DLocal (DLO) Q1 2025: TPV Soars 53%, Automation and AI Fuel Margin Leverage
DLocal’s Q1 delivered record highs in revenue and gross profit as total payment volume surged 53%, with automation and AI initiatives beginning to drive operational leverage. Despite mixed segment dynamics and regional headwinds, the company’s focus on technology-enabled efficiency and geographic diversification positions it for sustained margin expansion. Execution on automation and new merchant wins will remain central to DLocal’s compounding growth narrative in emerging markets.
Summary
- Automation Initiatives Drive Efficiency: AI and process automation are reducing manual workload and boosting conversion rates.
- Geographic Diversification Mitigates Volatility: Strong Latin America and Africa performance offset Brazil and Mexico softness.
- Merchant Retention and Share of Wallet Expand: Net retention rate and deepening partnerships underpin recurring growth.
Performance Analysis
DLocal’s Q1 2025 results were marked by robust total payment volume (TPV) growth of 53% year-over-year, reaching $8.1 billion, with constant currency growth even higher at 72%. Cross-border flows grew 76% YoY and 14% sequentially, crossing the $4 billion mark for the first time, led by remittances, commerce, financial services, and streaming. While local-to-local TPV rose 33% YoY, it slipped 3% sequentially due to seasonality and a partial share loss in Mexico.
Revenue climbed 18% YoY (36% in constant currency) to a new record, driven by Argentina, other Latin American markets, Africa, and Asia, though Brazil’s revenue declined due to a shift to payment orchestration (lower take rates) and a mix shift with a major merchant. Gross profit rose 35% YoY, fueled by Argentina, Egypt, Chile, and Turkey, but was tempered by one-off costs in Brazil and higher processing expenses in South Africa and Nigeria. Net retention rate of 144% and free cash flow conversion at 85% reinforced the business’s defensibility and cash generation. Net take rate declined four basis points sequentially, reflecting merchant and cost mix shifts.
- Cross-Border Momentum: Remittances and commerce verticals drove outperformance, offsetting local-to-local softness.
- Margin Leverage: Adjusted EBITDA to gross profit ratio improved to 68%, signaling operational scalability despite OPEX investments.
- Segment Divergence: Brazil and Mexico weighed on results, but were counterbalanced by strength in Argentina, Chile, and Turkey.
Automated process improvements and AI integration are already producing measurable gains in conversion rates and operational throughput, supporting the company’s margin expansion thesis. The company’s ability to navigate regional volatility and deliver sequential growth underlines the resilience of its emerging markets payments platform model.
Executive Commentary
"We believe that consistent sequential growth is a confirmation of our company's ability to compound growth over extended periods of time, consequently delivering shareholder returns. Net retention rate of TPV reached an impressive 144%. This figure demonstrates the defensibility of our business with our merchant base."
Pedro Arndt, Chief Executive Officer
"We have consistently executed our strategy, demonstrating strong operational performance by, once again, delivering record levels of revenue and gross profit, along with disciplined cost management and ongoing geographic diversification."
Jeffrey Brown, Interim Chief Financial Officer
Strategic Positioning
1. Automation and AI as Core Strategic Imperative
DLocal is embedding automation and artificial intelligence (AI) at the heart of its operations, not as a side initiative but as a structural driver for the future. AI is being deployed to automate customer experience and compliance, reducing manual intervention and improving efficiency. Process automation has enhanced chargeback and refund handling, increasing merchant win rates and accelerating settlement flows. These initiatives are expected to slow mid-term hiring needs, unlock operational leverage, and create a more scalable platform.
2. Merchant Retention and Share of Wallet Expansion
The company’s net retention rate of 144% signals deepening relationships and increasing wallet share with existing merchants. Notable merchant partnerships, such as Temu (cross-border ecommerce), ZEPS (remittances), and Rappi (on-demand delivery), are expanding across Africa, Asia, and Latin America. DLocal’s ability to support global merchants’ emerging market expansion is a competitive differentiator.
3. Geographic Diversification as a Volatility Buffer
DLocal’s revenue and profit growth are increasingly driven by a wider set of geographies, reducing dependency on any single market. While Brazil and Mexico presented headwinds, Argentina, Chile, Turkey, and new African markets delivered strong growth. This diversification supports the company’s compounding growth model and provides resilience against region-specific shocks.
4. Licensing and Regulatory Moats
Continuous expansion of the company’s licensed portfolio strengthens its regulatory positioning, a key advantage as merchants face complex compliance requirements in emerging markets. Three new licenses in Argentina and Chile were added this quarter, enhancing DLocal’s ability to serve global merchants in regulated environments.
Key Considerations
DLocal’s Q1 reflects a business balancing aggressive investment in technology and geographic expansion with disciplined cost management and margin focus. The company’s approach to automation and AI is already yielding operational and financial returns, but execution and merchant mix remain critical levers to watch.
Key Considerations:
- AI-Driven Efficiency Gains: Early results from automation are visible in conversion rates and reduced manual workload, but full impact will depend on organization-wide rollout.
- Merchant Concentration and Mix Risk: Revenue softness in Brazil and Mexico highlights exposure to large merchants and payment model transitions.
- Geographic and Vertical Diversification: Outperformance in Argentina, Chile, and Turkey demonstrates the value of a multi-market strategy, but currency and regulatory volatility persist.
- Margin Expansion Trajectory: Adjusted EBITDA to gross profit ratio improvement suggests scalable cost structure, contingent on continued tech execution.
Risks
DLocal remains exposed to emerging market volatility, including currency fluctuations, regulatory shifts, and macroeconomic instability. Merchant concentration risk persists, as seen in Mexico’s local-to-local TPV and Brazil’s revenue softness. Execution risk around automation and AI rollouts could impact the margin expansion narrative if integration lags or fails to deliver expected efficiencies. Additionally, competitive intensity in global payments and evolving compliance requirements may pressure take rates and operating costs.
Forward Outlook
For Q2 2025, DLocal management signaled:
- Continued investment in AI and automation to drive operational leverage
- Focus on expanding merchant relationships and deepening share of wallet
For full-year 2025, management maintained a high-growth, margin-expanding outlook, emphasizing:
- Sustained sequential growth in TPV and revenue
- Ongoing geographic and vertical diversification to offset regional volatility
Management highlighted that mid-term hiring growth will slow as automation scales, and that further operational leverage is expected as technology initiatives mature. The company expects to maintain its high free cash flow conversion and adjusted EBITDA to gross profit ratio as it invests in future growth.
Takeaways
DLocal’s Q1 2025 results reinforce its positioning as a high-growth, margin-expanding payments platform in emerging markets, with automation and AI beginning to yield operational leverage. Merchant retention and geographic diversification are offsetting regional headwinds, but execution on technology and merchant mix will remain key watchpoints.
- AI and Automation Execution: Early wins in process automation and AI integration are supporting conversion rates and cost efficiency, but full benefits are still to come as rollout continues.
- Merchant and Market Diversification: Strong performance in Argentina, Chile, and Turkey mitigates Brazil and Mexico softness, validating the company’s multi-market strategy.
- Future Focus on Margin and Share of Wallet: Investors should monitor the pace of automation-driven margin expansion and the company’s ability to deepen merchant relationships across regions and verticals.
Conclusion
DLocal’s Q1 highlights the compounding power of its emerging markets payments platform, with automation and geographic expansion driving both growth and margin leverage. Sustained execution on technology and merchant diversification will be essential to maintain this trajectory in a volatile macro environment.
Industry Read-Through
DLocal’s results send a clear signal to the global payments and fintech sector: automation and AI are shifting from optional enhancements to core strategic levers for margin and scalability, especially in high-growth, high-complexity markets. Geographic and merchant diversification are increasingly necessary to buffer against regional volatility and concentration risk. Competitors and partners in cross-border payments, remittances, and digital commerce should expect continued investment in technology-driven efficiency and regulatory compliance as foundational requirements for sustained growth and defensibility in emerging markets.