Nu Hits $1B Quarterly Profit Milestone, But Credit and Capital Concerns Persist

What happened

Nu Holdings reported crossing $1 billion in quarterly net income, a first for the company, underscoring the success of its scaled customer base and monetization efforts in Brazil, Mexico, and Colombia. The milestone aligns with the bull case outlined in prior research, where earnings above $1 billion are possible if cross-sell and deposit funding expand faster than risk-weighted assets. However, the company's latest reported metrics (Q1 2026) show rising early-stage delinquencies (NPL 15-90 at 5.0%), a decline in Brazil's CET1 ratio to 11.3%, and a risk-adjusted net interest margin of just 9.5%, indicating credit costs and capital consumption remain elevated. The stock trades at 21.5 times trailing earnings and 13 times EV/EBITDA, so the profit breakthrough may already be priced in, and the market may not reward it given ongoing balance-sheet pressures. Consequently, while the milestone is a positive confirmation of Nu's operating leverage, it does not by itself resolve the key concerns that have kept the stock in a wait-and-see range.

Implication

The $1 billion quarterly profit demonstrates Nu's ability to monetize its massive customer base, but it is only one quarter and may have benefited from favorable conditions; investors should not extrapolate it as a trend. The critical test is whether Nu can sustain this profit level while stabilizing Brazil's CET1 ratio above 11.3% and bringing NPL 15-90 back below 5.0% as Mexico's bank conversion scales. Until those metrics show durable improvement, the stock is unlikely to re-rate significantly above its current level; the base case fair value is around $15, with a bear case of $11 and a bull case of $18. For existing holders, this milestone provides some comfort that the business is strengthening, but it is not a reason to add aggressively; buying opportunities may emerge if the stock retests $12 or if credit metrics improve. For new investors, waiting for clearer evidence of credit stabilization and capital generation is prudent; the next few quarterly reports will be pivotal in determining whether Nu can transition from high growth to high-quality growth.

Thesis delta

The reported $1 billion quarterly profit slightly increases the probability of the bull scenario, as it shows the platform can generate substantial earnings when credit costs are manageable. However, the investment thesis remains unchanged: a WAIT rating with conviction 4.0 is maintained because the single quarter does not resolve the observed deterioration in NPL 15-90, decline in Brazil CET1, and compressed risk-adjusted NIM. The milestone does not warrant upgrading to a buy, but if the next two quarters show stabilization in these metrics, the thesis would shift to a more positive stance.