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SEC filingRevenue surged 49% to $8.8B driven by lending and first-party growth alongside higher payment and merchandise volumes, though profitability faced headwinds with operating income down 20% to $611M amid elevated operating costs on larger scale.
MercadoLibre delivered robust top-line growth in Q1 FY2026, with net revenues reaching $8.8 billion, up 49% from $5.9 billion in the prior year. This acceleration stemmed from our lending business's credit originations, expanded first-party sales, and elevated total payment volume and gross merchandise volume, fulfilling rising demand for digital payment infrastructure across Latin America. These drivers underscore our ecosystem synergies, where e-commerce and fintech reinforce each other to capture market share in underserved regions.
Gross profit rose 39.4% to $3.9 billion, achieving a 43.7% margin on the larger revenue base. Our gross profit margin, defined as net revenues and financial income minus related costs, reflects a strategic plan built on ample liquidity to cover expenses and a cost-effective capital structure directly influenced by service operation levels. While scale efficiencies supported this expansion, the slightly moderated growth rate versus revenue signals rising costs from intensified activities like shipping and inventory management.
Operating income, however, declined 19.9% to $611 million from $763 million, compressing the operating margin to 6.9%. Defined as income from operations over net revenues and financial income, this metric highlights pressures from our cost structure scaling with business volume. Investments in operations and the need to fund growth initiatives outweighed gross profit gains, a common dynamic in high-growth phases where near-term margins fund long-term positioning.
Bottom-line results showed net income at $417 million, down 15.6%, with diluted EPS of $8.23 versus $9.74 prior year. These reflect the trade-offs of aggressive expansion, balanced by strong cash generation: net cash provided by operating activities doubled to $2.08 billion from $1.03 billion. This liquidity surge, after netting debt and payments, provides management and investors visibility into available cash for investments and digital assets.
Risk models incorporate user credit history, transaction volume in our ecosystem, and merchant sales, guiding credit decisions amid portfolio growth. Looking ahead, we anticipate sustained capital expenditures in IT and logistics to preserve leadership in Latin American e-commerce and fintech, though current results are not necessarily indicative of future periods. This positions us to leverage our infrastructure for ongoing demand while navigating cost dynamics.