Executive Summary / Key Takeaways

• DLocal is a pivotal payment processing platform connecting global merchants to emerging markets, leveraging a "One dLocal" solution that simplifies complex local payment ecosystems and regulatory environments.
• The company demonstrates robust growth, with Q2 2025 Total Payment Volume (TPV) reaching a record $9.2 billion, marking its third consecutive quarter of over 50% year-over-year growth, driven by strong performance across diverse geographies and verticals.
• DLocal's technological edge, including SmartPix, Buy Now Pay Later integrations, and stablecoin solutions, enhances conversion rates and expands its addressable market, positioning it as a leader in alternative payment methods.
• Despite take rate compression from larger merchants, DLocal maintains strong profitability, with Q2 2025 adjusted EBITDA over gross profit at 71%, and generates significant free cash flow, supporting disciplined investments and shareholder returns.
• While facing macroeconomic volatility and competitive pressures, DLocal's deep local expertise, expanding license portfolio, and strategic focus on new merchant acquisition and share of wallet gains in frontier markets underpin its long-term growth thesis.

Unlocking the Global South: DLocal's Foundational Strategy

DLocal Limited, founded in 2016 and headquartered in Montevideo, Uruguay, has rapidly established itself as a critical infrastructure provider in the global payments landscape. The company's core mission is to empower global enterprise merchants to seamlessly connect with billions of consumers across emerging markets in APAC, the Middle East, Latin America, and Africa. This is achieved through its distinctive "One dLocal" concept: a single direct API, one unified platform, and one contract, which eliminates the need for merchants to manage multiple local entities and integrations. This streamlined approach is particularly vital in emerging markets, where payment ecosystems are often fragmented, costly, and characterized by lower performance compared to developed economies.

The addressable market for DLocal's services is vast, valued at trillions of dollars, and is projected to experience double-digit annual growth through 2030. This expansion is fueled by low penetration in digital adoption and card usage, coupled with powerful demographic and technological shifts. By 2050, nearly 90% of the global population under the age of 20 will reside in emerging markets, and these regions are expected to account for approximately 65% of global economic growth by 2035. This youthful, tech-native demographic is driving the rapid adoption of digital solutions, including mobile payments, digital wallets, and embedded financial services, creating a significant tailwind for DLocal's business model.

DLocal's strategic positioning is further solidified by its deep local expertise and expanding portfolio of financial services licenses. The company has consistently invested in obtaining regulatory approvals, securing nine new licenses globally in 2024, including an Authorized Payment Institution License from the UK's FCA, an International Money Transfer Operators License in Nigeria, and Payment Service Provider licenses in Ecuador and Uganda. In the first half of 2025, DLocal added three new registrations in Argentina and Chile, and three new licenses in the UAE, Turkey, and the Philippines. This growing portfolio is a significant competitive advantage, offering global merchants greater regulatory confidence and underscoring DLocal's commitment to compliant practices. This helps DLocal win more RFPs, close more deals, and gain share of wallet by providing security and compliance alignment to global merchants operating in complex regulatory environments.

Technological Edge: Driving Conversion and Expanding Horizons

DLocal's competitive moat is significantly reinforced by its continuous investment in differentiated technology and product innovation. The company's core technological strength lies in its ability to optimize payment routing and enhance transaction performance within the complex emerging market landscape. This is exemplified by several key initiatives.

The "Smart Requests" functionality, launched in Q3 2024, utilizes per-country machine learning models to optimize routing and chaining, boosting transaction performance and improving conversion rates by an average of 1.22 percentage points across the board. This seemingly minor improvement translates directly to approximately 1.2% additional revenue for merchants. In Q1 2025, DLocal deployed "Smart 3DS" in some African markets, strengthening payment security protocols for higher-risk transactions and driving a 6 percentage point improvement in conversion rates in those regions. Furthermore, the company has been a driving force behind network tokenization, enabling it with seven processors across ten countries in 2024. This initiative boosted system-wide conversion rates, with notable gains of 1.6 percentage points in Colombia and nearly 1.5 percentage points in Argentina in Q1 2025.

Beyond optimizing existing payment flows, DLocal is actively innovating in new payment methods and solutions. In early September 2025, DLocal launched "SmartPix" in Brazil, a groundbreaking solution that redefines the Pix experience by replicating most of the functionalities and convenience of card-on-file payments for merchants. This first-in-the-market offering is already live with clients and underscores DLocal's commitment to leading in the alternative payment method (APM) space. The company also launched multiple Buy Now Pay Later (BNPL) integrations in several markets during Q2 2025. These integrations allow merchants to offer credit to consumers without taking on credit risk themselves, with DLocal revenue sharing on the credit yields made by its BNPL partners.

DLocal is also making significant progress in stablecoin solutions, partnering with entities like Circle and BVNK. The company views stablecoins as a substantial opportunity rather than a threat, leveraging its broad emerging market presence, highly developed payout and pay-in infrastructure, local FX liquidities, and years of experience. DLocal is uniquely positioned to act as a crucial on-ramp and off-ramp provider between fiat and stablecoins, a segment where much of the margin lies due to FX and local liquidity requirements. These technological advancements, coupled with ongoing AI and automation initiatives aimed at driving operational efficiency and scalability, are foundational to DLocal's ability to maintain its competitive edge and capture future growth.

Financial Momentum and Strategic Diversification

DLocal's financial performance in the first half of 2025 reflects a business gaining significant momentum and demonstrating increasing diversification. The company delivered another quarter of solid growth and disciplined execution in Q2 2025, with key financial metrics accelerating. Total Payment Volume (TPV) reached a record high of $9.2 billion, marking the third consecutive quarter of over 50% year-over-year growth. Revenue and gross profit also hit all-time highs of $256 million and $99 million, respectively. In constant currency terms, TPV would have grown by 65% year-over-year and revenue by 63% year-over-year in Q2 2025.

This robust growth was broad-based, with core markets like Brazil and Mexico rebounding to deliver solid performance, while other geographies grew even faster. This underscores DLocal's increased business diversification and the resilience of its larger markets. Remittances and commerce were particularly strong TPV drivers in Q2 2025, followed by SaaS, delivery, streaming, and ride-hailing, with only slight offsets from advertising.

The company's net take rate improved by almost 3 basis points quarter-over-quarter in Q2 2025, primarily due to a higher share of pay-ins and a recovery of processing costs, though partially offset by lower FX fees in Argentina due to spread compression.

DLocal's operational efficiency is also evident in its profitability trends. The company has posted five consecutive quarters of improvement in the adjusted EBITDA over gross profit ratio, reaching 71% in Q2 2025. This demonstrates a disciplined approach to investment despite ongoing allocations to product, technology, operations, and compliance capabilities. Net income for Q2 2025 totaled $43 million, impacted by the Argentine peso devaluation on its bond portfolio; excluding these effects, net income would have been $53 million.

The company efficiently expatriated funds, reducing its Argentine bond exposure by over 80% and reallocating to U.S. treasuries to mitigate future volatility. DLocal also continues to generate strong cash flow, with $48 million in free cash flow in Q2 2025.

The company ended Q2 2025 with approximately $254 million in corporate cash and cash equivalents, even after paying dividends in June.

The company's strategic initiatives are clearly contributing to its financial strength. DLocal now serves nearly 760 merchants, with its top 50 clients operating in an average of 11 countries and using 48 payment methods, a significant increase from 8 countries and 35 methods just 18 months prior. Geographic diversification has also increased, with the top three markets now representing less than 50% of revenues, down 8 percentage points since 2023, and revenue in other markets growing almost three times faster. This diversification helps mitigate the inherent volatility of operating in emerging markets.

Competitive Landscape and Strategic Positioning

DLocal operates in a highly competitive global payments industry, contending with both large, established players and nimble fintechs. Its primary publicly traded direct competitors include PayPal Holdings , Adyen N.V. , and Block Inc. . While these rivals offer broad payment processing and fintech solutions, DLocal carves out its niche through a specialized focus on emerging markets and a unique operational model.

Compared to PayPal , DLocal's platform offers notably easier integration for merchants seeking to process international transactions in underserved regions. PayPal (PYPL), however, benefits from a well-established global brand, extensive network effects, and superior integration with e-commerce platforms, particularly in mature markets. DLocal's agility in cross-border operations is a strength, but it lags in overall scale and brand recognition, which can impact its market share in core e-commerce. DLocal's Gross Profit Margin (TTM) of 40.03% and Net Profit Margin (TTM) of 16.90% are competitive, but PayPal's larger base and established operations often translate to superior cash flow generation.

Against Adyen , which focuses on a single-platform approach for large enterprises, DLocal's model offers greater flexibility for diverse industries like streaming and gaming, potentially with a more efficient setup process appealing to mid-sized merchants. Adyen (ADYEY), however, excels in technological innovation, offering advanced analytics and a unified ecosystem that provides real-time data insights. Adyen's Gross Profit Margin of 89% and Net Profit Margin of 42% in 2024 significantly outpace DLocal's, indicating a premium model and stronger profitability. DLocal's regional expertise in emerging markets allows it to compete effectively where Adyen's global scale might not be as tailored.

Block Inc. (SQ) differentiates itself with a focus on small businesses and consumers, offering mobile-first solutions and strong ecosystem integration, particularly in blockchain and decentralized finance. DLocal, by contrast, emphasizes global merchant payments in emerging markets, with a streamlined interface for international transactions. While Block's ecosystem might provide better customer loyalty through its app-based services and notably faster transaction speeds in crypto, DLocal's B2B focus gives it an advantage in industries like advertising and travel. Block's 2024 Gross Profit Margin of 37% and Net Profit Margin of 12% are generally lower than DLocal's, but its broader consumer base contributes to strong overall revenue growth.

DLocal's competitive advantages stem from its proprietary technology for cross-border payments, its strong regulatory licenses in emerging markets, and the network effects derived from its merchant partnerships. The "One dLocal" solution provides seamless integration, potentially leading to superior margins through efficient transaction processing and stronger customer loyalty. This approach counters the regulatory strengths of larger players by offering tailored solutions in underserved regions and allows DLocal to maintain pricing power against more commoditized offerings. The company's ability to aggregate volume and negotiate with local processors also drives cost efficiencies, with approximately 20 basis points of cost improvements in processing costs year-over-year.

Outlook and Risks

DLocal's management has provided an optimistic outlook for the remainder of 2025, driven by strong performance in the first half and anticipated sustained momentum. The company expects to end the year around the upper limit of its initial guidance for TPV and revenue, and is likely to exceed the previously stated upper limit for gross profit and adjusted EBITDA. The updated full-year 2025 guidance projects TPV growth of 40%-50% year-over-year, revenue growth of 30%-40% year-over-year, gross profit growth of 27.5%-37.5% year-over-year, and adjusted EBITDA growth of 40%-50% year-over-year.

This positive outlook is predicated on DLocal's strategic focus on becoming a scale leader, prioritizing merchant contracts to avoid losing on price, increasing share of wallet with existing clients, and the continued ramp-up of large global Tier zero merchants. The company also anticipates new opportunities in nascent geographies and and verticals. While a net take rate compression is expected due to a higher mix of transactions from lower take-rate Tier zero merchants and sustained growth in lower take-rate local-to-local transactions, DLocal aims to offset this through growth in higher take-rate new verticals, a natural mix shift towards frontier markets, and new product launches.

Despite this optimism, DLocal operates in inherently volatile emerging markets, and management has highlighted several key risks for the second half of 2025. These include the evolving macroeconomic and trade landscape globally and its potential impact on emerging market consumers. Specific concerns include recent increases in tariffs on cross-border e-commerce in Mexico, along with potential regulatory changes in other markets, shifting fiscal regimes in Brazil, and the potential for currency devaluation and changes in capital controls in the markets where DLocal operates. The primary risk from tariffs is a potential slowdown in cross-border volumes, which is a significant category for DLocal.

DLocal's disciplined investment cycle is expected to continue, with a focus on product and development, license portfolio expansion, and building local operations teams. Despite these investments, the company anticipates achieving operational leverage, with the adjusted EBITDA to gross profit ratio improving year-over-year and tracking towards levels delivered in the past once this investment cycle concludes. Management believes the business can return to an adjusted EBITDA to gross profit ratio in the mid-70s over the long term.

Conclusion

DLocal Limited presents a compelling investment thesis, rooted in its specialized approach to unlocking the vast potential of emerging markets for global digital commerce. The company's "One dLocal" solution, coupled with its deep local expertise and expanding regulatory license portfolio, provides a critical bridge for merchants seeking to navigate complex payment ecosystems. DLocal's consistent financial performance, marked by record TPV and revenue growth in Q2 2025, underscores the effectiveness of its strategy and its increasing geographic and merchant diversification.

The company's technological leadership, demonstrated through innovations like Smart Requests, SmartPix, and stablecoin solutions, not only enhances conversion rates and operational efficiency but also positions DLocal at the forefront of evolving payment trends. While DLocal operates in a competitive landscape and faces inherent risks associated with emerging market volatility and take rate compression, its strategic focus on scale, new product development, and disciplined investment is designed to sustain long-term growth and profitability. DLocal's ability to generate strong cash flow and its commitment to shareholder returns, even amidst an ongoing investment cycle, further solidify its position as a unique and resilient player in the global fintech arena.