Dlocal Q3 2026: Lower Take Rate vs Higher Profit

On Thursday, $DLocal Limited(DLO)$ released its Q3 2026 results, and the stock fell 3%.

Here are the factors that I think drove this reaction:

• Slight revenue miss

• Lower revenue take rate

• Gross profit guidance at the midpoint

• Operating profit guidance at the low end

However, the market once again focused on the short term and missed what’s changing the business.

In May, investors didn't believe management's promise of operating leverage in the second half, but it arrived!

Operating profit grew 37% Y/Y, faster than gross profit, as Dlocal cut costs and headcount.

In this report, I will go through the results, the take rate, the cost cuts and the guidance, and look at what the stock costs after the drop.

Let's dig in.

1. Financial Summary

• Total Payment Volumes: $18.3B, +77% Y/Y, +4% Q/Q.

• Revenue: $398M, +41% Y/Y, flat Q/Q (estimate of $407M).

• Gross profit: $132M, +28% Y/Y, +4% Q/Q.

• Operating profit: $76M, +37% Y/Y, +19% Q/Q.

• Net income: $68M, +31% Y/Y, +24% Q/Q.

• Diluted EPS: $0.23, +35% Y/Y (estimate of $0.22).

• ADJ FCF: $99M, +163% Y/Y.

  

Dlocal missed slightly on revenue but beat on EPS, as net income of $68M is the most it has ever earned in 3 months.

1.1. Revenue

Dlocal reported revenue of $398M, up 41% Y/Y but flat compared to Q2.

Analysts expected $407M, so revenue missed by 2%, and that is probably the number the market reacted to.

Revenue went sideways, mostly because of Argentina, where Q2 had the Hot Sale shopping event. Argentine revenue fell from $68.9M to $63.5M, while the rest of the portfolio grew about 1% Q/Q.

The other drag is the mix, as more of the volume is now local-to-local and pay-outs, which carry lower fees.

For Dlocal, gross profit is more important, and it grew 4% Q/Q to $132M, even with flat revenue.

1.2. Profitability

Operating profit reached $76M, up 37% Y/Y and 19% Q/Q.

Operating profit grew faster than gross profit for the first time this year, and it was 58% of gross profit, the highest level since Q4 2023.

In Q1, operating profit was just 44% of gross profit, or 48% without a one-off tax charge from 2025. 2 quarters later, it is 58%.

Operating expenses are up 17% Y/Y because of the investments Dlocal made in the second half of 2025, but gross profit grew 28%, and the difference went straight to operating profit.

1.3. Net Income

Net income was $68M, up 31% Y/Y, while diluted EPS was $0.23, up 35%.

EPS grew faster than net income thanks to the buybacks, as the share count fell by 2.3% Y/Y.

Compared to Q2, the net financial result improved from $2.3M to $5.3M, as Dlocal earned more interest on its cash, which more than offset the interest on the new $150M loan.

1.4. Cash Flow

ADJ FCF was $99M, up 163% Y/Y, and 146% of net income.

Simply put, the working capital problem from Q1, when ADJ FCF fell to $15M, reversed.

The slide above shows why I don't read too much into any single quarter of Dlocal's cash flow. Over the first 9 months, ADJ FCF was $182M, or 111% of net income, which is the fairer picture, and the CFO warned that part of the Q3 benefit will reverse.

“Part of the working capital benefit we issue in free cash flow in Q3 is expected to normalize in future quarters.” Guillermo Lopez Perez, CFO, Q3 2026 Earnings Call

Dlocal is using that cash to buy back shares. Under the $300M program approved in March, it has bought 9.1M shares for $120.1M, at an average of $13.20. The remaining $180M would buy about 13.5M shares at today's price, about 4.7% of the company.

In August, Dlocal also signed a $150M loan at SOFR plus 2%.

The cash Dlocal earns sits in its local subsidiaries around the world, and moving it up to the holding company takes time and costs money. The loan gives the holding company cash right away, including for buybacks, while the money in the subsidiaries keeps earning local interest rates.

“The cash in our subsidiaries actually earns local rates that are broadly similar to or even higher than the cost of this facility.” Guillermo Lopez Perez, CFO, Q3 2026 Earnings Call

2. Payment Volumes

TPV grew 77% Y/Y to $18.3B, the 8th quarter in a row above 50% growth and the 4th at or above 70%.

In the chart above, you see that growth slowed from 92% in Q2. That was expected, as Q4 2025 and Q1 2026 had large merchant ramp-ups, making comps more difficult.

To put the last 2 years in perspective, TPV is 2.8x higher than in Q3 2024, when it was $6.5B.

Ride-hailing (Uber and Didi) a huge driver, TPV grew 230% Y/Y!

Ride-hailing grew Q/Q in every region, especially in Mexico, Brazil, Colombia and South Africa. Travel grew 190%, while on-demand delivery grew 162%.

Advertising grew 84%, but part of it was a one-off, as social media advertising in Brazil was very strong around the presidential election in October. The CFO expects it to normalize now that the election is over.

E-commerce grew 43% Y/Y and was flat Q/Q, as strong social commerce in Mexico and Brazil offset weaker cross-border volumes.

Existing merchants added $21.8B of TPV in the first 9 months, and new merchants only $0.6B.

From the slide of the presentation, we see that TPV grew from $27.7B to $50.1B in the first 9 months, almost entirely from merchants Dlocal already had, as they entered new markets with Dlocal and added new payment methods.

One of the new partnerships this quarter is with Nu, as Dlocal now connects Nu Global's digital wallet to local payment rails in emerging markets, including pay-ins and payouts through Dlocal's stablecoin on- and off-ramps.

It's nice to see 2 of my favorite companies, which I follow so closely, working together!

Net revenue retention was 140%, down from 152% in Q1 2026, while revenue from new merchants was only $3.8M, lower than $5.7M in Q3 2025. Moreover, TPV retention was 173%, as a new merchant can take years to ramp up.

“The recent massive ramp-up we had from our largest client is a client that had been with us for over seven years before that happened.” Pedro Arnt, CEO, Q3 2026 Earnings Call

The top 10 merchants were 62% of revenue, close to the 61% of Q3 2025, so even with the fast growth of the largest merchants, concentration is not going up.

3. Take Rate

The revenue take rate fell to 2.17% from 2.72% a year ago, while the gross profit take rate was 0.72%, flat Q/Q.

As in Q1, the market focused on the take rate.

The revenue take rate fell again, but the gross profit take rate stayed at 0.72%, the same as in Q2 2026, after falling every quarter since Q2 2025.

There are 3 reasons behind the decline.

First, the mix of flows. Local-to-local payments were 62% of TPV, up from 49% in Q3 2025, and Dlocal earns less on them as there is no currency conversion. Pay-outs were 25% of TPV, and they also carry lower fees.

Second, volume tiers. The largest merchants get lower prices as their volume grows, and Dlocal had several big ramp-ups this year.

Third, the countries. Smaller markets with high take rates, like Bolivia, sent less volume, while large markets like Brazil and Mexico sent more.

According to the slide above, the mix items took $8.8M off gross profit compared to Q2. Volume growth added $4.9M back, lower advancement costs in Argentina and a one-off cost recovery in Nigeria added $2.6M, and FX volatility added $6.2M.

Without the $6.2M FX gain, the gross profit take rate would have been about 0.69%.

The decline slowed in Q3 but didn't stop. The Argentine funding costs are lower because of a cheaper funding structure and lower interest rates, so that part should stay, while the FX gain could reverse, as management expects currencies to hurt in Q4.

Mexican revenue grew 64% Y/Y, while gross profit fell 2%.

Mexican revenue reached $75.4M and gross profit $9.8M. A few large merchants in Mexico reached the lowest price tiers, and processing costs went up, including costs from previous periods that were booked this quarter.

“Mexico is one of our markets that has higher concentration on a few large merchants, and so consequently, that means that you have merchants that are at lower take rates and that were, through this last quarter, also still hitting the lowest tiers in terms of our pricing tiers.” Pedro Arnt, CEO, Q3 2026 Earnings Call

The CEO wants to fix it by using the bigger volumes to bring the cost per transaction down, and he expects Mexico to improve next year, or even by the end of this year, depending on the holiday shopping season.

Meanwhile, Brazil was flat Q/Q at $39.5M of gross profit, as customers moved from cards to local payment methods PIX and Boleto, which earn Dlocal less. Africa and Asia was the best region, with gross profit up 29% Q/Q to $32.3M.

Gross profit grew 28% Y/Y, even though the gross profit take rate fell 27%.

Dlocal keeps less of each dollar as it processes cheaper flows for bigger merchants, but each dollar is still profitable, and the CEO said the declines are beginning to slow down.

“I wouldn't say we've hit the bottom in terms of take rate compression, but certainly if you look sequentially, the declines are beginning to slow down, as we anticipated they would.” Pedro Arnt, CEO, Q3 2026 Earnings Call

If TPV growth slows to the 20-30% range while the take rate falls more slowly, gross profit can keep growing in the mid-20s, which is the growth mechanism management described on the call.

4. Operating Leverage

Headcount fell 3% Q/Q, and gross profit per employee passed $100K!

Headcount peaked at 1,303 employees in Q2 and fell to 1,260 in Q3, while gross profit per employee reached $105K, up from $85K in Q3 2025. Operating expenses fell 11% Q/Q to $55.9M.

The CEO put the savings down to AI. During 2024 and 2025, Dlocal invested heavily in technology, licences and automation, and now it can process more volume with fewer people.

“Our AI capabilities were a large component of these investments, and we are now seeing those investments translate into greater productivity while continuing to push the frontier on payment coverage and performance.” Pedro Arnt, CEO, Q3 2026 Earnings Call

Operating profit at 58% of gross profit is now above the 50-56% of 2024 and 2025.

According to the CFO, lower payroll and lower spending on third parties are structural, while lower marketing, which Dlocal spent mostly in the first half around the World Cup, and unusually low credit losses are timing.

“I wouldn't think about this quarter's result as a margin target, and I would be careful about extrapolating from a single quarter to future quarters.” Guillermo Lopez Perez, CFO, Q3 2026 Earnings Call

Meanwhile, sales and marketing was $8.6M in Q3, compared to an average of $9.9M a quarter in the first half, and credit losses and other operating losses were about $1M lower than the first-half average. That is about $2M of the $7M drop in operating expenses.

Without the timing savings, operating profit would still have been about 56% of gross profit.

So 58% won't repeat every quarter, while the structural savings stay. Furthermore, the CFO expects gross profit to grow faster than operating expenses every year from here.

“The investment cycle is behind us, and now it's more about continued expansion of margins going forward, even as we pursue growth.” Pedro Arnt, CEO, Q3 2026 Earnings Call

For 2 years, the bear case was that Dlocal had to spend more and more to grow, while the falling take rate ate the rest. In Q3, headcount fell while TPV grew 77%.

5. Guidance

Dlocal kept its 2026 guidance, but moved within the ranges.

TPV growth is now expected at the upper end of 60-70%, gross profit growth around the middle of 25-30%, and operating profit growth at the lower end of 27.5-32.5%.

Management now expects FX headwinds in Brazil, Mexico and Argentina in Q4, which they estimate at 6 percentage points of Y/Y gross profit growth for the quarter, plus somewhat softer results in smaller, high take rate markets in Africa and Asia.

This guidance implies gross profit growth of 27.5% for the year and Q4 gross profit of $136M, up 17% Y/Y and 3% Q/Q, a sharp slowdown from the 32% growth of the first 9 months. The FX headwind explains 6 of those 15 points, so about 9 points come from the weaker high take rate markets and tougher comparisons.

Even the lower end of the operating profit guidance needs $87M in Q4, up 39% Y/Y!

That would put operating profit at 64% of gross profit in Q4, as operating profit grew 23% over the first 9 months. At the 56-58% of Q3, Q4 operating profit would be $76-79M.

I think operating profit could land slightly below the low end of the guidance, while the more important trend, operating profit growing faster than gross profit, stays in place.

6. Growth Opportunities

On the call, the CEO spent a lot of time on the next 3 to 5 years, and this quarter's new partnerships included LinkedIn. Meanwhile, Western Union added remittance payouts in Africa.

Asia is the largest market, but the CEO doesn't expect it to be material in 2027.

Dlocal recently hired a CEO for Asia Pacific, and the group CEO is very optimistic about the size of the market. Asia has a huge number of local payment methods and different rules in every country, which is the problem Dlocal solves for global merchants in Latin America and Africa.

“I would not expect this to be material or sizable in 2027. I think for year one, since we have hired a local team and local seniority, think of it more in terms of maybe mid to high single-digit contribution of top line, but with the potential to scale very quickly if we are successful.” Pedro Arnt, CEO, Q3 2026 Earnings Call

In a follow-up answer, the CEO said the first year could bring mid to high single digits of revenue if Dlocal succeeds. Dlocal has started processing for one of the largest music streaming companies and is in talks with one of the AI labs.

Furthermore, Dlocal went live with physical payments in Mexico, and its buy now, pay later platform connects more than 15 merchants to BNPL providers across the global south. The crypto business is growing too, as more merchants accept stablecoins at checkout and use them for remittances.

The licences are Dlocal's main competitive advantage. In Q3, it added 2 money transmitter licences in the US, an AML registration in Canada and a remittance authorization in Tanzania, and it now holds 42 licences and registrations plus 10 authorizations across 26 markets, with 20 more applications in progress.

7. Valuation

After the drop, Dlocal has a market cap of $3.8B.

The company holds $537M of its own cash, separate from merchant funds, against $164M of debt, so its enterprise value is about $3.4B.

Dlocal trades at a TTM P/E of 18, despite growing EPS 35%.

In the picture above, you see analyst estimates before the Q3 report. They expect net income of $328M in 2027 and $416M in 2028, which puts the stock at 11.6x 2027 and 9.2x 2028 earnings.

After the miss, analysts will probably cut their 2026 revenue estimates a little. For Dlocal, gross profit and operating profit matter more, and the guidance for both stayed within the ranges.

Also, the company returns a lot of cash. With $180M left in the buyback program and a dividend yield of about 1.5%, shareholders could get back 6% of today's market cap in the next year.

The average analyst price target is $18.50, 39% above today's price.

In my opinion, at 9.2x 2028 earnings, the market is pricing Dlocal like a company whose high growth phase has ended, while TPV is growing 77%.

8. Conclusion

The long-term thesis for Dlocal is intact, and Q3 made it stronger.

The market sold the stock on flat revenue and a lower take rate, while the cost base finally started to grow slower than gross profit, which is the change I have been waiting for since the investment cycle of 2025.

The take rate will keep falling as Dlocal wins more volume from the largest merchants in the world. That is fine as long as each dollar stays profitable, and Dlocal keeps using the cash to buy back its own shares at around $13.

Mexico and the currencies will weigh on Q4, but I don't see either of them changing the long-term story.

In conclusion, I still believe Dlocal remains one of the cheapest ways to own the digitization of emerging markets.