StoneCo (STNE) Q2 2026 earnings review
TPV Stabilizes, But Toxic Credit Vintages Drag Profitability
StoneCo's Q2 tells a story of two opposing forces. On the top line, earlier churn-reduction initiatives are starting to work, with TPV growth accelerating to 4.3% YoY (up from 2.7% in Q1). However, the bottom line is bleeding from poor asset quality. The rapid expansion of the credit portfolio has resulted in a surge of bad debt, with NPLs over 90 days skyrocketing to 8.60%. To make matters worse, an unexpected R$200.3 million non-recurring hit from distressed card issuers cratered IFRS net income by 23%. While aggressive share buybacks masked the pain—allowing Adjusted EPS to grow 8.6% despite a drop in Adjusted Net Income—the underlying earnings quality is deteriorating.
🐂 Bull Case
Total TPV accelerated to 4.3% YoY, and the active client base grew 2.5% sequentially to 4.82 million. This suggests that the simplified Ton product bundles introduced to stem Q1 churn are working.
Retail deposits grew 22% YoY to R$10.8 billion. Using these deposits to fund operations is effectively hedging the company against Brazil's rising CDI rates, preventing a massive margin squeeze.
🐻 Bear Case
NPLs over 90 days hit 8.60%. The flow-through of toxic late-2025 and early-2026 vintages forced expected credit loss provisions up 128% YoY to R$187.6 million, crushing operating leverage.
A sudden R$200.3 million non-recurring allowance for 'selected card issuers in distress' hit IFRS net income. This reveals significant, previously undisclosed counterparty risks existing outside the merchant loan book.
⚖️ Verdict: 🔴
Bearish. While top-line stabilization is welcome, the staggering jump in late-stage NPLs and the unexpected hit from distressed card issuers point to serious risk management failures. Earnings growth relies entirely on share buybacks rather than operational leverage.
Key Themes
Severe Credit Quality Deterioration
The massive credit expansion (+107% YoY to R$3.75 billion) is showing its consequences. NPLs 15-90 days accelerated to 6.00% (from 4.97% in Q1), and NPLs over 90 days surged to 8.60% (from 6.98% in Q1). Management blames the 'roll-forward of our weaker second-half 2025 and early 2026 vintages' and specific cases in the dedicated desk. The cost of risk remains painfully high at 21.5%.
TPV Deceleration Trend Broken
After a disastrous Q1 where TPV growth slowed to 3%, Q2 showed a positive reversal. Total TPV accelerated to 4.3% YoY to R$142.2 billion. Management explicitly noted that this reflects early results from churn-reduction initiatives launched in Q1, particularly within the Ton brand.
Counterparty Risk Exposed: R$200M IFRS Hit
A major red flag appeared in the IFRS reconciliation: a R$200.3 million allowance for expected losses on 'selected card issuers in distress.' Management stripped this out of the Adjusted Net Income, classifying it as a 'non-recurring event.' However, it highlights vulnerability to broader financial ecosystem distress beyond just MSME defaults.
ARPAC Contradicts Ecosystem Narrative
Management's core thesis is that shifting to a 'unified financial platform' deepens client relationships and cross-selling. However, the data directly contradicts this: ARPAC (Average Revenue Per Active Client) fell 6.6% YoY to R$251.1. Management claims this is a mix-shift effect from onboarding lower-revenue banking clients, but it proves the broader ecosystem is heavily diluting per-user monetization.
Pricing Optimization Masks Core Revenue Drop
Net Revenue from Transaction Activities plunged 35.1% YoY, while Financial Income jumped 10.7%. This is not a collapse in core acquiring; it is an intentional pricing optimization where Stone adjusts bundled rates, shifting card MDR revenues into prepayment revenues. This makes analyzing individual revenue lines less relevant; Adjusted Gross Profit (+0.1% YoY) is the only true barometer of margin health.
Retail Deposits Defending Against Macro Headwinds
With the Selic rate creating massive headwinds (projected around 14%), Stone's banking strategy is paying off defensively. Total retail deposits grew 22.3% YoY to R$10.8 billion. This low-cost funding source resulted in Net Financial Expenses actually decreasing 1.0% YoY, despite a higher average CDI rate and a larger credit portfolio.
AI Investments Scale Across Operations
Management explicitly cited 'increased investments in AI as we scale these capabilities across the business' as an offset to personnel cost reductions. This operational leverage is visible in Adjusted Administrative Expenses, which declined 6.2% YoY, and aims to automate customer service and sales processes.
Other KPIs
Accelerating. Up 8.6% YoY, vastly outperforming Adjusted Net Income (-2.6% YoY). This delta is entirely engineered through aggressive capital returns: Stone has repurchased R$ 3.0 billion in shares over the last 12 months, reducing the outstanding share count by 40.3 million.
Decelerating YoY but recovering QoQ. Down 1.0 p.p. from 25Q2 (44.6%) primarily due to the massive spike in credit provisions, which offset gains in funding efficiency. However, it improved sequentially from 41.6% in 26Q1 due to lower personnel expenses following Q1 layoffs.
Fell significantly from R$4.94 billion in 26Q1. The drop was driven by the massive R$3.08 billion extraordinary dividend payout in May (funded by Linx divestiture proceeds) and an additional R$739 million in share buybacks during the quarter.
Guidance
Highly unlikely to achieve. Through H1 2026, Adjusted EPS sits at R$ 4.58. Hitting the bottom of the range requires H2 EPS to average R$ 3.11 per quarter, an unprecedented acceleration given the current trajectory of credit provisions and the high Selic rate headwind.
Unlikely to achieve without massive H2 volume spikes. H1 2026 Adjusted Gross Profit is R$ 3.05 billion. Management previously warned in Q1 they were tracking 'closer to the bottom' due to interest rates, but current run-rates suggest they may miss the bottom end entirely.
Key Questions
Distressed Card Issuers Exposure
You took a R$200.3M IFRS hit for 'selected card issuers in distress'. What is the exact nature of this counterparty risk, and what is the maximum remaining exposure on the balance sheet for similar distressed ecosystem partners?
NPL Peak Timeline
With NPLs >90 days surging to 8.60% due to the 'flow-through of weaker H2 25 vintages', mathematically, in which quarter do you expect the new, tighter underwriting models to cross over and drive this ratio back down?
Bridging the FY26 Guidance Gap
You generated R$4.58 in Adjusted EPS in H1. To hit the bottom of your FY26 guidance (R$10.80), you need a massive step-up in H2. Besides basic seasonality, what exact operational levers will bridge a nearly 35% half-over-half EPS acceleration?
ARPAC vs Ecosystem Success
You are transitioning to a unified financial platform, yet ARPAC fell 6.6% YoY to R$251. Is there a timeline where cross-selling actually overtakes the dilution from onboarding lower-revenue banking clients?