NU (NU) Q4 2025: ARPAC Rises 27% as Credit Expansion and AI Drive Monetization
Nubank’s Q4 2025 results showcased a business model compounding scale, engagement, and monetization, with ARPAC up 27% year over year. Management flagged 2026 as an inflection point, prioritizing core market dominance, AI deployment, and global expansion. Investors should watch for near-term efficiency pressures as Nubank invests in talent, technology, and U.S. groundwork.
Summary
- Credit-Led Growth Accelerates: Credit card and unsecured lending growth, underpinned by AI, are driving deeper platform monetization.
- Efficiency Trade-Offs Ahead: Deliberate investments in AI, talent, and international expansion will pressure near-term operating leverage.
- Strategic Shift to Global Platform: 2026 marks transition from Latin American leader to a global digital banking contender.
Performance Analysis
Nubank delivered a quarter defined by scale and monetization, closing 2025 with 131 million customers and maintaining an 83% activity rate. ARPAC, average revenue per active customer, rose to $15, up 27% year over year, reflecting successful cross-sell and product adoption. Revenue growth was propelled by both a larger customer base and higher ARPAC, while gross profit grew at a slightly lower rate, shaped by credit loss allowances tied to portfolio expansion.
Credit expansion was the standout operational driver. The total portfolio grew 40% year over year to $32.7 billion, led by credit cards and unsecured lending. Credit card balances jumped 12.2% sequentially, the fastest pace since 2023, as AI-powered underwriting enabled significant credit limit increases, particularly in Brazil. Unsecured lending originations hit a record $4 billion for the quarter. Meanwhile, deposit growth of 29% year over year diversified funding, with cost of deposits declining to 87% of the interbank rate, supporting margin resilience.
- Credit Limit Expansion: Unused credit limits rose 60% year over year, reflecting AI-driven risk models and supporting future revenue potential.
- Asset Quality Stable: Non-performing loans (NPLs) and early delinquencies improved, with no signs of asset quality deterioration despite rapid loan growth.
- Efficiency Ratio Hits Record Low: Operating leverage drove the efficiency ratio below 20% for the first time, though management signaled near-term upward pressure from strategic investments.
One-off items, including a $58 million deferred tax asset remeasurement and a $25 million regulatory levy in Mexico, impacted net income, but the underlying trajectory remains robust. Return on equity reached a record 33%, underscoring the scalability of Nubank’s platform.
Executive Commentary
"As we enter 2026, we see this as an inflection year, the year we begin transitioning from a Latin American leader to a global digital banking platform. Our priorities are organized around three pillars. First, winning in our core markets... Second, strengthen foundations for international expansion... Third, AI as a superpower."
David Valles, Founder, Chief Executive Officer & Chairman
"We are laying the operational foundations for global expansion and accelerating the adoption of AI and other new technologies across the platform. These are deliberate investments in long-term capacity building at Nubank, and they will likely put upward pressure on the efficiency ratio in the near term. We are comfortable with this trade-off."
Guilherme Lago, Chief Financial Officer
Strategic Positioning
1. Credit-Led Business Model Compounds Engagement
Nubank’s core revenue engine is credit, which management views as the most defensible profit pool in financial services due to regulatory, capital, and data moats. AI-powered underwriting and credit limit expansion are enabling deeper wallet share, especially in Brazil, and are being exported to Mexico and Colombia. The credit-led model not only monetizes but also cements primary banking relationships, supporting engagement and cross-sell.
2. Multi-Segment and Product Expansion
2025 saw the launch of over 100 new products and features, including PIX with AI in Brazil, instant payments in Colombia, and a subscription-based credit card in Colombia. Ultravioleta, Nubank’s affluent segment offering, is gaining traction, with high-income and “super core” (mid-income) segments growing 40% and 100% year over year, respectively. SME tools and under-18 products expand the addressable market while supporting monetization beyond mass retail.
3. Early AI Leverage as a Strategic Differentiator
Nuformer, Nubank’s foundation AI model, is now in production for credit decisioning in Brazil and testing for additional use cases. AI is already improving underwriting, conversion, and service, with over 10 million monthly active users engaging with AI-powered features. Management sees AI as both a disruption risk and a margin expansion lever, with cost and revenue impacts compounding as adoption scales.
4. Internationalization and U.S. Entry
With conditional approval for a U.S. bank charter, Nubank is laying groundwork for targeted U.S. expansion, focusing on subsegments with unmet needs. While Latin America remains the primary growth engine, 2026 investments in team, product, and regulatory compliance will set the stage for global ambitions, with management emphasizing discipline and focus over broad-based blitz scaling.
5. Balance Sheet Resilience and Capital Allocation
Nubank’s $8.9 billion capital base and $38.8 billion in available funding provide substantial headroom for credit growth and international forays. Deposit growth and diversified funding reinforce balance sheet strength, supporting both risk management and strategic flexibility.
Key Considerations
This quarter underscores Nubank’s ability to monetize scale through disciplined credit expansion, while the strategic lens shifts to global platform ambitions and AI leverage. Investors should weigh near-term efficiency pressures against long-term value creation from these investments.
Key Considerations:
- AI as a Revenue and Cost Engine: Proprietary models are already lifting credit limits and underwriting quality, with further upside as AI is deployed across more products and geographies.
- Efficiency Ratio Inflection: Deliberate investments in AI, talent, and global expansion will elevate the efficiency ratio in 2026, but are expected to drive medium-term operating leverage and margin improvement.
- Regulatory and One-Off Impacts: Deferred tax asset remeasurement, regulatory levies, and return-to-office provisions affected Q4 results, but are not indicative of underlying trends.
- Segment Diversification: Rapid growth in mid- and high-income segments, as well as SME and under-18 products, is broadening Nubank’s revenue base and reducing reliance on mass retail.
Risks
Key risks include regulatory shifts, particularly in Brazil’s lending and payroll loan markets, and the operational complexity of scaling secured lending and international expansion. The transition to a global platform introduces execution risk, while deliberate cost investments may pressure near-term profitability. Competitive dynamics in private payroll loans and potential cannibalization of unsecured lending require careful monitoring as Nubank balances growth with asset quality.
Forward Outlook
For Q1 2026, Nubank management signaled:
- Seasonal uptick in early-stage delinquencies (15-90 NPLs), consistent with historical trends.
- Continued credit portfolio growth, with AI-driven underwriting and credit limit expansion as primary levers.
For full-year 2026, management emphasized:
- Strategic investments in AI, talent, and global expansion will elevate efficiency ratio in the near term.
- Medium-term operating leverage and margin improvement expected as investments yield returns.
Management highlighted several factors that will shape results:
- Finalization of the Mexican banking license process to unlock next phase of growth.
- Continued scaling of credit and product launches in Colombia and Mexico.
Takeaways
Nubank’s Q4 results highlight the compounding effects of scale, engagement, and AI-driven monetization, while 2026 marks a deliberate pivot toward global platform ambitions and foundational investments.
- Credit Expansion as Growth Engine: AI-enabled credit limit increases and disciplined underwriting are translating into higher ARPAC and robust loan growth without sacrificing asset quality.
- Efficiency Trade-Offs: Near-term operating leverage will be pressured by investments in technology, talent, and U.S. groundwork, but the medium-term outlook remains positive as these initiatives mature.
- Global Platform Ambition: The transition from regional to global digital banking, underpinned by proprietary AI and robust capital, is Nubank’s next major value creation lever to monitor.
Conclusion
Nubank’s Q4 2025 demonstrates a scalable, credit-led platform compounding monetization and engagement, while setting the stage for global expansion and AI-driven advantage. Investors should expect near-term cost headwinds as Nubank invests for the next phase, but the underlying business model remains robust and well-positioned for long-term growth.
Industry Read-Through
Nubank’s results reinforce the structural shift toward digital banking platforms that monetize scale through proprietary AI and credit-led models. The rapid adoption of AI for underwriting, product cross-sell, and cost reduction sets a new competitive bar for incumbent banks and fintechs in Latin America and beyond. Margin resilience and balance sheet discipline are increasingly critical as digital banks transition from regional disruptors to global contenders. Regulatory shifts in payroll lending and funding costs will be key industry watchpoints, while the successful navigation of efficiency trade-offs during investment cycles will differentiate long-term winners.