Nu Holdings Stock Plunges as Earnings Reveal Cost and Credit Concerns

What happened

Nu Holdings' stock dropped 9.34% after releasing Q4 and full-year 2025 results, driven by investor focus on cost structure, credit-risk trends, and margin signals. The DeepValue report notes strong metrics like ARPAC at $15 and risk-adjusted NIM at 10.5%, but the market is likely questioning the sustainability of Q4 credit improvements, which benefited from Brazil's seasonal '13th salary' effect. Beyond the positive earnings narrative, the sharp decline reflects growing skepticism about underlying credit quality and potential cost pressures that could erode profitability. This reaction underscores the fragility of Nu's premium valuation, with a P/E of 31.9x and P/B of 7.6x, leaving little margin for error. Investors are now reassessing near-term prospects amid risks like U.S. charter execution delays and credit normalization in key markets.

Implication

The stock's drop signals a market shift towards caution, prioritizing concrete evidence over optimistic narratives around credit health and cost efficiency. Key watchpoints include whether ARPAC growth sustains and if delinquencies reverse post-seasonality, as flagged in the DeepValue report's bear case. Execution on the U.S. national bank charter, with its 'capitalize within 12 months' condition, now carries heightened importance, as slippage could further undermine investor confidence. Given the elevated multiples, any deviation from expected performance could push the stock toward the DeepValue bear case of $13 per share, necessitating tighter risk management. Therefore, investors should consider reducing exposure, await confirmation from upcoming quarterly reports, and be prepared for potential thesis breaks if credit or regulatory milestones falter.

Thesis delta

The 'POTENTIAL BUY' thesis is now under pressure, as the market reaction indicates increased skepticism about credit sustainability and cost control, aligning with the DeepValue report's downside risks. However, the core thesis remains intact if ARPAC growth and efficiency hold, but investors must adjust for a higher risk premium and focus on imminent checkpoints like FDIC application status and Q2 2026 credit metrics.