NU Nu's Profit Just Doubled Again. So Did the Skepticism About Whether It Lasts.

One Profitable Quarter Was a Milestone. Two in a Row Is a Pattern.

Nu Holdings' second quarter of 2023 - three months ended June 30, 2023 - answers the question nu/2023-03 left open: was Q1's $141.8 million IFRS profit a one-off crossing point, or the start of something durable? Q2's answer is $224.9 million of net income attributable to shareholders, up 58% quarter-over-quarter and swinging from a $29.9 million loss a year ago - Nu's second consecutive profitable quarter, on total revenue of $1,868.6 million (+61% YoY). Profit before income taxes reached $324.0 million, more than 13 times the $24.6 million loss reported in Q2 2022. For the first half of 2023 combined, Nu has now booked $366.6 million in net income, against a $74.9 million loss for the same six months of 2022 - a swing of over $440 million in one year.

The market reaction has been considerably more favorable than the muted response after Q1's profitability milestone: Nu closed the quarter at $7.89, up 65.8% from $4.76 three months earlier and now within reach of its $9.38 IPO-day close for the first time since early 2022 (see Target Valuation Range). Growth in Mexico and Colombia continued to outpace Brazil's own early-years trajectory, per management's own framing on the call, while a long-running Brazilian tax dispute quietly resolved in Nu's favor this quarter (see Beyond the Usual) - a genuinely clean footnote in an otherwise strong quarter.

The Prescription

Nu should keep pushing the two levers management itself named on the call: growing the active customer base (83.7 million customers, +18.4 million YoY, 82% activity rate) and raising ARPAC^» per customer, which hit a new high of $9.3/month this quarter (+18% YoY on an FX-neutral basis) - up from $8.6 just one quarter ago in nu/2023-03. The compounding is working exactly as advertised: more mature customer cohorts are already monetizing at $24/month, meaning the blended $9.3 figure still has years of runway as younger cohorts mature, the same structural argument Nu has made since its first quarters as a public company (see nu/2022-03).

What Nu should stop doing: continuing to lead its own public messaging with Adjusted Net Income figures now that two consecutive quarters of real, IFRS-basis profit exist to point to instead. This isn't a new critique (see nu/2023-03) but it compounds with each additional profitable quarter - the gap between what Nu reports under IFRS and what it emphasizes to the market keeps existing even as the IFRS number itself becomes the stronger story to tell.

Key Financial Metrics

Q2 2023 vs. Q2 2022, consolidated, reported in USD - Nu reports natively in US dollars, so no FX conversion is needed

Metric	Q2 2023	Q2 2022	YoY
Total revenue	$1,868.6M	$1,157.6M	✅ +61%
Gross profit	$782.0M	$363.5M	✅ +115% (margin: 41.8% vs. 31.4%)
Total operating expenses	$458.0M	$388.1M	✅ +18%, well below revenue growth
Profit (loss) before income taxes	$324.0M	$(24.6)M	✅ Swung to a profit
Profit (loss) for the period	$224.9M	$(29.9)M	✅ Swung to a profit, +58% QoQ vs. Q1 2023's $141.8M
Earnings per share - basic	$0.0475	$(0.0064)	✅ Swung positive
H1 2023 profit (loss) for the period (six months)	$366.6M	$(74.9)M	✅ Swung to a profit

Balance sheet metric	Jun 2023	Mar 2023	Change
Total assets	$33,608.1M	$29,489.4M	✅ +14.0%
Total liabilities	$27,963.5M	$24,280.9M	✅ +15.2% (deposit growth, not distress - see below)
Total equity	$5,644.6M	$5,208.5M	✅ +8.4%
Deposits	$18,033.7M	$15,757.7M	✅ +14.4%
Loans to customers	$2,433.2M	$2,020.2M	✅ +20.4%
Cash and cash equivalents	$6,175.0M	$4,310.5M	✅ +43.3%

Gross margin expanded again, to 41.8% from 40.2% in Q1 2023 and up from 31.4% a year ago - the operating-leverage trend flagged last quarter continuing rather than reversing. Total operating expenses grew 18% year-over-year against 61% revenue growth, meaning Nu's cost base scaled at roughly a third the rate of its top line. Credit loss allowance expense rose to $590.4 million from $338.5 million a year ago (+74%), still growing faster than revenue in absolute terms, but the gross-margin math above shows revenue and interest income growth is now comfortably outrunning it - the reverse of the dynamic that compressed margins in nu/2022-03.

Key Operational Metrics

• Customers: 83.7 million (+18.4 million YoY, +28% YoY), up from 79.1 million as of April 2023 cited in nu/2023-03. Monthly activity rate: 82%, unchanged from last quarter. Active customers grew 32% YoY.
• Monthly ARPAC: $9.3, a new record high, +18% YoY FX-neutral - continuing the unbroken climb: $6.7 (Q1'22) → $8.6 (Q1'23) → $9.3 (Q2'23). Management noted more mature cohorts are already monetizing at $24/month.
• Geography: Colombia reached 700,000 customers this quarter, and Nu resumed active growth investment in Mexico after a brief pause, adding roughly 1.5 million customers per month there per the call. Nu's Mexican subsidiary Nu Financiera reported capital adequacy ratios of 42.2% in Mexico and Nu's Brazilian entities similarly well above the 10.5% regulatory minimum in both countries, per management's remarks - a solvency buffer worth noting given the pace of loan-book growth.
• Segment reporting: still a single reportable operating segment, unchanged from every prior quarter covered.

Beyond the Usual

A years-old Brazilian federal tax dispute over PIS/COFINS contribution increases was finally, fully settled this quarter. Nu had carried a $15.7 million provision against this matter as of December 31, 2022 - itself a lawsuit Nu had already withdrawn back in June 2019 - and in May 2023 the judicial deposit backing the claim was released to the Brazilian Tax Authorities, using up the provision and closing the matter. The provision for lawsuits and administrative proceedings line consequently dropped from $17.9 million to just $4.7 million quarter-over-quarter, almost entirely because this single long-dormant tax item cleared. This is genuinely interesting footnote color, not a criticism: a multi-year contingent liability resolved cleanly, at the amount already provisioned, with no incremental cash cost to Nu beyond what had already been set aside.

Civil-risk provisions (mostly credit-card-related lawsuits) grew from $2.1 million to $4.5 million over the same period - a smaller, ordinary-course increase that stands out mainly because it's now the majority of a much smaller total provision, following the tax item's resolution above.

Total liabilities grew 15.2% quarter-over-quarter, driven almost entirely by deposit growth (+14.4%) rather than any distress signal - deposits are Nu's primary funding source, so this is the expected shape of a growing deposit-taking institution's balance sheet, not a red flag. It's flagged here only because a 15%+ single-quarter jump in total liabilities is the kind of number that reads alarming without this context, and the filing itself doesn't spell out the distinction for a reader skimming just the balance sheet totals.

What Management Emphasized on the Call

Vélez again led with the growth-and-profitability combination, framing Nu Holdings as "now translating its potential into profits" - a shift in verb tense from Q1's "starting to convert," consistent with two consecutive profitable quarters instead of one. Management devoted more of the prepared remarks than in prior quarters to the two-lever framework (customer growth, then ARPAC growth) as the explicit playbook going forward, rather than to defending the growth story against skepticism the way earlier calls did (see nu/2022-03).

Mexico and Colombia both got extended, specific treatment - the capital-adequacy figures (42.2% in Mexico, both markets above regulatory minimums), the Cuenta Nu savings account's role in reaccelerating Mexican growth, and Colombia's customer count - continuing the pattern from nu/2023-03 of international expansion getting substantive rather than superficial airtime. The resolved tax dispute and the civil-provision growth flagged in Beyond the Usual went unmentioned on the call, consistent with neither being large enough to warrant discussion.

Target Valuation Range

Reverse-DCF implied fair value: the current $32.0 billion enterprise value still requires roughly the same ~25-35% CAGR profit growth trajectory established last quarter (12% WACC) - not a materially more optimistic ask despite the 66% rally, since profit itself grew ~58% quarter-over-quarter. Bottom line: still reasonably valued, not clearly cheap anymore - the rally roughly tracked the improvement in profitability and growth rather than running ahead of it, so this reads as a fair re-rating rather than a fresh mispricing in either direction.

Nu closed Q2 2023 at $7.89 (June 30, 2023), against 4,742,615,887 total shares outstanding (3,651,272,846 Class A, 1,091,343,041 Class B):

Market cap → enterprise value	Q2 2023
Share price (period-end)	$7.89
Shares outstanding	4,742,615,887
Market capitalization	~$37.4B
Total liabilities	n/a (net cash basis used)
Less: cash and equivalents	$6,175.0M (vs. $764.5M interest-bearing debt + $19.2M leases)
Enterprise value	~$32.0B

Market cap is up from the $22.4 billion implied at the end of Q1 2023.

Peer-multiple sanity check	Q1 2023	Q2 2023	Change
Revenue basis	TTM	TTM (Jul 2022-Jun 2023), ~$6,244.7M	-
Enterprise value	~$18.8B	~$32.0B	⚠️ up
EV/Revenue	~3.4x	~5.1x	⚠️ up, tracking the stock's rally
P/B	~4.3x	~6.6x	⚠️ up
P/E (annualized)	~39.5x	~41.6x	- roughly flat, earnings base grew in proportion

The reverse-DCF sanity check from nu/2023-03 is worth re-running with a second data point now available: at a $32.0 billion enterprise value and the same 12% WACC assumption, Nu's Q2 2023 annualized profit run-rate (~$900 million) implies a required growth trajectory broadly similar to what was implied three months ago - meaning the stock's 66% rally this quarter was largely justified by the actual improvement in profit (which itself grew roughly 58% quarter-over-quarter), rather than the market pricing in a materially more optimistic future than it already was. This is still a two-quarter base for a multi-year model, so the same caveat from nu/2023-03 applies: treat this as a sanity check on direction, not a precise target, until more profitable quarters accumulate.

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