dLocal Q3 2026: Growth Remains Strong, But Take Rate Erosion Continues

What happened

dLocal reported Q3 2026 total payment volume of $18 billion, up 77% year-over-year, marking an eighth consecutive quarter of 50%+ growth, with revenue up 41% to $398 million. However, gross profit rose only 28% to $132 million, implying a gross profit/TPV of approximately 0.73%, down from 0.99% in Q3 2025, confirming continued compression in the company's core take rate. Operating profit grew 37% to $76 million, aided by disciplined opex growth of 17%, resulting in an operating profit/gross profit ratio of 58%, the highest since Q4 2023, but this is a function of cost control rather than improving unit economics. Adjusted free cash flow of $182 million for the first nine months of 2026, with 111% conversion to net income, is flattered by the reversal of temporary working-capital effects from Q1 2026 and is not a reliable indicator of sustainable cash generation. Overall, the quarter demonstrates continued volume momentum but reinforces concerns about pricing power and margin quality.

Implication

Despite the robust TPV and revenue growth, the further decline in gross profit/TPV to around 0.73% indicates that dLocal is still trading price for volume, likely due to competitive pressures in key markets like Brazil, Mexico, and Egypt. The improvement in operating profit margin stems primarily from slower opex growth and automation, but if gross profit continues to undergrow revenue, the absolute profit pool may not expand enough to justify the current valuation of ~25x trailing earnings and ~21x EV/EBITDA. Adjusted free cash flow conversion of 111% is unsustainable because it includes a one-time working capital release; investors should focus on normalized cash conversion, which was negative in 2024 due to receivable build-ups. The next few quarters will be critical to see whether newer higher-margin products like BNPL Fuse, SmartPix, and stablecoin payouts can lift gross profit/TPV toward the 1.0% level, or whether take rate erosion accelerates further. Until there is concrete evidence of stabilization or a more attractive entry price near $12, the risk-reward remains balanced-to-unfavorable for initiating new positions.

Thesis delta

The Q3 2026 results reinforce the existing WAIT thesis: top-line growth remains exceptional, but gross profit/TPV dropped to approximately 0.73%, its lowest in recent quarters, confirming that the company's take rate is still compressing despite management's product diversification efforts. While the operating profit margin improved due to cost discipline, this does not offset the fundamental concern that each dollar of TPV is generating less profit than before. Therefore, the thesis is unchanged; evidence of gross profit/TPV stabilization or a lower entry valuation is still required to turn constructive.