DLocal (NASDAQ: DLO) stands out
as a rare example of a company that is quietly executing, delivering strong
growth, and improving profitability at the same time. Following its Q3 2025
earnings release, DLocal has demonstrated that its business model remains
highly relevant in a world increasingly driven by cross-border digital commerce
and emerging market consumption. In this article we will dive into DLocal
recent earnings, stock performance & valuation, growth potential, and the
risks investor should consider.
About DLocal
DLocal is a global payments
platform focused on enabling cross-border and local payment solutions in
emerging markets. Founded in 2016 and headquartered in Montevideo, Uruguay, the
company went public on NASDAQ in June 2021. DLocal helps global merchants
accept payments across Latin America, Africa, Asia, and the Middle East through
a single API, supporting local cards, bank transfers, digital wallets, and
alternative methods, benefiting from long-term emerging market digitalization
trends.
DLocal Financial Performance
In Q3 2025, DLocal delivered
strong financial performance, with quarterly revenue reaching $282.48 million,
up from $185.77 million in Q3 2024, representing 52.06% year-over-year growth,
while EPS rose sharply to $0.17 from $0.09, an increase of 88.89%. On a
trailing twelve-month basis, revenue increased to $960.19 million compared to $729.49
million in Q3 2024, growing 31.62%, and TTM EPS improved to $0.56 from $0.40,
up 40.6%. Free cash flow per share (TTM) reached $0.57, slightly higher than $0.56
a year earlier, reflecting 1.79% growth. Profitability remains solid, with a Gross
profit margin of 38.6%, Net profit margin of 17.8%, and Free cash flow margin
of 17.89%, while capital efficiency is strong with Return on assets of 9.66%
and Return on equity of 35.56%, supported by a conservative Debt to equity
ratio of 0.13.
Over the past five years, DLocal
has grown its revenue at a 68.2% CAGR and its net income at 53.3%. Free cash
flow turned negative in 2024 but became positive again in TTM Q3 2025. DLocal
has proven to be a fast grower in the past and is still projected to deliver
rapid growth in the coming years.
DLocal Fiscal 2025 Financial
Forecast
Looking ahead, analysts forecast 2025
revenue of $1.05 billion, a 40.71% increase from $745.97 million in 2024, and non-GAAP
EPS of $0.70, up 36.71% from $0.51. Wall Street analyst give Buy rating, with
average price target of $17.95 implying 18.56% upside, and a high target of $21,
representing 38.71% potential upside.
DLO Stock Price Performance
and Valuation
At the time this article was written DLocal stock was trading at $15.14 per share. DLocal stock has risen 28.7% over the past year, significantly outperforming the S&P 500’s 16.2% gain during the same period, reflecting improving investor confidence as fundamentals strengthen. However, since its IPO in June 2021, the stock remains down 56.1%, underperforming the S&P 500’s 64.1% increase, because of high valuation in the past.
DLocal also offers a 3.37% dividend yield, adding income
appeal uncommon for a growth-oriented fintech. From a valuation standpoint, the
stock trades at a P/S TTM of 4.44 and forward P/S of 4.15, reasonable levels
given its strong revenue growth, while non-GAAP P/E TTM of 20.94 and forward
P/E of 21.18 imply the market is not overly pricing in future earnings
expansion. Additionally, a P/FCF TTM of 25.97 appears justified by healthy
margins and solid cash generation.
Based on Fiscal.ai data, the
forward P/S and forward P/E ratios since the IPO are significantly below their
historical averages. This indicates potential undervaluation, as DLocal is
still growing rapidly. Overall, these valuation metrics suggest DLocal remains
attractively priced relative to its growth profile, making the stock appealing
for long-term investors despite its past underperformance.
DLocal Growth Potential
Dlocal growth potential remains
solid driven by several factors.
- Exceptional Net Revenue
Retention and Merchant Expansion Economics
DLocal showcased exceptional merchant stickiness in Q3 2025, with Net Revenue Retention (NRR) at 149% up from 145% in Q2 and 113% in Q1, among the highest in fintech. This signals existing merchants expanding consumption rapidly via higher order frequency, new payment methods, and cross-selling. A 149% NRR means revenue would grow significantly from the current base alone, even without new acquisitions. TPV retention hit 157%, highlighting volume growth outpacing new customer gains.
This shifts economics, cutting reliance on acquisition costs and freeing capital for expansion and innovation. Key drivers include scaling by 6 Magnificent 7 firms and Fortune 500 clients, deeper integrations, and diversification half of top 10 merchants now differ from 24 months ago. This decouples growth from acquisition efficiency. - Cross-Border and Remittances
Acceleration as the Fastest-Growing Revenue Segment
Cross-border payments, including remittances, grew 75% year over year in Q3 2025 to $5.3 billion, representing 51% of total TPV. Remittances were the fastest-growing component, with volumes up 226% year over year, far exceeding the company’s overall TPV growth of 59%. This surge reflects strong structural tailwinds in the global remittance market, where average fees remain elevated at 6.62% globally and 8.45% in Sub-Saharan Africa, according to the World Bank. With more than 4 billion people in emerging markets and a middle class projected to double by 2034, demand for faster, lower-cost international payments continues to rise.
Management highlighted partnerships with Western Union and Digit9 focused on African corridors, enabling transfers in minutes and pricing advantages of 200–500 basis points. Although remittances carry lower margins, they provide higher growth, more predictable recurring revenue, and reduced concentration risk for investors. - Geographic Diversification
Reducing Concentration Risk While Enabling Frontier Market Monetization
DLocal’s revenue concentration in its top three markets has fallen below 50%, down from 58% in 2023, signaling meaningful geographic diversification over the past two years. Latin America remains the core region, contributing 83% of Q3 revenue and growing 61% year over year, while Africa and Asia are scaling rapidly. Excluding Egypt, which faced isolated merchant losses, the Africa & Asia segment grew 83% year over year, indicating strong underlying momentum. This diversification reduces exposure to country-specific regulatory and FX risks.
Brazil illustrated this resilience by rebounding to 79% revenue growth in Q3, driven by strength across streaming, e-commerce, and advertising. Colombia also delivered strong results, while frontier markets such as Bolivia and Nigeria added material gross profit. Strategically, expansion beyond Latin America into Africa and Asia’s vast unbanked population significantly enlarges DLocal’s addressable market and supports sustained 50%+ growth potential.
Risks to Consider
While DLocal looks like a good
opportunity, we should be mindful of potential risks.
- Currency Volatility
Operations in volatile markets such as Argentina and Egypt expose DLocal to significant foreign exchange risk, resulting in revenue and profit volatility and difficult year-over-year comparisons in 2025. Sudden currency devaluations, capital controls, and FX restrictions can reduce transaction values when translated into U.S. dollars and complicate profit repatriation. These macro-driven factors can obscure underlying operational performance despite continued local-currency growth. - Regulatory Challenges
Operating across more than 40 countries exposes DLocal to complex and evolving regulatory regimes in Latin America, Africa, and Asia, increasing compliance costs and operational risk. Changes in licensing, FX, or payments regulations can disrupt growth. Past challenges, including alleged violations of Argentine foreign exchange rules and short-seller accusations, have heightened regulatory and investor scrutiny, potentially amplifying reputational risk and valuation volatility. - Customer Concentration
DLocal’s revenue remains highly concentrated among a small number of large merchants, with the top five accounting for 47% of total revenue and the largest single client contributing roughly 16%. This concentration increases vulnerability to client churn, volume fluctuations, or contract renegotiations. Any loss of, or pricing pressure from, a major merchant could have a disproportionate impact on revenue growth and profitability.
Read More: Futu Holdings Stock (FUTU) Great Growth and Undervalue in Q3 2025 Earnings
Conclusion
DLocal demonstrates a compelling
combination of strong revenue growth, improving profitability, solid cash
generation, and a conservative balance sheet, all while operating in
high-growth emerging markets. Despite recent share price gains, the stock
remains well below its IPO level and trades at reasonable valuation multiples
relative to its growth outlook. With favorable analyst expectations and
long-term structural tailwinds, DLocal appears well positioned as an attractive
long-term investment opportunity.
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