TLDR

  • MercadoLibre’s fourth-quarter revenue reached $8.76 billion, marking a 45% increase year-over-year and surpassing estimates by approximately $300 million.
  • Gross merchandise volume saw a 37% year-over-year rise, with Mexico experiencing a 49% surge and Brazil up by 46%.
  • Earnings per share (EPS) were $11.03, falling short of the expected $11.43 due to significant investments in AI and its ad platform.
  • The MELI+ subscription service demonstrated accelerated growth, now including bundled offerings from Disney+, Netflix, HBO Max, and Apple TV+.
  • Following the earnings report, the stock experienced an overnight decline of around 5% but closed Tuesday with a 3% gain, ultimately rising 4.29% on the day.

MercadoLibre reported fourth-quarter revenue of $8.76 billion, a 45% increase compared to the previous year and approximately $300 million above Wall Street’s projections.

The robust revenue figures contributed to a 3% rise in the stock on Tuesday, reversing a nearly 7% drop on Monday, which was the stock’s largest single-day decline since November.

In after-hours trading, the stock saw another dip, falling close to 5% as investors reacted to the earnings miss.

MELI Stock Card

Earnings per share were reported at $11.03, which was below the consensus estimate of $11.43 and a decrease from $12.61 in the same quarter last year.

This variance was largely attributed to expenditures on AI tools and advertising platform technology, areas where the company is actively investing.

Mexico and Brazil Drive Volume Growth

Across the platform, gross merchandise volume increased by 37% year-over-year. Mexico led this growth with a 49% increase, while Brazil saw a 46% rise.

Fulfillment penetration in Mexico reached a record high of nearly 80% in the fourth quarter, with free shipping coverage now matching that of Brazil.

Total payment volume for the quarter amounted to $83.7 billion, representing a 42% year-over-year increase.

Net income was $559 million, and free cash flow stood at $763 million.

Subscription Tier Gets a Boost

MELI+, the company’s subscription service, concluded the year with an acceleration in subscriber growth.

This growth in Brazil was driven by two key initiatives: reducing the minimum order threshold for fast shipping from R$79 to R$19, and introducing MELI+ Mega, a premium tier that includes subscriptions to Disney+, Netflix, HBO Max, and Apple TV+.

The reduced shipping threshold helped lower customer churn and boost conversion rates, particularly as the monthly subscription cost of R$9.90 was comparable to or less than a single shipping fee.

MercadoLibre is increasing its focus on AI across its platform. In the fourth quarter, it launched an AI-enhanced search experience in Argentina that utilizes each buyer’s search and transaction history to present relevant products.

This system customizes results based on a buyer’s preference for premium or value-oriented products, offering a more personalized experience than traditional keyword searches.

On the seller side, the company’s Seller Assistant tool is streamlining the onboarding process for new merchants and guiding them toward higher reputation tiers.

This tool also generates short-form product videos from a single image and manages customer service inquiries that would otherwise require human intervention.

Investment in the ad platform is also yielding early positive results. The company reported that spending on bidding algorithms, ad placements, and usability enhancements is leading to increased adoption among brands and top sellers.

AI tools are supporting account managers for major brands, while separate systems are engaging smaller, long-tail sellers to stimulate demand.

MercadoLibre characterized these developments as initial steps in a broader strategy to integrate AI throughout its marketplace.

The stock closed with a 4.29% gain on Wednesday, as investors considered the revenue beat against the backdrop of the earnings miss.