dLocal Q1: TPV Surges 73% But Unit Economics Worsen

What happened

dLocal reported Q1 2026 TPV above $14 billion, up 73% year-over-year, with record gross profit of $119 million (+40% YoY) and operating profit of $57 million (+25% excluding tax adjustments). However, gross profit/TPV compressed to roughly 0.85%—below the already declining 0.99% in Q3 2025—as higher OPEX carry-over and temporary working capital effects dragged adjusted free cash flow to just $15 million. Net income excluding tax adjustments rose only 11% to $52 million, while management left full-year guidance unchanged, citing expected operating leverage improvement in the second half. The results align with the bear-case trajectory in the DeepValue report, where pricing pressure in Brazil, Mexico, and Egypt continues to erode unit economics despite explosive volume growth. The investment thesis remains on hold: until gross profit/TPV stabilizes above 0.9% and free cash flow recovers, the stock offers limited margin of safety at current valuations.

Implication

Monitor Q2/Q3 for any improvement in gross profit/TPV and free cash conversion; a pullback toward $12 would offer a more attractive entry if unit economics show signs of stabilizing above 0.9%.

Thesis delta

The Q1 report confirms the thesis that dLocal's volume growth is masking accelerating unit economics compression—gross profit/TPV dropped to an estimated 0.85%, below the bear-case threshold of 0.9% in the DeepValue framework. The waiting stance is validated; no enough evidence yet to upgrade from WAIT to BUY, as the core metrics driving the thesis have deteriorated further.