Does MercadoLibre’s (MELI) Free Shipping Push Mark a Shift in Its Long-Term Margin Story?

• MercadoLibre reported second-quarter 2025 results, revealing strong year-over-year revenue growth to US$6.79 billion and continued user expansion, but missed analyst earnings expectations due to higher investments in free shipping and marketing initiatives.
• Despite a significant increase of 14.4 million unique active buyers and growth in key fintech metrics, the company's operating margins were compressed as management emphasized ongoing investment to build long-term platform strength.
• We’ll explore how the margin pressures from increased investment in free shipping may influence MercadoLibre’s broader investment narrative and outlook.

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MercadoLibre Investment Narrative Recap

To be a MercadoLibre shareholder, you generally need to believe in its ability to leverage e-commerce and fintech scale in Latin America for long-term compounding returns. The latest quarter’s margin pressures from heavier free shipping investments do not drastically change the business’s core near-term catalyst, user and credit growth, but they sharpen awareness of cost management as the leading short-term risk.

Among recent announcements, MercadoLibre’s planned US$5.8 billion investment expansion in Brazil aligns directly with the current results, as the scale-up in logistics and marketing spending contributed to both robust revenue gains and the profit margin squeeze. This development should be viewed alongside the growing user base and long-term focus, as revenue growth remains a critical pillar.

Yet, in contrast to the growth story, investors should be aware that heightened investments can put meaningful pressure on short-term margins if...

Read the full narrative on MercadoLibre (it's free!)

MercadoLibre's narrative projects $43.2 billion in revenue and $4.9 billion in earnings by 2028. This requires 24.5% annual revenue growth and a $2.8 billion increase in earnings from the current $2.1 billion level.

Uncover how MercadoLibre's forecasts yield a $2850 fair value, a 19% upside to its current price.

Exploring Other Perspectives

The Simply Wall St Community’s 27 fair value forecasts for MercadoLibre range from US$1,485 to US$3,406 per share. Amid these varied views, many remain focused on how rising investment costs could affect margins and shape performance going forward, reminding you to compare several perspectives when assessing the stock.

Explore 27 other fair value estimates on MercadoLibre - why the stock might be worth 38% less than the current price!

Build Your Own MercadoLibre Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your MercadoLibre research is our analysis highlighting 2 key rewards that could impact your investment decision.
• Our free MercadoLibre research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate MercadoLibre's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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