MercadoLibre, Inc. (MELI) Cash Flow Statement

The OCF/NI ratio of 7.86 in 2026Q2 is exceptionally high, driven largely by a $2.7B working capital inflow, which appears to be a seasonal or one-off benefit rather than a sustainable trend. Over the past year, the ratio has fluctuated between 1.91 and 9.32, indicating that cash conversion is highly volatile and may not consistently outpace earnings. Investors should monitor whether this gap narrows as working capital normalizes, which could signal a deterioration in earnings quality.

The FCF trajectory is highly erratic, with the 2026Q2 margin of 38.7% benefiting from a massive working capital release, while the 2025Q1 margin of 11.3% was depressed by a working capital outflow. This volatility suggests that FCF is not a reliable indicator of underlying earnings power, and investors should focus on the average FCF margin over a longer period. The strong top-line growth of 39.1% YoY, as noted in the income statement analysis, may not translate into consistent FCF expansion if working capital swings persist.

The capital intensity is modest for a company with a proprietary logistics network, suggesting that much of the infrastructure investment may be funded through operating leases or third-party arrangements. The increase in CapEx to $441M in 2026Q2 from $148M in 2024Q1 reflects continued investment in fulfillment and technology, but the ratio to revenue remains stable. This implies that MELI can scale without a disproportionate increase in capital spending, which supports FCF generation over the long term.

The working capital swings are substantial and appear to be driven by the fintech segment's credit portfolio and payment processing float. In 2026Q2, a $2.7B inflow suggests a significant increase in customer deposits or payables, which may not be sustainable. Conversely, the $456M outflow in 2025Q1 indicates a build-up in receivables or inventory. These fluctuations complicate the assessment of underlying cash generation and warrant close monitoring of the credit book's growth and collection cycles.

The absence of dividends and minimal buybacks underscores management's commitment to reinvesting cash flows into the business, particularly the logistics network and credit portfolio. This approach is consistent with a high-growth phase, but it also means that shareholders rely entirely on capital appreciation for returns. As the credit book expands, the company may need to allocate more capital to funding loan growth, which could pressure FCF and limit future shareholder returns.

The cumulative OCF/NI ratio of approximately 5.0 suggests that earnings significantly understate cash generation, likely due to non-cash charges like D&A and SBC, as well as working capital inflows. However, this divergence may also reflect the timing of credit portfolio growth, where cash inflows from loan repayments are not yet offset by provisions. Investors should be cautious, as this gap may narrow if credit losses materialize or working capital normalizes, potentially leading to a correction in cash flow.