MELI's Margins Under Pressure: Can it Balance Growth & Profitability?

MercadoLibre MELI faces mounting scrutiny over its ability to sustain profitability while pursuing aggressive expansion across Latin America's e-commerce and fintech markets. MELI’s strategy of lowering free shipping thresholds, accelerating credit card issuance and expanding logistics infrastructure has undoubtedly strengthened its ecosystem advantage. Yet this approach also exposes an underlying vulnerability, as MELI appears to be trading short-term margins for long-term scale in markets where competition and cost inflation are both intensifying.

The third-quarter 2025 results reflect this pressure, with operating margin declining 70 basis points (bps) year over year to 9.8%, while gross profit margin fell 260 bps to 43.3%. These declines highlight how volume-led growth is no longer translating into proportional operating leverage. Logistics remains the anchor of MELI’s moat, but the efficiency curve appears to be flattening with unit shipping costs in Brazil declining only 8% sequentially despite a 42% surge in items sold. In fintech, Mercado Pago’s credit portfolio jumped 83% to $11 billion, but margin compression to 21% in Net Interest Margin After Losses suggests the capital intensity of scaling financial services. With newer credit card cohorts still unprofitable, MercadoLibre’s fintech flywheel could become a near-term drag rather than a profit driver.

The Zacks Consensus Estimate for fourth-quarter 2025 revenues is pegged at $8.54 billion, indicating a 39.48% year-over-year rise. But the central issue for MercadoLibre is not its ability to grow; it is whether that growth can still coexist with healthy profitability. MELI has built undeniable scale, yet its rising logistics and credit costs suggest the balance between expansion and earnings power is starting to slip. Sustaining momentum requires proving that efficiency gains can match the pace of investment and that the business can generate durable margins even as it competes more aggressively across Latin America. At this stage, MercadoLibre’s growth strategy increasingly appears to come at the expense of profitability, suggesting that the balance between expansion and earnings power is becoming harder to sustain.

MELI Faces Intensifying Competition

MercadoLibre faces growing competitive pressure from Sea Limited (SE) and Amazon AMZN as both deepen their presence in Latin America’s e-commerce and fintech landscape. Sea Limited is expanding its Shopee platform and digital finance arm across Brazil and Mexico, mirroring MercadoLibre’s integrated commerce-fintech model to capture consumer engagement. Amazon, meanwhile, continues to strengthen its logistics, Prime ecosystem and local marketplace capabilities, targeting the same middle-income customer segment that drives MELI’s growth. As Sea Limited and Amazon scale their regional ecosystems, MercadoLibre’s ability to defend its market share and preserve margins will increasingly hinge on execution efficiency and ecosystem monetisation.

MELI’s Share Price Performance, Valuation and Estimates

MELI shares have increased 23.4% in the year-to-date (YTD) period, outperforming the Zacks Internet-Commerce industry and the Zacks Retail-Wholesale sector’s increase of 16.5% and 8.8%, respectively.

MELI’s YTD Price Performance

From a valuation standpoint, MELI stock is currently trading at a forward 12-month Price/Sales ratio of 3.03X compared with the industry’s 2.48X. MELI has a Value Score of D.

MELI Valuation

The Zacks Consensus Estimate for MELI’s 2025 earnings is pegged at $40.27 per share, down 6.8% over the past 30 days, indicating 6.85% year-over-year growth.

MercadoLibre, Inc. Price and Consensus

MercadoLibre, Inc. price-consensus-chart | MercadoLibre, Inc. Quote

MercadoLibre currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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