DLocal (DLO) Q2 2025: TPV Surges 53% as Merchant Diversification Accelerates
DLocal’s Q2 results underscore a step-change in merchant adoption and geographic diversification, with total payment volume up 53% and revenue growth outpacing even bullish expectations. Management’s guidance revision and commentary signal that the company’s S-curve of digital payment localization is gaining momentum across the Global South, with new products and market entries broadening the addressable base. Investors should watch for how DLocal navigates emerging regulatory and FX risks as it leans into an ambitious expansion cycle.
Summary
- Merchant Localization Strategy Scales: DLocal’s core growth is increasingly driven by top merchants expanding into more countries and payment methods.
- Product Innovation Drives Stickiness: Launches like Smart PIX and BNPL integrations deepen platform utility and revenue opportunities.
- Guidance Signals Sustained Momentum: Upwardly revised outlook reflects broad-based strength, though macro and regulatory risks remain in focus.
Performance Analysis
DLocal delivered record highs in total payment volume (TPV), revenue, and gross profit, with TPV up 53% year over year and revenue rising 50%. This outpaced even optimistic expectations, as both core markets (Brazil and Mexico) rebounded and “rest of world” geographies accelerated nearly three times faster than the top three markets. Notably, the company’s top three markets now account for less than 50% of revenue, down from 58% a year ago, reflecting meaningful diversification.
Gross profit climbed 42%, buoyed by volume gains in both large and emerging markets, while adjusted EBITDA grew 64% and the EBITDA-to-gross profit ratio improved for the fifth consecutive quarter. Operational leverage was evident even as operating expenses rose 10% sequentially, primarily due to tech headcount and third-party services. Free cash flow generation remained robust at $48 million, up 22% sequentially, underscoring the company’s ability to fund growth internally despite dividend payments and continued investment.
- Geographic Expansion: Markets like Turkey, South Africa, and Pakistan contributed materially, offsetting partial volume losses in Egypt.
- Take Rate Dynamics: Net take rate ticked up quarter over quarter, driven by a higher share of pay-ins and processing cost recovery, though management reiterates the long-term downward trend as merchant volumes scale.
- Merchant Concentration: Growth is broadening, with the top 20 merchants driving momentum but diversification steadily improving as more merchants expand into new markets via DLocal.
Despite FX headwinds in Argentina and one-off processing cost recoveries in Brazil, the company’s underlying profitability and cash generation remain strong, positioning it well for continued investment in product and geographic expansion.
Executive Commentary
"We continue to experience strong momentum across the business, once again setting a record high TPV of $9.2 billion and achieving our third consecutive quarter of over 50% year-over-year growth. Both revenue and gross profit also reached all-time highs... Our core markets, particularly Brazil and Mexico, rebounded to deliver solid performance while the rest of our geographies are growing even faster."
Pedro Arndt, Chief Executive Officer
"By consistently executing our strategy, we have once again hit record numbers in TPV, revenue, gross profit, and adjusted EBITDA, all while maintaining disciplined cost management and continuing our geographic expansion. We ended the period with a robust liquidity position with corporate cash and cash equivalents at approximately $254 million."
Jeffrey Brown, Interim Chief Financial Officer
Strategic Positioning
1. Merchant S-Curve Adoption
DLocal’s business model, enabling global merchants to localize payments across emerging markets, is entering a new phase of adoption. The company’s “S-curve” thesis—where merchants expand from international acquiring to deep local payment integration—is validated by top clients now averaging 11 countries and 48 payment methods, up from 8 and 35 eighteen months ago. This broadening footprint reduces volatility and increases revenue stickiness, as merchants rely on DLocal for multi-market expansion.
2. Product Innovation as a Growth Lever
New product rollouts are enhancing DLocal’s value proposition and take rate resilience. The launch of Smart PIX in Brazil brings card-like functionality to the instant payment system, while integrated buy-now-pay-later (BNPL) partnerships allow merchants to tap into local credit demand without DLocal assuming credit risk. Stablecoin settlement solutions, with partners like Circle and BVNK, position the company as a key on- and off-ramp provider for digital assets in emerging markets, leveraging its FX and payout infrastructure.
3. Geographic and Segment Diversification
The company’s expansion into new markets (UAE, Turkey, Philippines) and sectors (remittances, SaaS, ride-hailing) is diluting country and merchant concentration risk. Revenue outside the top three markets is growing nearly three times faster, and the addition of new licenses enables DLocal to offer a broader suite of regulated financial services, strengthening its moat and opening new addressable markets.
4. Operating Leverage and Efficiency
Despite an ongoing investment cycle in tech, product, and compliance, DLocal’s revenues per employee are rising and operating leverage continues to improve. Management highlights a lean culture and expects further scalability gains from AI and automation initiatives, supporting margin expansion even as headcount and OPEX rise.
5. Corporate Governance and Capital Allocation
Recent board and executive changes signal a push toward best-in-class governance and shareholder alignment. The appointment of a new CFO with deep payments experience, ongoing transition to a majority independent board, and cancellation of treasury shares all point to maturing corporate practices and capital discipline.
Key Considerations
This quarter marks a clear inflection in DLocal’s growth vector, with broad-based merchant adoption and new products driving both scale and resilience. Investors should weigh the following:
Key Considerations:
- Merchant Expansion Pace: Top merchants are leveraging DLocal in more countries and with more payment methods, deepening integration and stickiness.
- Product Suite Evolution: Smart PIX, BNPL, and stablecoin features are expanding the platform’s utility and protecting take rates against long-term compression.
- Geographic Balance: Diversification beyond Brazil, Mexico, and Argentina is accelerating, reducing exposure to single-market shocks.
- Cost Discipline vs. Investment Cycle: Operating leverage is improving, but OPEX is set to rise as product and market investments continue in H2.
- Governance and Capital Return: Board independence and treasury share cancellation may reduce governance risk and support shareholder value.
Risks
Emerging market volatility remains a material risk, with macroeconomic shifts, FX devaluations, and evolving capital controls (especially in Argentina and Brazil) all flagged by management. Regulatory and tariff changes, such as increased cross-border e-commerce tariffs in Mexico and potential digital taxes, could disrupt merchant flows and segment growth. While DLocal’s diversification helps, concentrated exposure to large merchants and sectors still presents risk if adoption patterns shift or new entrants emerge.
Forward Outlook
For Q3 2025, DLocal guided to:
- TPV and revenue at the upper end of previous guidance, reflecting ongoing strength across geographies and segments.
- Gross profit and adjusted EBITDA expected to exceed prior upper range, driven by sustained volume growth and operational leverage.
For full-year 2025, management raised guidance as follows:
- Upper-limit targets for TPV and revenue, with gross profit and adjusted EBITDA likely to surpass earlier expectations.
Management highlighted several factors that could influence results:
- Macroeconomic volatility and trade policy shifts, especially tariffs and fiscal changes in key markets.
- Potential for further FX devaluations and capital control changes in emerging markets.
Takeaways
DLocal’s Q2 demonstrates a strong pivot toward multi-market, multi-product merchant relationships, with accelerating adoption across the Global South and operational discipline supporting profitable growth.
- Merchant and Geographic Diversification: The business is less reliant on any single market or client, as top merchants expand their DLocal footprint and new geographies gain traction.
- Innovation Offsets Take Rate Pressure: A robust pipeline of new payment and settlement products is supporting take rate stability and deepening merchant relationships.
- Investment Cycle Remains Key: While cost discipline is evident, OPEX will rise in H2 as DLocal pursues further product and market expansion—investors should monitor margin trajectory closely.
Conclusion
DLocal’s high-growth thesis is showing tangible results as merchant and geographic diversification accelerate, supported by a disciplined operating model and a differentiated product roadmap. While macro and regulatory risks are non-trivial, the company’s ability to deliver profitable growth and adapt to shifting environments positions it well for continued outperformance.
Industry Read-Through
DLocal’s results reinforce the secular trend of global merchants localizing payment flows in emerging markets, with platform providers that offer deep local expertise and a broad product suite gaining share. Rising adoption of alternative payments, BNPL, and stablecoin settlement is likely to reshape competitive dynamics across payments, remittances, and cross-border commerce. Peers with concentrated exposure to a few large markets or legacy payment rails may face increased pressure as merchants seek partners who can provide both regulatory coverage and product innovation in volatile environments.