cut and the bulk of the credit-card ramp - stayed compressed at 10.0%, essentially flat with Q1's 8.15% rather than recovering. Only Other Countries improved, and modestly, off the smallest base of the four. The consolidated direct-contribution margin fell 6.9 percentage points to 15.2%, a smaller drop than Q1's 8.59-point fall, suggesting the rate of deterioration is slowing even though margin itself hasn't turned around.
Brazil
US$ million; margin is direct contribution as a percent of net revenues and financial income, per quarter. Revenue is Net revenues and financial income (segment note, external customers); profit is Direct contribution (segment note). Values are standalone quarters; some are derived from half-year, nine-month or full-year figures in the filings.
Mexico
US$ million; margin is direct contribution as a percent of net revenues and financial income, per quarter. Revenue is Net revenues and financial income (segment note, external customers); profit is Direct contribution (segment note). Values are standalone quarters; some are derived from half-year, nine-month or full-year figures in the filings.
Argentina
US$ million; margin is direct contribution as a percent of net revenues and financial income, per quarter. Revenue is Net revenues and financial income (segment note, external customers); profit is Direct contribution (segment note). Values are standalone quarters; some are derived from half-year, nine-month or full-year figures in the filings.
Other Countries
US$ million; margin is direct contribution as a percent of net revenues and financial income, per quarter. Revenue is Net revenues and financial income (segment note, external customers); profit is Direct contribution (segment note). Values are standalone quarters; some are derived from half-year, nine-month or full-year figures in the filings.
Stock Price: A Fifth Straight Quarter Below June 2025's Peak
MercadoLibre's stock closed the quarter at $1,697.39 on June 30, 2026, down modestly from Q1's $1,729.02 but still 35.1% below June 2025's $2,613.63 closing high - a peak-to-trough move over the trailing two years. The stock's May 2026 close of $1,695.65 was its lowest month-end close since July 2024's $1,668.90, meaning the June close essentially matched the low rather than recovering from it. Over the full two years, the stock is up just 1.7% from July 2024's $1,668.90 - nearly the entire two-year gain evaporated during the pullback that began after last June's peak (month-end close). No stock split falls within the two-year price window used here, so these are actual nominal prices, not split-adjusted figures.
Beyond the Usual
The tax dispute of the last three quarters just lost its first appeal
On July 16, 2026, the Federal Regional Court of the Third Region denied MercadoLibre's appeal in the original Brazil-Argentina intercompany-services withholding-tax case, and the Company will no longer make judicial deposits in that specific case going forward. The provision now stands at $632 million (net of $593 million in judicial deposits, which includes $143 million of accrued interest income), up from $592 million three months ago and $528 million at FY2025 year-end - a third consecutive quarter of growth, now with an adverse ruling attached rather than just an escalating "probable" assessment. Separately, in May 2026 four Brazilian subsidiaries restructured their intercompany service agreements and filed two new writs of mandamus specifically arguing for a lower 10% withholding rate (versus the 15% rate applied to the original, now-lost case) - management assesses the risk of losing these new cases as probable at the 10% rate and only reasonably possible at 15%, and has provisioned accordingly (a separate, smaller $3 million exposure at the differential rate remains unprovisioned). This is now three overlapping legal threads on the same underlying issue, not one resolved dispute.
The buyer protection program's maximum exposure grew faster than its reserve, again
Management's estimate of the maximum potential exposure under the buyer protection program grew to $9,292 million as of June 30, 2026, from $7,953 million at FY2025 year-end - a 16.8% increase in six months - while the actual reserve grew from $19 million to just $22 million, a ratio of roughly 422-to-1. Management states plainly that it doesn't believe the maximum theoretical exposure represents actual expected losses, based on historical claims experience, and this gap has been a stable feature of every quarter rather than a new concern - but the dollar gap itself keeps widening in absolute terms as the payment platform scales, and it's worth tracking whether the ratio itself (not just the dollar figures) ever moves.
A $3.5 billion multi-year commitment to cloud and AI infrastructure, two-thirds still unspent
The Company's purchase commitment for cloud platform and other technology services - explicitly including artificial intelligence capabilities, under two- and five-year agreements with its providers - rose to $3,502 million total (from $3,459 million last quarter), with $2,064 million of that still remaining to be spent. The size and multi-year structure of the commitment is itself a signal of how much infrastructure spend the Company has locked in ahead of actual usage, well beyond the ordinary cadence of a single quarter's capex.
New warehouse leases across four countries grew to $2,254 million, none of them operational yet
The Company has signed lease agreements for new warehouses in Brazil, Mexico, Argentina and Chile totaling $2,254 million (from $2,122 million last quarter), with lease terms running 2 to 16 years - all of it disclosed as not yet commenced. This is forward-looking evidence of where the logistics network is expanding before the footprint shows up in reported fulfillment capacity or segment costs.
$622 million in legal and tax exposure is disclosed as reasonably possible, and none of it is on the balance sheet
Separately from the Brazil-Argentina withholding-tax provision covered above, the Company discloses an aggregate $622 million of legal actions its management and outside counsel consider reasonably possible - not probable - of resulting in a loss, for which no amount has been accrued. Reasonably-possible-but-unaccrued is a distinct, lower disclosure tier than the withholding-tax matter, which is provisioned because management assesses it as probable; this $622 million is the total the Company is required to flag without yet booking, a different kind of exposure worth reading separately from the appeal loss above.
The supplier finance program grew 33% in six months, to $819 million
Obligations the Company has confirmed as valid to financial institutions under its supplier finance program - which lets suppliers request early payment on their invoices through participating banks rather than waiting for MercadoLibre's normal payment terms - rose from $616 million at FY2025 year-end to $819 million as of June 30, 2026. That's not a red flag on its own; it's a standard working-capital tool that scales with the size of the payables book. But a one-third increase in six months is a meaningfully faster pace of growth than the rest of the commitments in this section, and it's worth watching whether the program keeps compounding at that rate or was a one-time step-up.
Coverage Table
| Theme | Q2 2026 | Q2 2025 | YoY | Why it matters |
|---|---|---|---|---|
| Net revenue, reported | $10,169M | $6,790M | +49.8% | First time crossing $10 billion in a single quarter |
| Operating margin | 6.7% | 12.2% | -5.4pp | Essentially flat with Q1's 6.9% - the margin compression hasn't reversed |
| Consolidated direct contribution margin | 15.2% | 22.1% | -6.9pp | Every one of the four country segments lost margin |
| Adjusted free cash flow | $214M | $522M | -59.0% | Positive again after Q1's outflow, but still thin |
| Brazil-Argentina tax provision | $632M | $528M (Dec 2025) | +19.7% since FY2025 | Appeal just lost, two new related cases opened - see Beyond the Usual |
| Stock price | $1,697.39 | $2,613.63 (Jun 2025 peak) | -35.1% peak-to-trough | Near its two-year low, not recovering (month-end closes) |
Target Valuation Range
Too early to call against peers; slightly cheaper on sales than last quarter, flat on EBITDA and earnings. At about $92.5 billion of enterprise value MercadoLibre trades at ~2.6x trailing EV/Revenue (from ~2.9x), ~23.8x EV/EBITDA (from ~23.7x) and ~46.2x P/E (from ~45.7x), while trailing adjusted free cash flow fell to $1,127M from $1,367M. This section has no peer table.
| Market cap → enterprise value | Q2 2026 |
|---|---|
| Share price (period-end, Jun 30, 2026) | $1,697.39 |
| Shares outstanding | ~50.7M |
| Market capitalization | ~$86.1B |
| Total debt (incl. operating lease liabilities) | $13,176M |
| Less: unrestricted cash and investments | $6,751M |
| Net debt | $6,425M |
| Enterprise value | ~$92.5B |
Enterprise value eased slightly from Q1 2026's ~$93.4 billion, almost entirely on the stock's own modest pullback.
| Valuation multiples | Q1 2026 | Q2 2026 (TTM†) | Change |
|---|---|---|---|
| TTM Revenue | $31,803M | $35,182M | - |
| TTM Adjusted EBITDA» | $3,941M | $3,892M | down |
| TTM Net income | $1,920M | $1,863M | down |
| TTM Adjusted free cash flow | $1,367M | $1,127M | down |
| EV/Revenue | ~2.9x | ~2.6x | down |
| EV/EBITDA» | ~23.7x | ~23.8x | flat |
| P/E | ~45.7x | ~46.2x | up slightly |
† TTM = trailing four quarters (Q3 2025 through Q2 2026), each quarter's Adjusted free cash flow taken as the Company's own disclosed non-GAAP figure rather than an operating-cash-flow-less-capex method, to keep the TTM sum on one consistent basis.
MercadoLibre, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, filed with the U.S. Securities and Exchange Commission on August 6, 2026, and the Company's Q2 2026 earnings press release dated August 5, 2026. No verbatim management-call transcript was located on the Company's own investor-relations site for this quarter, so this post does not include a management-commentary section. Historical MELI share price data covers month-end closes from July 2024 through June 2026.