StoneCo Earnings Call: Profits Up, Risks in Focus

Stoneco ((STNE)) has held its Q4 earnings call. Read on for the main highlights of the call.

StoneCo’s latest earnings call painted a largely upbeat picture, combining strong profit growth, rising returns on equity, and rapid expansion in its banking and credit businesses with an assertive capital return strategy. Management acknowledged near-term pressure from slower payment volume growth, higher churn, and elevated credit costs, but argued that disciplined execution and new commercial initiatives should keep the story on a positive trajectory.

EPS and Profitability Beat Internal and Market Expectations

StoneCo delivered adjusted basic EPS of BRL 9.71 for 2025, up 34% versus last year and ahead of the BRL 9.60 guidance range. Fourth-quarter EPS climbed 27% to BRL 2.87, powered by net income growth and an aggressive share buyback program that amplified per-share results.

Gross Profit Expands Despite Share Repurchase Drag

Full-year adjusted gross profit reached BRL 6.319 billion, an increase of 13.5% year over year and effectively in line with the company’s earlier guidance. Management noted that excluding the estimated BRL 60 million gross profit drag from BRL 1.8 billion in share repurchases, gross profit would have been BRL 6.379 billion, marginally above the prior target.

Return on Equity Climbs as Capital Efficiency Improves

The company’s profitability translated into a higher return on equity, with consolidated ROE hitting 26% in Q4 2025, up six percentage points from a year earlier. Management highlighted this as evidence that StoneCo is not only growing earnings but also using its capital more efficiently as it scales.

Banking Franchise Gains Scale and Deepens Deposit Base

StoneCo’s banking arm continued to gain traction, with active banking clients rising 21% to 3.7 million over the past year. Client deposits surged 27% to BRL 11.1 billion, with penetration over MSMB TPV improving to 8.2%, and time deposits now making up 86% of the funding base.

Credit Portfolio Growth Drives Revenue but Raises Risk

The credit business is scaling quickly, with the portfolio reaching BRL 2.8 billion in Q4, up 23% sequentially, supported by BRL 2.5 billion in merchant working capital and BRL 300 million in credit card balances. Credit revenues jumped 33% quarter over quarter to BRL 238 million, as average monthly yields improved to 3.1%, but this growth also contributed to higher provisions and cost of risk.

Expanding MSMB Client Base and Rising Heavy-User Engagement

StoneCo’s MSMB client base grew 15% year over year to 4.7 million, underlining continued commercial reach despite tougher macro conditions. The share of heavy users increased to 41% from 38% in the prior quarter, improving cross-selling opportunities across acquiring, banking, and credit products.

Capital Returns Accelerate with Buybacks and Linx Proceeds

Capital return was a central theme, as StoneCo handed back BRL 3 billion of excess capital in 2025, equivalent to a roughly 15% yield. The board also approved a little over BRL 2 billion for share buybacks in 2026, while the completed sale of Linx unlocked about BRL 3 billion in additional proceeds earmarked for shareholders next year.

Solid Net Cash Position Underpins Financial Flexibility

The company closed Q4 with an adjusted net cash position of BRL 2.6 billion, providing a comfortable liquidity buffer even after heavy buyback activity. Management pointed out that without the BRL 1.3 billion in fourth-quarter repurchases, adjusted net cash would have risen by roughly BRL 350 million sequentially.

Tax Benefits and Cost Discipline Support Margins

StoneCo’s effective tax rate dropped to 10.3% in Q4 from 13.7% a year earlier, helped by increased benefits from Lei do Bem incentives. At the same time, “other expenses” declined 27% year on year, saving around 100 basis points of revenues, mainly due to lower share-based compensation.

TPV Growth Slows as Macro and Mix Weigh on Volumes

Not everything moved in the right direction, with MSMB TPV growth cooling to 5.3% in Q4 versus prior periods. Management flagged a challenging macro backdrop, a mix shift favoring digital merchants where StoneCo has less exposure, and some internal onboarding and churn issues, and now expects flat TPV in Q1 2026 and only mid-single-digit growth for the year.

Higher Churn Prompts New Commercial and Retention Push

Operational metrics in the quarter lagged internal expectations, as the company saw slightly higher churn and softer gross client additions. In response, StoneCo is rolling out commercial initiatives focused on retention, bundle cross-selling, and improving share of wallet, with management stressing that execution in the coming quarters will be critical.

Loan Loss Provisions and Service Costs Rise with Credit Scale

Cost of services increased 23% in Q4 and rose 200 basis points as a share of revenues, largely due to higher loan loss provisions tied to the expanding credit book. Provisions totaled BRL 110 million for the quarter, up 27% compared with Q3, illustrating the upfront cost of growing the portfolio.

Credit Delinquencies Elevated but Remain Well Covered

Asset quality indicators showed pressure, with NPLs of 15–90 days climbing to 4.43%, driven by a small set of higher-ticket clients managed by the specialized desk, while NPLs over 90 days ticked up to 5.21%. Even so, the coverage ratio remained robust at 264%, and management acknowledged that the cost of risk, at around 17%, is currently elevated as the book matures.

Selling and Administrative Costs Climb with Strategic Investments

Operating expenses edged higher, with selling expenses up 16% and adding 40 basis points to the revenue ratio, while administrative costs rose 12%. The company is hiring to offset turnover and investing more in repositioning and marketing, and it expects selling and marketing to stay relatively high as a share of revenues through 2026.

Net Cash Decline Reflects Aggressive Share Repurchases

Adjusted net cash fell BRL 930 million sequentially in Q4, largely because of BRL 1.3 billion in share buybacks during the period. Those repurchases not only reduced cash but also carried an estimated BRL 60 million drag on gross profit, a trade-off management views as accretive over the long term due to EPS uplift.

Conservative Guidance and Reduced KPI Detail Signal Caution

StoneCo adopted a more cautious tone on guidance by dropping some 2027 operational KPI disclosures, such as detailed portfolio metrics, arguing that the mix and execution path differ from its original plan. Management also acknowledged that softer TPV and shifts in capital allocation, including the Linx divestment and larger buybacks, mean previously implied per-share targets are no longer realistic.

Provisioning Timing Weighs on Near-Term Profitability

The company highlighted a timing mismatch between credit revenues and provisions, as expected losses are booked upfront while income accrues over time. This accounting treatment means that scaling the credit portfolio suppresses near-term profitability, but management believes it sets a more conservative base for future earnings as revenues catch up.

Guidance Points to Moderate Growth Built on Banking and Credit

Looking ahead, StoneCo guided 2026 adjusted gross profit to between BRL 6.6 billion and BRL 7.0 billion, implying roughly 4–11% growth over 2025, and 2027 gross profit to BRL 7.2–8.3 billion, with EPS expected at BRL 10.8–11.4 in 2026 and BRL 11.8–13.4 in 2027. The outlook assumes mid-single-digit TPV growth with a flat first quarter, margin expansion driven by credit and banking, an effective tax rate in the mid-teens, and interest rates easing slightly, while the announced BRL 2 billion buyback is factored in but the Linx proceeds are not.

StoneCo’s earnings call left investors weighing strong earnings, rising ROE, and heavy capital returns against softer volume trends and a bumpier credit risk profile. With banking and credit now central growth engines and a more conservative guidance framework in place, the stock’s near-term performance will likely hinge on whether management can execute on retention, credit discipline, and cost control while maintaining its impressive profitability metrics.