XP Inc. Earnings Call Signals Profitable Scale-Up

Xp Incorporation ((XP)) has held its Q4 earnings call. Read on for the main highlights of the call.

Xp Inc.’s latest earnings call painted a picture of a franchise that is scaling up profitably while navigating a tougher retail backdrop. Management highlighted record assets, rising margins and robust capital returns, but also pointed to margin pressure in the core retail business, softer net inflows from SMBs and higher taxes, leaving investors balancing strong fundamentals against execution risks into 2026.

Total Client Assets Cross BRL 2 Trillion

Total client assets across custody, management and administration climbed to about BRL 2.1 trillion in the fourth quarter, up 22% from a year earlier and clearing the symbolic BRL 2 trillion mark. The milestone underscores XP’s growing relevance in Brazil’s investment ecosystem and gives the firm a larger base from which to monetize advisory, distribution and banking services.

Revenue Growth and Q4 Acceleration

Gross revenue for 2025 reached BRL 19.5 billion, an 8% year‑on‑year advance that accelerated into year‑end. Fourth‑quarter gross revenue rose to BRL 5.3 billion, up 12% versus 4Q24 and 7% sequentially, with management noting that the second half of 2025 delivered slightly above 10% growth versus the prior year, signaling improving commercial momentum.

Profitability Expansion

Adjusted net income for 2025 came in at BRL 5.2 billion, growing 15% year on year and outpacing top‑line expansion. In the fourth quarter, adjusted net income reached BRL 1.3 billion, up 10% from a year earlier, while adjusted diluted EPS advanced 18% for the full year to BRL 9.81, helped by operating leverage and share repurchases.

Strong EBT and Margin Gains

Earnings before taxes increased 10% in 2025 to BRL 5.5 billion, supported by stronger fee and banking income. Adjusted EBT for 4Q25 was BRL 1.5 billion, rising 20% year over year and 16% quarter on quarter, and the adjusted EBT margin widened to 31.3% in the quarter and 29.6% for the year, confirming a trend of improving profitability.

Return on Equity and Capital Strength

Adjusted return on average equity improved to 23.9% in 2025, 94 basis points higher than in 2024, signaling efficient use of capital despite heavy investment. XP ended the year with a BIS ratio of 20.4% and CET1 of 17.3% after returning BRL 2.4 billion through dividends and buybacks, leaving what management views as a comfortable buffer.

Record Corporate & Issuer Services Performance

The corporate and issuer services arm delivered its best results ever, with 4Q25 revenues of BRL 895 million, up 49% year over year and 23% sequentially. Full‑year segment revenue reached BRL 2.7 billion, a 19% increase, underpinned by strong debt capital markets activity and cross‑selling of derivatives and credit solutions to corporate clients.

Retail Franchise Resilience

Retail still accounts for about 75% of XP’s total revenue, with FY25 retail gross revenue at BRL 14.6 billion, up 8% versus 2024, and 4Q25 retail revenue at BRL 3.9 billion, also growing 8%. The firm serves roughly 5 million clients through about 18,000 advisers across some 800 centers, underscoring the breadth of its distribution network despite recent margin pressure.

Product and Cross‑Sell Momentum

Cross‑selling continued to deepen client relationships, with credit card total payment volume up 11% year over year in 4Q25 to BRL 14.6 billion and life insurance written premiums up 25%. Retirement plan assets rose 17% to BRL 95 billion, while newer offerings such as FX, global investments, digital accounts and consortia grew 21% and together generated BRL 258 million in quarterly revenue.

Service Excellence and Tech Adoption

XP reported ongoing migration toward fee‑based advisory, with about 23% of retail assets under such models and rising use of financial and wealth planning tools. Adoption of its expert allocation tool hit record levels in December, and 39% of advised clients are now above the firm’s service model index target, driving 21% higher revenues and more than double the net asset inflows compared with other clients.

Capital Returns and Share Buybacks

Shareholder remuneration remained a clear priority, with BRL 2.4 billion returned in 2025 through dividends and repurchases. XP retired more than 24 million shares, roughly 4% of the share count, and kept a BRL 1 billion buyback program open, which, combined with earnings growth, supported double‑digit EPS expansion.

Net New Money Pressure from SMBs

Net new money dynamics were more mixed, as retail inflows were dented by small and medium business behavior, including about BRL 3 billion in SMB redemptions in the fourth quarter. Total net new money still reached BRL 32 billion in 4Q25, split BRL 20 billion from retail and BRL 12 billion from corporate clients, but management cautioned that 2026 remains a challenging environment for inflows.

Retail Margin Compression and Market Share Pressure

Management acknowledged that retail margins and market share have come under pressure over the past two years amid tougher competition and changing client behavior. In response, XP is redesigning service models and launching efficiency initiatives to restore profitability in the segment, though these efforts may take time to show full financial impact.

NPS Decline and Reputation Noise

Customer satisfaction, as measured by Net Promoter Score, slipped from above 70 to 65 in the fourth quarter, reflecting what the company described as isolated reputation events. While XP expects the impact from issues around certain structured notes and partner‑bank developments to be temporary, the drop highlights sensitivity of client sentiment to media coverage.

Higher Tax Expense from Revenue Mix

Quarterly tax expense rose as revenue tilted more toward banking, debt capital markets and issuer services, which face higher effective tax rates than market‑making activities. Management emphasized that the step‑up reflects business mix rather than structural tax changes, but the heavier tax load weighed on net margins even as pre‑tax profitability improved.

Reliance on Foreign‑Led Trading Activity

Trading activity has been driven largely by foreign investors, while retail trading and fixed income flows have not yet fully recovered, limiting upside to certain revenue lines. Executives stressed that it is still early for this foreign‑led rally in Brazilian assets to translate into sustained improvement in retail take rates and volumes.

RWA Growth and Warehousing Strategy

Risk‑weighted assets rose to BRL 119 billion, up 13% year over year and 11% quarter on quarter, as XP expanded warehousing of fixed‑income instruments, mainly corporate credit, to underpin its DCM franchise. While management views current capital levels as ample, this strategy raises balance‑sheet intensity and demands careful capital allocation and risk management.

Operational Investments Keep SG&A Elevated

Selling, general and administrative expenses totaled BRL 6.3 billion for 2025, with fourth‑quarter SG&A up 10% year over year as XP continued to invest in technology, AI tools, CRM and adviser expansion. The efficiency ratio held at 34.7% over the last 12 months, but leadership warned that sustained investment could pressure short‑term operating leverage if revenue growth does not accelerate.

Regulatory and Systemic Concerns

Irregularities at Banco Master triggered scrutiny and media attention across Brazil’s financial system, raising questions about regulatory responses and market structure. XP said clients suffered no losses and that more than 85% of transferred deposits were retained, and it voiced support for structural improvements while warning against rules that could unintentionally curb competition.

Guidance and Execution Risks into 2026

Management reaffirmed 2026 guidance for gross revenue between BRL 22.8 billion and BRL 26.8 billion, implying around 17% growth at the low end and a stronger year than 2025, alongside efficiency ratios similar to 34.7% and expanding financial and EBT margins. They expect around BRL 20 billion in quarterly retail net new money, net income growth ahead of RWA, continued capital returns within targeted BIS and CET1 ranges and sustained EPS and ROAE momentum, but conceded that delivering this will be challenging and likely back‑loaded.

XP’s earnings call left investors with a nuanced but broadly constructive story of a platform gaining scale, widening margins and returning capital, yet facing retail, tax and regulatory headwinds. If the group can translate its corporate strength, product breadth and technology investments into higher retail inflows and margins, the ambitious 2026 targets could prove a catalyst for further value creation.