dLocal's Bullish 2026 Outlook Contrasts with Deepening Take-Rate Erosion

What happened

dLocal announced record 2025 results, surpassing $1 billion in revenue and $191 million in adjusted free cash flow, with no debt and $720 million in cash, highlighting strong operational momentum. Management guided for 50-60% TPV growth in 2026, targeting over $60 billion, backed by operating leverage and a new $300 million buyback program. However, the DeepValue report reveals that gross profit per TPV declined to 0.99% in Q3-25 from 1.20% a year ago, indicating persistent take-rate compression despite volume growth. This erosion is driven by competitive pressures in key markets like Brazil, Mexico, and Egypt, FX volatility, and high merchant concentration, with top 10 customers accounting for 62% of revenue. While the company projects escape velocity, investors must scrutinize whether new products like BNPL Fuse can offset these structural challenges without concrete evidence in recent filings.

Implication

The strong 2025 results and aggressive 2026 guidance may boost short-term sentiment, but they do not address the underlying decline in gross profit per TPV, which signals pricing power erosion. High merchant concentration and FX vulnerabilities in volatile emerging markets amplify downside risk, potentially derailing margin targets. Capital return initiatives like dividends and buybacks are positive but rely on stable cash flows, which are at risk if take-rates continue to fall. Monitoring upcoming quarters for gross profit per TPV stabilization and new product traction is crucial to assess whether growth can translate into durable economics. Without such evidence, the current valuation at $14.35 offers limited margin of safety, aligning with the DeepValue 'WAIT' rating.

Thesis delta

The news reinforces dLocal's growth narrative but does not shift the investment thesis, as it lacks data on reversing take-rate compression or margin improvement. A more bullish stance would require consecutive quarters of gross profit per TPV above 1.05% with TPV growth over 40%, as outlined in the DeepValue report. Until such evidence emerges, the recommendation remains to wait for a clearer entry point around $12 or proof of economic stabilization.