DLocal Limited
Payment tollbooth to the Global South with rising scale and cleaner governance, but EM risks and take‑rate pressure demand discipline
DLocal operates a single-API payments platform that lets large global merchants accept pay‑ins and make pay‑outs across 40+ emerging markets, handling local methods such as Pix in Brazil and wallets across Africa and Asia.
Scale, regulatory licenses and country connectivity have accelerated: 2Q25 TPV reached 9.2 billion dollars (+53 percent YoY), revenue grew 50 percent to 256.5 million dollars, adjusted EBITDA rose 64 percent, and quarterly free cash flow was 48.4 million dollars.
Management raised 2025 guidance and highlighted a shift toward a majority‑independent board, cancellation of treasury shares, and a seasoned incoming CFO. Corporate cash stood at 253.8 million dollars as of June 30, 2025 even after paying a 150 million dollar cash dividend, while borrowings were 56.8 million dollars, underscoring net cash strength.
Quality is solid but not unassailable. The moat rests on high merchant switching costs, regulatory permissions, and an increasingly broad local‑rails footprint. However, take‑rates have trended down with scale and mix, and outcomes remain exposed to FX, capital controls, and taxation changes in markets like Argentina, Egypt, Mexico and Brazil.
Governance has improved since the 2022 short‑seller episode: the company rebutted the allegations, initiated buybacks, and is formalizing board independence and committees, but controversy risk is not zero. Our bottom line: this is a scalable, asset‑light tollbooth on EM digital commerce worth owning at a fair price with margin of safety.
Does DLocal have a strong competitive moat?
Moat drivers: (1) Switching costs for enterprise merchants integrating a single API across 40+ jurisdictions, payment types and compliance regimes; (2) Intangible/regulatory assets from licenses and bank/local payment relationships that take time to replicate; (3) Scale and process know‑how in FX, pay‑outs and retries that can lift conversion.
These are real and appear to be strengthening as DLocal adds licenses (e.g., UK FCA Authorized Payment Institution) and enters new partnerships (Deel, MoneyGram, Juspay, BVNK, Coda, Bolt) which expand coverage and capabilities.
That said, the business lacks the classic two‑sided network effect of card networks and faces well‑funded rivals (Adyen, Stripe, local PSPs). Efficient scale exists in certain smaller markets where regulatory friction deters new entrants, but take‑rate compression with volume tiers is a structural counterweight.
Overall we view the moat as narrow but durable if execution stays high.
Does DLocal have pricing power in its industry?
Pricing power is mixed. On the one hand, DLocal’s solution is mission‑critical for cross‑border monetization in hard markets where alternatives are costly or slow, which supports healthy gross margins. On the other hand, net take rate declines with merchant scale, product mix (higher pay‑outs share, orchestration), and currency effects.
In 2Q25 gross profit over TPV was about 1.07 percent versus 1.16 percent a year ago, echoing long‑run take‑rate pressure even as gross profit dollars grow fast. We expect modest further compression over time, partly offset by mix into higher‑take‑rate verticals and frontier markets.
How predictable is DLocal's business?
The model benefits from recurring merchant volumes and a broadening client and country mix. 2Q25 TPV grew 53 percent and revenue 50 percent, and management raised full‑year 2025 guidance across TPV, revenue, gross profit, and adjusted EBITDA.
Still, visibility is lower than for global card networks due to EM FX regimes, regulatory changes and merchant‑specific dynamics. Management explicitly called out risk from Mexican tariffs, Brazilian fiscal shifts and potential FX regime changes in Argentina and Egypt.
We score predictability as above average for an EM‑heavy fintech, but below the most predictable tollbooth businesses.
Is DLocal financially strong?
Balance sheet resilience is strong. As of June 30, 2025, cash and cash equivalents totaled 476.9 million dollars, including 253.8 million dollars of corporate cash, after paying a 150 million dollar dividend in June. Borrowings were 56.8 million dollars with lease liabilities around 4.0 million dollars, indicating low leverage.
Free cash flow clocked 39.7 million dollars in 1Q25 and 48.4 million dollars in 2Q25. This liquidity should comfortably fund organic growth, selective M&A and shareholder returns through cycles.
How effective is DLocal's capital allocation strategy?
Capital allocation has improved and is increasingly shareholder‑friendly while preserving growth investment.
Actions include a 150 million dollar cash dividend (and a formal policy to pay 30 percent of prior‑year free cash flow defined as operating cash excluding merchant funds less capex), 2024 buybacks with planned cancellation of treasury shares, and disciplined investment in licenses and engineering.
The announced intention to acquire AZA Finance would deepen African FX and cross‑border capabilities if closed. We view the framework as sensible for an asset‑light compounding model, though continued scrutiny of SBC, buyback timing and M&A returns is warranted.
Does DLocal have high-quality management?
Leadership quality is a positive. CEO Pedro Arnt, long‑tenured former CFO of MercadoLibre, joined as co‑CEO in 2023 and now leads execution with a bias for scale discipline.
In August 2025 DLocal named Guillermo López Pérez (Visa, AmEx, Tink, Featurespace) as CFO, and the board signaled a shift to a majority‑independent composition with new governance committees. Founders remain engaged.
The team has navigated short‑seller allegations by conducting internal reviews, enhancing governance and maintaining growth and cash generation. Execution risk in complex EM markets remains, but management depth is strengthening.
Is DLocal a quality company?
DLocal Limited is a good quality company with a quality score of 76/100
- Evidence of durable switching costs and regulatory assets: one API into 40+ countries, growing license stack including a UK FCA Authorised Payment Institution license.
- Rapid, profitable scale: 2Q25 revenue +50 percent, adjusted EBITDA +64 percent, FCF 48.4 million dollars, and guidance raised for 2025.
- Net‑cash balance sheet post 150 million dollar dividend; borrowings 56.8 million dollars mainly short‑term working capital lines.
- Take‑rate pressure and EM volatility persist: gross profit/TPV ~1.07 percent in 2Q25 and management flags risks in Mexico, Brazil, Argentina, Egypt.
- Governance trending stronger: majority‑independent board and committees in progress, treasury share cancellation, experienced CFO appointed; a 2025 secondary by General Atlantic added liquidity without dilution.
What is the fair value of DLocal stock?
Is DLocal a good investment at $14?
The following analysis is provided for informational and educational purposes only. It does not constitute financial advice, investment advice, or a recommendation to buy or sell any security. The opinions expressed are based on publicly available information and historical data. Beanvest and its contributors may hold positions in the securities mentioned. Investors should conduct their own due diligence or consult a licensed financial advisor before making any investment decision.