StoneCo Q4 Earnings Call Highlights

StoneCo (NASDAQ:STNE) reported fourth-quarter and full-year 2025 results while outlining leadership changes, capital return plans tied to both recurring operations and the Linx divestment, and updated guidance for 2026 and 2027. The call also marked the transition from former CEO Pedro Zinner to incoming CEO Mateus Scherer, with CFO and IRO Diego Salgado providing additional financial and capital allocation detail.

Leadership transition and strategic focus

Zinner said the quarter “marks the conclusion” of his tenure as CEO, and that he will move to a new role as non-executive chairman of the board. He highlighted steps taken during his tenure to simplify the business and focus on payments, banking, and credit, including the sale of software assets Linx to TOTVS for “more than BRL 3 billion.” Zinner also referenced product launches such as TapTon and Payments Links with “zero settlement,” as well as efforts to unify the company’s technology stack and deploy AI to reduce cost and improve quality.

Scherer, who takes over as CEO, said Stone will continue building “as the financial partner for entrepreneurs across Brazil,” emphasizing execution, bundled offerings, and disciplined growth in credit and banking.

Full-year 2025 performance and profitability

Management framed full-year performance relative to guidance and capital allocation commitments. Scherer said adjusted gross profit reached BRL 6.319 billion, up 13.5% year-over-year. He added that factoring in BRL 1.8 billion of share repurchases executed in the second half of the year—estimated to have a BRL 60 million impact on gross profits—adjusted gross profit would have been BRL 6.379 billion, “slightly above” the company’s BRL 6.375 billion guidance.

Adjusted basic DPS was BRL 9.71 per share, up 34% year-over-year and above the BRL 9.60 per share guidance, which management attributed to operational execution and capital efficiency. In the fourth quarter, Scherer said adjusted net income increased 10% year-over-year, driven by 12% growth in continuing operations, while adjusted basic EPS was BRL 2.87, up 27% year-over-year, benefiting from both net income growth and share repurchases.

The company’s consolidated ROE increased by 6 percentage points year-over-year to 26% in the fourth quarter, reflecting higher profitability and capital efficiency, according to management.

Operating trends: payments, banking, and credit

Stone reported 13% year-over-year growth in total revenue and income for continuing operations to BRL 3.7 billion in the fourth quarter, driven by mid-single-digit TPV growth and “disciplined pricing.” Adjusted gross profit from continuing operations grew 9% year-over-year to BRL 1.7 billion, with revenue growth partially offset by higher credit provisions as the loan portfolio expanded.

• MSMB payments: The client base rose 15% year-over-year to 4.7 million clients, with heavy users increasing to 41% from 38% in the prior quarter. MSMB TPV growth slowed to 5.3% year-over-year. Management attributed the deceleration to macro pressure on smaller clients, stronger performance among digital-native merchants versus brick-and-mortar (where Stone has greater exposure), and internal execution issues in the fourth quarter, including slightly higher churn and softer gross client additions than planned. Scherer said commercial initiatives are underway and gross additions have “already shown a clear improvement,” with focus shifting to churn management through bundled offerings and deeper relationships.
• Banking: Banking active clients grew 21% year-over-year to 3.7 million. Deposits rose 27% year-over-year and 23% quarter-over-quarter to BRL 11.1 billion. Deposit penetration over MSMB TPV increased to 8.2% in Q4 2025 from 7.1% the prior quarter and 6.8% in Q4 2024. Time deposits represented 86% of deposits, up from 84% in the prior quarter, which management tied to investment product adoption and greater eligibility for its cash sweep strategy, supporting lower funding costs.
• Credit: The portfolio reached BRL 2.8 billion, up 23% sequentially, including BRL 2.5 billion in merchant solutions (also up 23% quarter-over-quarter) and BRL 300 million in credit cards (up 30% sequentially). Credit revenues were BRL 238 million, up 33% sequentially, while provisions were BRL 110 million, up 27%. Management emphasized that provisions are recognized upfront while revenue accrues over time, suggesting that continued portfolio growth should increase earnings contribution. NPL 15–90 days increased to 4.43%, driven primarily by payment delays among a limited number of higher-ticket clients in the specialized desk, while NPLs above 90 days rose to 5.21% from 5.03% in the prior quarter. Coverage remained 264%, and cost of risk was approximately 17% in the quarter. Average monthly credit yield rose to 3.1% from 2.9% in Q3 2025.

Expense and cash flow highlights

Salgado said cost of services increased 23% in the quarter, rising 200 basis points as a percentage of revenues, primarily due to higher loan loss provisions tied to portfolio growth. Financial expenses increased 12% but fell 30 basis points as a percentage of revenues, which he attributed to using low-cost demand deposits as funding that helped offset a higher average CDI rate year-over-year.

Administrative expenses rose 12% year-over-year, decreasing slightly as a percentage of revenue, as the company sought leverage across support functions. Selling expenses increased 16% and rose 40 basis points as a percentage of revenue; Salgado said 2025 market spending was more evenly distributed than 2024, when spending was weighted toward the first half due to “a significant investment in a specific reality show.” Other expenses fell 27% year-over-year due to lower share-based compensation. The effective tax rate was 10.3% in the quarter, down from 13.7% a year earlier, primarily due to higher benefits from Lei do Bem.

Adjusted net cash ended the quarter at BRL 2.6 billion, down BRL 930 million sequentially, mainly due to BRL 1.3 billion in share repurchases during the quarter. Excluding buybacks, Salgado said adjusted net cash would have increased by nearly BRL 350 million.

Capital allocation and updated guidance

Management reiterated its framework for defining and returning excess capital. Scherer said that one year ago the company identified BRL 3 billion of excess capital and returned the full amount over the year, representing a “15% yield.” Salgado said the company refined its core equity ratio hurdle, reducing it from 20% to 17% after updating methodology to better align with Brazilian Central Bank standards for deferred tax assets.

Following 2025 performance, Salgado said Stone generated “just over BRL 2 billion” in excess capital, approved by the board for distribution via share repurchases during 2026, noting a repurchase program of the same amount was announced on Dec. 22.

Regarding Linx, management said the transaction closed and proceeds were received on Feb. 27, releasing “slightly over BRL 3 billion” in capital to be returned to shareholders in 2026. Salgado said the company expects to approve that distribution during an April board meeting with a market announcement to follow.

For guidance, the company provided ranges for continuing operations:

• 2026: adjusted gross profit of BRL 6.6 billion to BRL 7.0 billion; adjusted basic EPS of BRL 10.8 to BRL 11.4. Management said this assumes the BRL 2 billion buyback is fully executed in 2026, but does not include Linx proceeds.
• 2027: adjusted gross profit of BRL 7.2 billion to BRL 8.3 billion; adjusted basic EPS of BRL 11.8 to BRL 13.4, with no additional capital distribution included.

Salgado said the guidance assumes an effective tax rate in the “mid-teens.” In Q&A, management said it assumed Selic in the low 12% range by the end of 2026 and the high 11% range for 2027.

Stone also said it will no longer provide 2027 operational KPI guidance, explaining that the framework made sense when the company had “virtually no credit portfolio” and lower deposits, but that the mix has shifted—credit and deposits are ahead of plan, while TPV is behind—making specific operational KPI guidance less relevant.

On competitive dynamics, management said the market remained “rational from a pricing standpoint,” while acknowledging some competitors expanded offerings and sales footprints. Stone attributed recent TPV softness more to macro conditions and internal execution (churn and gross additions) than to competition, and said it expects year-over-year TPV growth to be roughly flat in the first quarter before improving in the second half as bundling initiatives ramp.

Management also discussed AI efforts, describing a deliberate approach focused on redesigning processes in areas such as customer service, sales, hubs, and risk, as well as expanding tool access across teams. Executives said it is “too soon” to quantify the impact and that the 2027 guidance does not assume “huge benefits” from AI.

About StoneCo (NASDAQ:STNE)

StoneCo Ltd., commonly known as Stone, is a Brazilian financial technology company that provides integrated digital payment solutions and related financial services to merchants. Through its cloud-based platform, Stone enables businesses of all sizes to accept a variety of payment methods, including point-of-sale (POS) terminals, mobile card readers and e-commerce gateways. In addition to payment acceptance, the company offers value-added services such as working capital loans, digital banking products and automated billing tools designed to help merchants manage cash flow and streamline operations.

Since its founding in 2012 by André Street and Eduardo Pontes, Stone has focused on serving over half a million merchants across Brazil’s retail, restaurant and services sectors.