MercadoLibre, Inc. (MELI) Income Statement

The sequential acceleration from 39.5% in 2025Q3 to 49.8% in 2026Q2 suggests that the commerce and fintech segments are both firing, likely driven by deeper penetration of Mercado Pago and continued logistics investments. However, this growth is increasingly reliant on credit expansion, which carries higher risk. Investors should monitor whether this pace is sustainable as the credit book matures and competition intensifies.

The 580 basis point decline over the past two years indicates that the cost of scaling fulfillment and the funding of Mercado Credito are outpacing the benefits of higher-margin advertising revenue. While the company has historically expanded margins through operating leverage, the gross margin trend suggests that the mix shift toward lower-margin fintech and logistics services is a persistent drag. If this trajectory continues, it could undermine the bull case for margin expansion.

The sharp decline in operating margin, despite robust revenue growth, suggests that the company is not achieving the operating leverage expected from a platform business. SG&A and R&D expenses have grown faster than gross profit, with R&D up 59% YoY in 2026Q2, possibly reflecting heavy investment in AI and logistics. This may be a deliberate strategy to build long-term moats, but it is currently pressuring profitability and warrants close monitoring.

The increase in COGS reflects the scaling of logistics and the cost of funding the credit portfolio, which are inherently capital-intensive. R&D expenses have also grown disproportionately, likely due to investments in technology and AI, which may be necessary to maintain competitive advantage but are currently compressing margins. Management's expense discipline appears to be secondary to growth initiatives, and investors should monitor whether these investments yield sufficient returns.