Nu Holdings' Rapid Customer Gains Highlight Growth, But Valuation Concerns Persist

What happened

Nu Holdings, a scaled digital bank in Latin America, has demonstrated strong profitability with trailing twelve-month revenue of US$11.5 billion and net income around US$2.5 billion, as noted in its recent filings. In Q3 2025, the company added 4.3 million customers, reaching a total user base of 127 million, according to a Zacks article published on December 24, 2025. This acceleration in customer acquisition underscores the effectiveness of its low-cost, mobile-first model, which boasts robust unit economics such as ARPAC over US$10 and cost-to-serve under US$1 per month. However, the stock trades at elevated multiples of approximately 32 times earnings and 7.6 times book value, with a discounted cash flow analysis suggesting intrinsic value of US$6.2 per share versus the current price near US$16.5. The high valuation embeds optimistic assumptions about sustained growth and benign credit conditions, which are at risk given Nu's exposure to unsecured consumer lending in volatile Latin American economies and evolving regulatory scrutiny.

Implication

Nu's addition of 4.3 million customers in a quarter reinforces its growth narrative and ability to penetrate underbanked markets, supporting near-term revenue expansion. However, this growth is already priced into the stock, which trades at rich multiples that leave little margin for error if economic conditions worsen. The company's profitability is heavily dependent on credit performance, and any downturn in Latin American economies could lead to higher defaults and earnings volatility. Regulatory changes in core markets like Brazil and Mexico, such as caps on interest rates or tighter capital rules, could further compress returns and growth prospects. Therefore, while customer gains are positive, they do not justify a change in investment strategy, and investors should continue to monitor credit quality and regulatory developments before considering new positions.

Thesis delta

The rapid customer gains in Q3 2025 confirm Nu's ability to scale and attract users, aligning with the growth aspects highlighted in the master report. However, this does not address the core concerns of overvaluation and credit risk, so the overall thesis of 'POTENTIAL SELL' remains unchanged. No significant shift is warranted; instead, the news reinforces the need for caution until valuation or risk-reward improves.