NU Revenue Tripled Again. Adjusted Profit Grew Just 3%. The Stock Fell Below $4 Anyway.

Record Revenue, Flat Profit - The Gap the Headline Didn't Show

Nu Holdings' second quarter of 2022 looked, on the surface, like a continuation of the story told since the December 2021 IPO (see nu/2022-03): another record revenue quarter, another record activity rate, another quarter of triple-digit growth. Total revenue reached $1,157.6 million, up 244% year-over-year in nominal dollars (230% on Nu's preferred FX-neutral basis) - a number large enough that the company said it had become the #4 credit-card issuer in Brazil by purchase volume, "surpassing century-old incumbent institutions," per the earnings presentation.

But sit the quarter's Adjusted Net Income - Nu's own non-IFRS profitability measure - next to the year-ago quarter, and the growth story stalls: $17.0 million in Q2 2022 versus $16.5 million in Q2 2021, an increase of just 3%, on revenue that more than tripled. The engine that's supposed to convert growth into profit didn't fire this quarter - not because the business slowed, but because credit loss provisioning grew even faster than revenue did, for the second straight quarter (see Key Financial Metrics). The market, for its part, had already priced this in: Nu closed the quarter at $3.74, down 51.5% from the $7.72 it closed Q1 2022 at, and down 60.1% from its $9.38 close on IPO day - a decline that outpaced the quarter's own numbers by a wide margin (see Target Valuation Range).

The Prescription

Nu's own quarterly-cohort disclosures make the case for what it should keep doing: nothing about the multi-year monetization curve broke this quarter. Mature customer cohorts are still climbing toward $21-23 a month in ARPAC^» while the blended base sits at $7.8, and 55% of active customers now use NuConta as their primary bank account - the single best predictor Nu has of a customer eventually reaching that higher monetization tier. The right move is the same one flagged last quarter: keep converting an already-massive, cheaply-acquired customer base into more products per customer, rather than chasing new-customer volume for its own sake.

What Nu should stop doing this quarter specifically: reporting Adjusted Net Income without also giving investors the one number that actually explains why it stalled - the pace of credit loss allowance growth relative to revenue growth. Credit loss allowance expenses grew 310% year-over-year to $338.5 million, comfortably outrunning revenue's 244% growth, and management's own materials don't put those two growth rates next to each other anywhere in the earnings deck. A company that already discloses ARPAC cohort curves down to the dollar has the analytical sophistication to show this comparison plainly instead of leaving investors to compute it from the raw financial statements themselves.

Key Financial Metrics

Q2 2022 vs. Q2 2021, consolidated, reported in USD - Nu reports natively in US dollars, so no FX conversion is needed

Metric	Q2 2022	Q2 2021	YoY
Total revenue	$1,157.6M	$336.1M	✅ +244% nominal (+230% FX-neutral)
Gross profit	$363.5M	$166.4M	⚠️ +118% (margin: 31.4% vs. 49.5%)
Credit loss allowance expenses	$(338.5)M	$(82.7)M	⚠️ +310% - outran revenue growth
Total operating expenses	$(388.1)M	$(172.9)M	⚠️ +124%
Loss before income taxes	$(24.6)M	$(6.5)M	⚠️ Loss widened
Loss for the period	$(29.9)M	$(15.2)M	⚠️ Loss widened
Adjusted Net Income, non-IFRS	$17.0M	$16.5M	⚠️ +3% - essentially flat despite tripled revenue
Net cash from operating activities (derived, see note)	~$464.3M	n/a	✅ Swung positive
Total cash and cash equivalents (quarter-end)	$3,701.0M	n/a	✅ +34.7% vs. Q1'22's $2,968.6M

Balance sheet metric	Jun 2022	Dec 2021	Change
Total assets	$25,188.7M	$19,858.7M	✅ +26.8%
Total liabilities	$20,450.5M	$15,416.1M	⚠️ +32.7%
Total equity	$4,738.2M	$4,442.5M	✅ +6.7%
Deposits	$13,293.2M	$9,667.3M	✅ +37.5%
Credit card receivables + loans to customers (net)	$8,154.2M	$5,975.3M	✅ +36.5%

Nu's interim filing only discloses cash flows on a cumulative six-month basis, not standalone by quarter - the operating cash flow row above is derived by subtracting the already-published Q1 2022 figure (nu/2022-03: $78.3M) from this filing's H1 2022 total ($542.6M) - a figure ultimately sourced from filed documents, just not disclosed standalone by Nu itself.

Gross margin compressed further, from 49.5% a year ago to 31.4% this quarter - the same credit-loss-provisioning story flagged last quarter, now more pronounced: credit loss allowance expenses more than quadrupled (+310%) while revenue "only" tripled (+244%). Management's own framing, on the call, attributed the margin compression to two factors: growth itself forcing IFRS 9's front-loaded provisioning, and rising interest rates pushing up gross revenue (via interest earned on cash) without a matching gross-profit benefit, since higher rates also raise funding costs. Both are real effects, but neither changes the fact that Adjusted Net Income - the profitability number Nu leads with - barely moved year-over-year. 90+ day NPLs^» rose from 3.0% (Q1'22) to 3.7% this quarter, and 15-90 day NPLs rose from 2.6% to 3.7% - the sharpest sequential delinquency increase since the IPO, though still below the pandemic-era peaks of 2020.

Key Operational Metrics

• Customers: 65.3 million (Jun 2022), up 57% YoY, with 5.7 million net adds in the quarter - in line with Q1's pace. Monthly active customers: 52.3 million, activity rate a new record 80% (up from 78% last quarter, 72% a year ago).
• Monthly ARPAC: $7.8, up 105% FX-neutral year-over-year, continuing the unbroken climb since IPO ($4.0 → $4.9 → $5.6 → $6.7 → $7.8 over the last five quarters). Mature cohorts are already averaging ~$21/month.
• Monthly cost to serve per active customer: $0.8, flat year-over-year (0% FXN) - Nu frames this as evidence of operating leverage, since ARPAC grew 105% over the same period while cost to serve didn't grow at all.
• Credit portfolio: $9.2 billion (credit cards + personal loans), +109% FXN YoY. Personal loans grew to 23% of the portfolio mix (from 13% a year ago), and management explicitly repriced and moderated personal loan origination growth this quarter - a deliberate slowdown aimed at credit resilience given "a more uncertain short-term outlook for the Brazilian economy," per CFO Guilherme Lago on the call - rather than a demand shortfall.
• Purchase volume: $20.0 billion, up 94% FXN YoY.
• Deposits: $13.3 billion, up 87% FXN YoY, funded at a cost below Brazil's CDI risk-free rate; loan-to-deposit ratio of just 24%.
• Geographic mix: Mexico reached 2.7 million customers, Colombia 313,800 - both still the #1 issuer of new cards in their respective markets. Nu continues to report a single reportable operating segment; no country-level revenue breakout is available in an interim filing (annual-only disclosure, same as nu/2021-12).
• Brazil-only profitability, disclosed for the first time this quarter: Nu Brazil (on a standalone basis, excluding Mexico and Colombia) generated an accounting profit of $13.0 million for H1 2022, versus a $19.7 million full-year loss in 2021 - the first time management has broken out this geography-specific profitability figure, framed on the call as evidence that Brazil now funds the international expansion rather than needing external capital.

Adjusted Net Income of $17.0 million is only 3% above the $16.5 million Nu posted in Q2 2021 - a real deceleration hidden inside a quarter Nu's own materials frame entirely around growth superlatives (record revenue, record purchase volume, record credit portfolio). The cause is legible in the filed statements - credit loss allowance expenses grew 310% versus revenue's 244% - but neither the earnings presentation nor the press release puts those two growth rates side by side anywhere. Worth watching whether Adjusted Net Income re-accelerates once the credit book's growth rate normalizes, or whether this becomes a multi-quarter pattern.

Beyond the Usual

A regulator quietly released Nu Financeira early from an elevated capital requirement it had carried since 2018: as a condition of receiving its financial-institution license that year, Nu Financeira committed to operate with a Basel-style minimum capital adequacy ratio of 14.0% - well above Brazil's standard 10.5% requirement - for its first five years of operations, through 2023. On July 14, 2022, the Brazilian Central Bank informed Nu that this elevated requirement no longer applied, more than a year ahead of schedule, leaving Nu Financeira subject only to the standard 10.5% floor. A central bank voluntarily relaxing a young lender's capital constraint early is a meaningful vote of confidence in its risk management that doesn't get any mention in Nu's own earnings materials.

Nu changed how it recognizes write-offs on delinquent personal loans this quarter, moving the write-off trigger from 360 days past due to 120 days past due (credit card write-offs are unaffected, staying at 360 days). The company states the change had no effect on the profit-or-loss statement, but it does pull loans out of the reported gross exposure and NPL figures roughly three months earlier than the prior methodology would have - the filing discloses the impact at $139.4 million in additional write-offs that would not have occurred yet under the old 360-day standard.

This means Nu's 90+ day NPL ratio (3.7% this quarter) is calculated on a methodology that removes bad personal loans from the numerator sooner than before, making the ratio look somewhat better than a like-for-like comparison against Q1 2022 or earlier quarters would show. It's a legitimate accounting-estimate change tied to Nu's actual recovery experience with these loans - not evidence of hidden deterioration - but it's a real comparability break worth remembering the next time Nu's NPL trend is compared across this quarter's boundary.

Nu's January 2022 acquisition of Olivia, the Brazilian AI personal-finance startup, continues to run at a loss inside the group: $288,000 of revenue and roughly $5.7 million of net loss for the three months of Q2 alone (derived from the filing's H1 cumulative disclosure of $568,000 revenue / $14.8 million loss, less Q1's already-reported $280,000 / $9.1 million - see nu/2022-03) - a narrowing loss trajectory quarter over quarter, though still a drag on consolidated results eighteen months after the deal closed.

What Management Emphasized on the Call

The prepared remarks led with the same growth superlatives as the prior two quarters, but CEO David Vélez spent unusually specific time this quarter breaking out Nu Brazil's standalone profitability - $13.0 million in H1 2022, positive for the first time as a full-year figure - explicitly framing it as proof that the core market can now "reinvest those profits into the expansion and improvement of our operations" in Mexico and Colombia without needing fresh capital. That's a more concrete capital-allocation narrative than prior quarters offered, and it's consistent with the international guarantee structures flagged in nu/2022-03 (the Nu Servicios guarantee, the April 2022 $650 million syndicated facility) - Brazil is now explicitly positioned as the internal funding source for that expansion, rather than just an incidental beneficiary of it.

On credit, CFO Guilherme Lago was candid that the personal loan slowdown was a deliberate choice, not a demand problem - "we decided to reprice and moderate the growth of our personal loan portfolio aimed at strengthening its credit resilience in the context of a more uncertain short-term outlook for the Brazilian economy." That's a more cautious tone than the "cherry-pick who gets credit" confidence of the Q1 2022 call, and it lines up with the NPL increase disclosed this quarter (see Beyond the Usual above) - management's own actions this quarter (tightening personal loan growth) are consistent with what the delinquency data shows, rather than contradicting it.

Target Valuation Range

No numeric fair-value target yet - three quarters of public trading, with an unstabilized credit-provisioning cycle, still isn't enough to anchor a DCF, so the ~4.5x EV/TTM Revenue and ~3.7x P/B below describe today's ~$14.26 billion enterprise value, not a derived target. Bottom line: materially cheaper again - down to roughly 4.5x trailing revenue from Q1's already-compressed 14.3x - on a business whose top-line and balance-sheet growth genuinely accelerated, while its bottom-line growth stalled. This looks less like pure macro sentiment now and more like the market pricing in the credit-provisioning story directly.

Nu closed Q2 2022 at $3.74 (June 30, 2022), down 51.5% from Q1's $7.72 close and down 60.1% from the $9.38 IPO-day close eight months earlier - a far steeper decline than Q1's 17.7% drop, tracking the broader 2022 growth-stock selloff but also, this quarter, a business where Adjusted Net Income genuinely didn't grow much. Using Q2's weighted-average diluted share count of 4,670,972,000 (basic and diluted are equal, since Nu reported a net loss for the quarter):

Market cap → enterprise value	Q2 2022
Share price (period-end)	$3.74
Shares outstanding	4,670,972,000
Market capitalization	~$17.47B
Total liabilities	n/a (net cash basis used)
Less: cash and equivalents	$3,701.0M (vs. $495.9M interest-bearing debt + leases)
Enterprise value	~$14.26B

Market cap is down more than half from $36.0 billion three months earlier.

Peer-multiple sanity check	Q1 2022	Q2 2022	Change
Revenue basis	TTM (Apr 2021-Mar 2022)	TTM (Jul 2021-Jun 2022), ~$3,151.7M	-
Enterprise value	~$33.2B	~$14.26B	✅ down sharply
EV/Revenue	~14.3x	~4.5x	✅ down sharply
P/B	~7.5x	~3.7x	✅ down
P/E	not meaningful (IFRS loss)	not meaningful (IFRS loss)	-

A full DCF remains premature for the same reasons flagged in the prior two posts: three quarters of public-company disclosure isn't enough history to anchor multi-year free-cash-flow assumptions, and this quarter's own numbers show why - a credit-loss-provisioning cycle that hasn't yet stabilized can swing Adjusted Net Income growth from "record" to "flat" within a single quarter. The peer-multiple read is honest enough on its own: Nu is now trading at roughly a third of its Q1 multiple on trailing revenue, on a business that's growing its top line and balance sheet faster than ever, while its actual profit generation stalled. Whether that's the market correctly pricing in a credit cycle risk that hasn't fully played out, or over-punishing a business whose fundamentals (deposits, ARPAC, activity rate) are all still improving, isn't resolved by this quarter's filing - only the next few quarters of credit performance will show which read was right.

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