Stoneco ((STNE)) has held its Q2 earnings call. Read on for the main highlights of the call.

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StoneCo’s latest earnings call painted a mixed picture for investors. Management showcased solid progress in payments growth, banking deposits and credit scale, alongside tight cost control and sizable capital returns. Yet, the tone turned cautious around credit quality and interest rates, with elevated cost of risk and rising NPLs signaling a tougher backdrop than when guidance was first set.

TPV Reacceleration and Payment Mix

Total Payment Volume growth reaccelerated to 4% year-over-year, marking the first clear sign that customer retention efforts are working better than in the first quarter. However, the TPV mix is shifting toward PIX QR Code, which is expanding faster than card volumes and pushing take-rates slightly lower as PIX gains share and some commercial offers compress pricing.

Banking Franchise Momentum and Deposit Growth

StoneCo’s banking arm continued to build traction, with retail deposits reaching BRL 10.8 billion, up more than 20% year-over-year. Management stressed that clients are engaging more with account offerings, underscoring the company’s ambition to deepen relationships and solidify its “bank for entrepreneurs” positioning.

Credit Portfolio Scale and Revenue Mix

The credit portfolio doubled year-over-year to BRL 3.8 billion, driven mainly by working capital solutions for merchants. Credit revenues grew 14% with flat overall yields as lower-yield, government-backed lines diluted returns but helped improve the risk profile, and StoneCo now books credit card interchange inside the credit product P&L.

Revenue, Profitability and Earnings Per Share

Quarterly revenue reached BRL 3.6 billion, while adjusted gross profit was about BRL 1.6 billion and BRL 3.1 billion year-to-date, with full-year guidance of BRL 6.6–7.0 billion reaffirmed. Adjusted net income slipped slightly year-over-year, but adjusted EPS rose roughly 9%, mainly because share buybacks reduced the share count, masking some underlying earnings pressure.

Client Base Expansion and Product Penetration

StoneCo’s active merchant base climbed to 4.8 million, showing continued scale across micro and small businesses. ARPAC increased as more clients adopted banking and credit products, indicating deeper wallet share, even though churn remains a challenge in the more complex SMB segment where solutions and distribution take longer to refine.

Capital Returns and Balance Sheet Strength

The company returned BRL 4.3 billion to shareholders in the first half, reflecting an aggressive capital return strategy following the Link sale proceeds. After these payouts, StoneCo still reported a normalized capital ratio of 26%, which management highlighted as evidence of a resilient capital position to support ongoing growth and credit expansion.

Operational Discipline and Efficiency Measures

Expense growth stayed well below revenue expansion, with administrative expenses actually declining year-over-year on lower personnel and third-party costs. Cost of services excluding provisions remained broadly flat, and management cited workforce reductions plus broader AI adoption as key levers for operational leverage and improved efficiency.

Strategic Progress in Brand and Product Integration

StoneCo rolled out its new brand positioning as “Stone, the bank for entrepreneurs,” aiming to sharpen its identity with business clients. It also integrated Pagar.me into Stone, unifying online and in-person operations into a single account and view, a move meant to spur cross-sell and capture the faster-growing digital transaction segment.

Credit Quality Pressure and Provisioning

Cost of risk stayed high at 21.5% in the quarter, with provisions totaling BRL 188 million as portfolio growth, seasoning of late-2025 and early-2026 vintages, and dedicated-desk delinquencies raised loss expectations. NPLs rose across indicators, especially over-90-day loans, while coverage fell to 204%, largely due to mix effects from more government-backed, guaranteed credit.

Dedicated-Desk Defaults and Issuer Distress

Problems concentrated in the dedicated credit desk, with larger-ticket loans averaging BRL 700,000 and some exposures above BRL 10 million, including a bankruptcy of a major client that triggered heavy provisioning. StoneCo also booked a roughly BRL 200 million nonrecurring provision tied to receivables from an issuer in distress, taken for prudence even though management expects eventual recovery.

Revenue Volatility and Retention Challenges

Net revenue from transaction activities fell about 11% sequentially, mainly because some card network incentives recognized in the first quarter did not recur in the second, adding short-term volatility to reported revenue. On the commercial front, churn remains an issue, particularly among SMBs, where management cautioned that improving retention will require extended testing, gradual rollout and more tailored offerings.

Guidance and Interest-Rate Headwinds

Management reiterated 2026 guidance for adjusted gross profit of BRL 6.6–7.0 billion and adjusted basic EPS of BRL 10.8–11.4, but emphasized they are now focused on the lower end of these ranges with performance skewed to the second half. They expect cost of risk to drift down to the mid-to-high teens by year-end, yet warned that the higher Selic rate, now near 14% versus an assumed 12.5%, represents a pretax headwind of more than BRL 300 million.

StoneCo’s earnings call suggests a company steadily strengthening its franchise in payments, banking and credit, while navigating a rougher credit cycle and less favorable interest-rate environment. For investors, the story hinges on whether operational discipline, strategic integration and second-half growth can offset credit and rate pressures enough to deliver on the lower end of the reiterated guidance.