DLO — Q2 2026 Financial Report Analysis

dLocal processed US$17.7 billion of payments in the second quarter of 2026, up 92% from a year earlier, but kept a much thinner slice of each dollar. Revenue rose 56% to US$399.7 million, while gross profit grew only 29% to a record US$127.2 million and operating profit grew 15% to US$64.2 million. Net income rose 28% to US$54.8 million (US$0.18 per diluted share, from US$0.14). That is faster than operating profit, mainly because a year ago the company booked foreign-exchange losses that did not repeat. Management raised its full-year volume and gross profit guidance but left operating profit guidance unchanged.

At a glance

• Volume +92%, gross profit +29%: dLocal earned 0.72 cents of gross profit per dollar processed, down from 1.07 cents a year ago. Growth is coming from large merchants and lower-fee local payments.
• Operating margin 16.1%, down from 21.7%: operating expenses rose 46% (US$63.0 million vs US$43.1 million), faster than gross profit. Higher pay, new hires and World Cup marketing explain the gap.
• Adjusted free cash flow US$68.5 million, 125% of net income: cash generation recovered from a weak first quarter (US$14.7 million). For the first half, adjusted free cash flow was still 6% lower than a year earlier.

What dLocal does, and the two numbers that matter

dLocal, based in Uruguay, handles payments for global companies such as ride-hailing apps, online retailers and streaming services. It collects money from their customers in more than 60 emerging markets and pays out to sellers and drivers there. Two measures carry most of the story:

• Total payment volume (TPV) is the dollar value of all payments dLocal processes. It measures how much business flows through the platform, not what dLocal earns.
• Take rate is revenue divided by TPV, the cut dLocal keeps. This quarter it was 2.26% (US$399.7 million of revenue on US$17.7 billion), down from 2.78% a year ago. On a gross profit basis (after paying banks and local payment networks), the cut fell from 1.07% to 0.72%.

The company gives three reasons for the lower margin. First, more of its volume is now "local-to-local": money paid and settled in the same country, which carries no cross-border currency conversion fee. Second, large merchants are ramping up. Third, scale merchants get volume discounts. Volume is growing very fast, and each dollar of it is worth less.

Results table

Operating margin is operating profit as a share of revenue: what is left after running the business, before interest and tax. "pp" means percentage points.

Where the growth came from

dLocal splits revenue by the country where its merchants' customers paid. Its three biggest markets grew much faster than the rest:

Brazil, Mexico and Argentina together made up 58% of revenue, up from 48% a year ago. The filing gives a different story for each when it explains gross profit:

• Brazil: ride-hailing and travel merchants ramped up, on top of steady e-commerce growth.
• Argentina: growth was spread across e-commerce, ride-hailing and food delivery. Funding costs were also lower. dLocal pays merchants before it collects from local payment networks, and it borrows in pesos to do that.
• Mexico: the drag. Revenue rose 64%, but the biggest ("Tier 0") merchants reached higher volume tiers that come with lower prices, and costs rose. Revenue grew while profit per dollar fell.
• Africa and Asia: less of the volume came from Mozambique and Vietnam, where dLocal earns a wide currency-conversion spread. The company also had a one-off cost increase in Nigeria.

Exchange rates also played a part. In constant currency (stripping out exchange-rate moves), TPV grew 80% rather than 92%, revenue 50% rather than 56%, and gross profit 23% rather than 29%. A weaker US dollar added roughly six points to each growth rate. That helped this quarter, and dLocal does not control it.

Why operating profit lagged

Operating expenses were US$63.0 million, up 46% year on year. Technology and development nearly doubled to US$13.3 million (from US$7.4 million), and sales and marketing doubled to US$9.9 million (from US$4.8 million). General and administrative costs rose 35% to US$36.5 million. The company says the increase reflects:

• a full year of hiring and investment that started in the second half of 2025;
• annual raises and "a limited number of senior strategic hires";
• marketing concentrated in the first half, around the World Cup and large merchant events.

Gross profit grew 29% and expenses grew 46%, so operating profit rose only 15%. The ratio of operating profit to gross profit fell to 50% from 56%. Compared with the first quarter it improved from 44%, but the first quarter included a one-off US$4.4 million tax charge in expenses.

What the headline numbers hide

• Net income grew faster than operations. Profit before tax rose 27% while operating profit rose 15%. The difference is below the operating line. A year ago, finance costs were US$14.9 million, driven by foreign-exchange losses on an intra-group loan between the Argentine and Maltese subsidiaries. That loan was fully repaid in September 2025, so finance costs fell to US$2.8 million. Net financial and inflation items went from a US$4.8 million loss to a US$0.8 million gain, a swing of about US$5.6 million. The tax rate was about 16% in both years, so tax did not change the comparison. Net income growth of 28% partly reflects a prior-year cost that will not come back, rather than a better business.
• Buybacks helped only slightly. Diluted share count fell 1.7% to 295.9 million. dLocal bought back 6.9 million shares for US$86.1 million under a US$300 million program approved in March 2026, US$75.9 million of it in this quarter. Most of the EPS increase came from net income, not a smaller share count.
• Cash conversion is good this quarter and weaker for the half-year. Reported operating cash flow (US$140.5 million) is not a good guide, because it includes money owed to merchants that dLocal holds briefly. The company's adjusted free cash flow strips that out and subtracts capital spending. On that basis it was US$68.5 million, 125% of net income. The first quarter was only US$14.7 million, because of timing on tax credits and on receivables from advance-payment operations. For the first six months, adjusted free cash flow was US$83.2 million, below US$88.2 million a year earlier and about 86% of first-half net income. This measure also adds back US$6.5 million of share-based pay for the quarter, which is a real cost to shareholders.
• The balance sheet is growing faster than revenue. Trade receivables (mostly payments in transit) rose 136% to US$1.15 billion. Trade payables (mostly money owed to merchants) rose 125% to US$1.55 billion. Both grew faster than revenue (+56%) and faster than the quarter's volume (+92%). Payables still exceed receivables by about US$405 million, so merchants' money is funding the gap rather than dLocal's own cash. The float is larger now, and any delay in collecting from local partners would have a bigger effect.
• Revenue now includes some lending-type income. "Finance income" (fees for paying merchants early) is now reported separately inside revenue: US$6.8 million, up from US$2.7 million. "Other revenues" (mainly transactional-tax pass-throughs and fixed fees) rose to US$14.9 million from US$4.7 million. Core transaction revenue grew 52%, slightly slower than the 56% headline.
• Customer concentration is high. The 10 largest merchants made up 61% of first-half revenue. Two merchants each accounted for more than 10%, compared with none a year ago. Losing or repricing either one would show up quickly.
• New debt after the quarter. On 12 August 2026, dLocal signed a US$150 million unsecured three-year credit facility at SOFR plus 2.00%, for general corporate purposes. Corporate cash, meaning the company's own money and not merchants' funds, fell by US$82.7 million in the quarter to US$369.1 million. The quarter paid both a US$57.2 million dividend and the buybacks.

Guidance: volume up, profit unchanged

Volume and gross profit are running ahead of target, so those ranges went up. Operating profit is the gap. It grew 15% in the first half against a full-year target of 27.5%–32.5%, so the second half needs operating profit growth well above 30%. In May, management said expenses should benefit from the end of the investment cycle, automation-driven headcount reductions, other cost cuts, and lower share-based pay expense. The CEO also warned that the strong growth "will naturally create more demanding comparisons" in the second half and into 2027.

Takeaway: dLocal is winning a lot more volume, but it keeps less of each dollar, and expenses have grown faster than gross profit. The full-year operating profit target now depends on second-half cost cuts, not on volume growth.

What to watch next quarter

• Operating expenses versus gross profit. For guidance to hold, expenses in the third quarter should be flat to down while gross profit keeps rising. A third straight quarter of expenses growing faster than gross profit would put the 27.5% floor at risk.
• Gross profit per dollar processed. It fell from 1.07% to 0.84% to 0.72% over the past year. If it stabilizes, faster volume turns into faster profit. If it keeps falling, volume growth is mostly passing through to merchants.
• Mexico pricing and the two largest merchants. Both are where the filing points to pricing pressure.
• Currency. About six points of this quarter's growth came from exchange rates. A stronger dollar would reverse that.

The full interim financial statements (Exhibit 99.2) were filed with this release. The figures above come from the earnings release and those statements, and the regional breakdown is from note 5.