Prepared remarks
Good day, and thank you for standing by. Welcome to the dLocal Second Quarter 2026 Results Conference Call. Please be advised that today's conference is being recorded. I will now turn the call over to the company.
Good afternoon, and thank you all for joining our earnings call today. If you have not seen the earnings release, as always, a copy is posted in the Financials section of the Investor Relations website. On the call today, you have Pedro Arnt, Chief Executive Officer; Guillermo Lopez Perez, Chief Financial Officer; Christopher Stromeyer, SVP of Corporate Development; and Mirele de Aragao, Head of Investor Relations. A slide presentation has been provided to accompany the prepared remarks. This event is being broadcast live via webcast, and both the webcast and presentation may be accessed through dLocal's website at investor.dLocal.com. The recordings will be available shortly after the event is concluded. Before proceeding, let me mention that any forward-looking statements included in the presentation or mentioned in this conference call are based on currently available information and dLocal's current assumptions, expectations and projections about future events. While the company believes that our assumptions, expectations and projections are reasonable given currently available information, you are cautioned not to place undue reliance on those forward-looking statements. Actual results may differ materially from those included in dLocal's presentation or discussed in this conference call, for a variety of reasons, including those described in the forward-looking statements and Risk Factors section of dLocal's filings with the U.S. Securities and Exchange Commission, which are available on dLocal's Investor Relations website. Now I will turn the conference over to dLocal. Thank you.
Good afternoon, everyone, and thank you for joining us today. Our results for the second quarter of 2026 are yet another proof point of our continued traction and execution. There are four main trends I'd like to kick off with that best summarize the current strength of our business. TPV reached $17.7 billion, accelerating to 92% year-over-year, the highest growth rate since the first quarter of 2022. We've processed more in the second quarter than what we did throughout all of 2023. Second, our net revenue retention was 153%, the fifth straight quarter above 140% as we continue to deepen our relationships with our merchants. Our gross profit hit $127 million, up 29% year-on-year. We've now hit an annualized rate of more than $500 million in gross profit. And finally, our operating leverage is improving with operating profit as a percentage of gross profit, up six percentage points quarter-over-quarter to reach 50%. As messaged previously, we expect further operating leverage improvements to kick in during the next two quarters as we benefit from the deployment of automations and AI we have been investing in and spending in key areas that were front-loaded to the first semester of this year softens out. On TPV, the metric that reflects market share, growth was extraordinary this quarter, but even more importantly, has been consistently strong. TPV growth has remained above 50% year-over-year for seven consecutive quarters, with the last three quarters above 70%, and furthermore, growth has accelerated over the past five quarters, reaching its highest year-over-year rate in over four years. Although the pace and scale of this growth will naturally create more demanding comparisons as we move through the second half of the year and into 2027, what we are seeing today reflects the positive returns on investments we have made in our platform and our portfolio of licenses. It serves as a testament to the trust merchants place in us as they build and grow across emerging markets. This trust is a direct result of the execution on our value proposition. Through a single integration, our merchants access the locally relevant payment methods, local card schemes and the financial infrastructure they need to operate and grow across more than 60 emerging markets. Our licenses, local teams and operating expertise help them navigate complexity and improve performance in each country, ultimately increasing substantially their chances of a successful go-to-market deployment in the places that they partner with us. Today, more than 760 leading global merchants trust dLocal. This includes four of the largest ride-hailing companies operating in emerging markets, five of the 10 largest e-commerce platforms, the top five video streaming platforms and seven of the 10 largest remittance companies, among many other of the world's best businesses. We are now also starting to serve some of the world's preeminent AI companies and digital asset exchanges. The trust that these merchants place in us is translating into deeper relationships over time as they add countries, payment methods and products. Consequently, our TPV retention rate of 188% this quarter demonstrates the depth of these relationships. This quarter alone, several Tier 0 merchants had significant ramp-ups in some of our largest markets such as Brazil and Argentina, demonstrating that the opportunity remains substantial even in more established markets. We also continue to see our merchants expand into new geographies at a very rapid pace. Across our portfolio, we continue to gain both share of wallet and market share across the global South. Share of wallet increased by two percentage points year-over-year in the first half to the low teens, and we now estimate our share of emerging market digital payments to be in the low single digits. Despite our growth, the opportunity to deepen relationships across our merchant base and capture even more new merchants remains massive. Asia Pacific is a clear example of this and one we're increasingly excited about. It is the largest, very fast-growing and highly fragmented region with significant untapped opportunity that we serve. It has become one of our strategic priorities as we have been expanding our presence and investments throughout that region. All of this growth that we're seeing today reflects the investments we've made in our platform over the last several quarters and years. Those investments are delivering tangible results, and they continue to strengthen the foundation for our next phase of growth. Our focus remains on three areas: First, we continue to broaden our offering and invest in performance through our optimization capabilities. In the end, the performance and breadth of our One dLocal offering is the single most important factor for our continued growth and success. Second, we are embedding AI and automation across the business. This is already increasing our development capacity with meaningfully higher monthly deployments and shorter lead times. And we expect the positive impact on our cost structure from our automation efforts to become increasingly visible starting in the second half of the year, across different areas of the company. And third, we're expanding the value-added services we offer merchants, creating additional opportunities and revenue streams over time. We will soon launch dMore, our merchant of record solution through which dLocal acts as the legal seller on behalf of the merchant, allowing us to offer our clients a more comprehensive go-to-market solution. And our buy now, pay later offering continues to expand and improve and is now live in eight markets. We will continue to invest with discipline behind these priorities and the others we have as we continue to scale out the business. With that, let me turn it over to Guillermo to walk you through our quarterly financial results.
Thank you, Pedro. Good afternoon, everyone. Let me start by briefly summarizing the key financial highlights for this record quarter. As Pedro mentioned, we had an exceptional quarter in volume, which translated into another quarter of record gross profit. Operating profit improved 22% sequentially, and we also began to see operating leverage improvements emerge during the quarter, with operating profit as a percentage of gross profit up six percentage points sequentially. Net income increased 28% year-over-year and roughly 30% sequentially. And EPS also benefited from the execution of our share repurchase program. Cash generation remained strong with adjusted free cash flow conversion of 86% of net income in the first half of the year. Let me now dive into the details, beginning with volume performance. Volume reached $17.7 billion in the second quarter, up 92% year-on-year. First half growth was exceptional, broad-based across our merchants and verticals and helped by favorable FX. Ride-hailing was the largest contributor to sequential growth. One large global merchant was an important driver, but the growth wasn't concentrated just there. Several ride-hailing and on-demand delivery merchants expanded meaningfully too. Travel, remittances, e-commerce, SaaS and advertising also contributed to growth. Financial services were down modestly, mostly seasonality of some travel-related merchants in LATAM. So our business mix continues to evolve. Local-to-local flows hit 61% of TPV, up six percentage points from Q1. The increase in local-to-local mix was primarily driven by the growth of ride-hailing and on-demand delivery, which are inherently local-to-local businesses. This volume growth translated into another record quarter of gross profit. Gross profit reached $127 million, up 29% year-over-year and 7% sequentially. Brazil and Argentina were the primary drivers. In Brazil, gross profit reached a record $40 million, supported by the ramp-up of ride-hailing and travel merchants alongside sustained e-commerce growth. Argentina also delivered record gross profit with $20 million, driven by broad-based growth across e-commerce, ride-hailing and on-demand delivery as well as lower advancement costs. Elsewhere in Latin America, gross profit grew 6% sequentially and 32% year-over-year. Mexico kept growing volume well. Gross profit was modestly lower sequentially though, and the mix shifted to local-to-local and some large merchants' ramp-ups reached their final pricing tiers. In Africa and Asia, gross profit was down sequentially. That's mainly due to a lower share of higher spread markets like Mozambique and Vietnam, where Q1 had gains that don't necessarily recur, as we flagged last quarter. Turning to expenses. Total operating expenses were $63 million, up 46% year-over-year and down 4% sequentially. The year-over-year increase reflects three factors: the annualization of investments made in the second half of 2025; higher average salaries driven by the annual merit cycle and a limited number of senior strategic hires; and higher marketing spend concentrated in the first half around our World Cup campaign and large merchant events. Sequentially, the reduction reflects in part the absence of the $4.4 million non-recurring prior year tax item recorded in OpEx in Q1. Headcount remained broadly stable sequentially, while gross profit per employee increased. From here, we don't expect material increases in headcount this year. As a result, operating profit reached $64 million, up 15% year-over-year and 22% sequentially. Operating profit represented 50% of gross profit, an increase of six percentage points from Q1. As Pedro mentioned, we have invested heavily in automation. As those initiatives deploy and as we annualize our second half 2025 investments, we expect operating leverage to become increasingly visible during the rest of the year. Finally, below the operating line, net income reached $55 million, up 28% year-over-year. Diluted EPS was $0.18, supported by earnings growth and helped by the execution of our share repurchase program. Under the $300 million program authorized in March up to the end of Q2, we have repurchased approximately 6.9 million Class A shares for $86 million. All of these shares have been canceled. The reported effective tax rate for the quarter was approximately 16%. Excluding the non-recurring prior year tax adjustment, the normalized effective tax rate for the first half was 15%. As we have discussed, the effective tax rate can vary quarter-to-quarter based on country and business mix. Adjusted free cash flow was $69 million, up 41% year-over-year, with adjusted free cash flow conversion of 125% of net income. Cash flow from operations before working capital changes increased to $83 million, reflecting higher operating profit, but free cash flow also benefited from a partial reversal of last quarter's temporary working capital effects, which was partially offset by higher income tax paid. With that, I will hand it back to Pedro.
Thank you, Guillermo. Following the strength we've seen in the first half, we are updating our annual guidance. Looking ahead, we continue to see strong momentum across multiple verticals and geographies. This strength is broad-based and gives us the confidence to raise our TPV growth guidance to 60% to 70% year-over-year. It's worth reinforcing why TPV remains such an important metric for us. Payments is ultimately a scale business. As our volumes grow, we gain greater leverage with downstream providers, deepen our FX liquidity and generate more data to improve performance. These dynamics reinforce one another over time and are central to the long-term value creation of our business model. Following the strength in volumes and the continued ramp-up of several large merchants, we are also raising our gross profit growth guidance to 25% to 30% year-over-year. We are maintaining our operating profit growth guidance of 27.5% to 32.5% year-over-year only because, as Guillermo discussed, annual operating profit will be dragged down by the non-recurring prior year tax item and FX headwinds that we did not expect in the original forecast. As always, our outlook is subject to the inherent volatility of the emerging markets in which we operate. That said, we believe this guidance best reflects what we see in the business as of today. And with that, I'll hand it over to Chris to lead us through some questions on the quarterly results.
Hello, everyone, from a wintery but sunny day here in Montevideo, Uruguay. As we did last quarter, we want to take a few minutes here to cover the key themes that we think will be relevant to investors from this quarter. Pedro, Guillermo, thank you so much for being here with us again. And Pedro, let me start with you. We delivered another spectacular quarter in terms of TPV growth with evident share of wallet gains across our portfolio. As we move into tougher comps going forward, what gives you confidence that we can keep delivering high growth in the medium term?
So big picture, the growth we're seeing is a reflection of two things: the market opportunity, which is still enormous and will continue to be enormous, but also the returns on the investments we've been making to improve performance, broaden product offering and strengthen our competitive positioning. And so those are trends that we feel comfortable will sustain themselves over time. Looking at it a little bit shorter term, the first half of the year also benefited from a ramp-up of some large global merchant expansion deals, both into existing geographies and new markets. For example, the largest Tier 0 merchant that Guillermo discussed previously, that ramp-up across key markets is already completed. So the headwinds from the tiered pricing impact as they ramped up, which have been significant factors over recent quarters, becomes less pronounced going forward. One interesting data point is if we exclude this one very large merchant relationship and a few currency volatility effects, net take rate would have been very close to flat quarter-over-quarter despite TPV growth that still would have been in excess of 65% year-on-year. So even as we enter these tougher year-on-year comps from these ramp-ups that already have been behind us, we really don't see any signs of the overall growth model slowing down, and we continue to expect share of wallet gains across the existing merchant base, expansion into new merchants, going into new geographies and then, as always, continuing to offer more payment methods and new products. The investment thesis is one of a durable growth opportunity, supported by the size of market and an overall secular trend towards digitalization of emerging market economies globally. As we continue to execute, we feel very enthusiastic about the mid- to long-term opportunities of this business.
Great. Guillermo, going over to you, turning from growth to profitability. Operating expenses declined modestly quarter-over-quarter. But I think more importantly, our full year guidance implies further and important improvements in operating leverage in the following quarters. What gives you confidence in that trajectory?
Well, there are a few things that are coming together to give me some confidence. The first one, I would say the big one, is timing. There's a lot of investments we made in the second half of last year that are now fully in our numbers in the first half. So I think that headwind will fade in the second half. We also have front-loaded marketing into the first half. We have the World Cup campaign and a large merchant event, and that happened in the first half of the year, and that shouldn't repeat in the second half. It's also worth saying that the first half carried one-off costs that we don't expect to happen in the second half. So we had higher credit loss provisions that we expected, we had higher operational losses and we had the prior year tax adjustments. We don't expect that level of one-offs in the second half, although it must be said that those are always difficult to predict. And also finally, headcount, as you can see in the earnings script, has been broadly flat. There's a salary step-up from the merit cycle that we do every year and a few senior hires that we did, and now that's embedded into our base. There's the automation program that Pedro mentioned that we should still roll out throughout the organization and help us see some of that leverage in the second half of the year. One thing I would mention and flag is that if you take some combinations of our guidance ranges, you can back into an OpEx cut that's bigger than what we have currently planned. So cost discipline always carries some risk. We'd rather hold the operating profit guidance as it is and let the gross profit upside and the cost normalization play out. I think that's the way we are balancing the near term with the long-term investments that we need in this growing business.
So following up on what Guillermo said about automation, which is what's actually happening operationally in the company. Pedro, can you give us some more color on how we're seeing our AI efforts and where we are on that trajectory?
Yes. We're really seeing AI as a core enabler across the company as we increasingly embed it across engineering, compliance, operations, commercial and customer support. There are tangible results already, although we expect more to come, especially in the back half of the year. As we've said previously, over 60% of code is already AI generated. That's led to what I think is nearly a doubling of engineering deployments year-over-year and a significant reduction of lead times in our software development cycle. That's how we're supporting volume growth that is over 80% for H1, with headcount, as Guillermo just said, which is broadly stable overall. That bodes well for the long-term operational leverage of the business model. When I look ahead, I see further efficiency opportunities through AI and automation and more of a medium-term look as we expand our product portfolio and cover more countries. We expect to be able to selectively add headcount, primarily feet on the ground for localization, while at a centralized middle- and back-office level we expect to be able to push the envelope in terms of automation and high operational leverage.
Great. Turning to taxes, where investors have seen some volatility in the last few quarters in terms of our effective tax rate. How should they think about the tax rate going forward?
Quarter-to-quarter, the tax rate will keep moving and it depends on the country and the business mix. So there's going to continue to be that volatility in coming quarters. Looking ahead and based on the legislation currently enacted, we do expect some upward pressure on our effective tax rate, particularly in jurisdictions that implement the OECD's Pillar 2 framework, which we expect to impact us starting in 2027. It's important to say that there are still regulatory developments under discussion across several of the countries in which we operate. So it's too early for us to quantify the ultimate impact, but we continue to evaluate these changes with our external advisers, and we will provide updates as appropriate. More on this year, excluding quarter-to-quarter volatility and the prior year tax adjustments, our normalized effective tax rate for the first half provides a reasonable reference point for the remainder of the year.
Great. And one last one, Pedro, before we open the line, let me just come back to you. From everything we've covered during the earnings presentation and this conversation, for you, what are the most important takeaways that you'd like to leave our investor community with?
First, the strength of the execution and the kind of growth that's been delivered, and more importantly, that it should continue to deliver. All of this is supported by the fact that our relationships with global merchants are increasingly deeper and stickier. You see that in the retention rates we mentioned during the prepared remarks. We're seeing merchants adding countries, adding payment methods and now beginning to add products that they use from us. That generates a positive cycle where we can continue to invest in platform and product and innovation, and we see the returns of those investments, allowing us to capture what is a sizable market opportunity going forward. Second, somewhat related to scale and to AI and inherent to the business model, is the operating leverage long term. You'll see some of that in the second half as the business continues to scale and the automation initiatives that we've mentioned get deployed. Longer term, the balancing act becomes making sure we find the right equilibrium between continued delivery of operating leverage, while at the same time investing to keep the flywheel going. This is a highly attractive cash-generative financial model, and that gives us the ability to continue investing to carry out that flywheel, yet consistently return value to shareholders. We think the company is in a really strong position right now, and we just need to continue executing on our strategic plan.
Great. Thank you very much, Pedro, Guillermo. This concludes our conversation, and we now open the line to questions.
Questions and answers
Our first question will be coming from the line of Tito Labarta of Goldman Sachs.
I mean, very impressive on the TPV growth. I guess, just to understand what drove such a large increase in the quarter. I know you gave some color there on some merchants and ride-hailing, etc. But was there anything unexpected? I don't think anybody was modeling 90% year-over-year TPV growth. So just to understand that dynamic, and it seems like there's still room for that to continue to grow at a very healthy pace. Pedro, you mentioned that there was that one merchant that negatively impacted the statement, but if it wasn't for that, it would have been flat. Could you mention that again because I think on the other hand, what everybody is trying to figure out is what is the floor on the take rate? I know there's an inverse relationship between TPV growth and take rate and there's a lot of local-to-local volume in Brazil and Mexico. Help us think about the take rate and TPV growth.
Thanks, Tito. If you look at the vertical performance quarterly, it paints a picture in terms of phenomenal strength around ride-hailing and travel primarily. Ride-hailing has doubled quarter-on-quarter. That's a reflection of very rapid expansion into numerous new markets and significant share of wallet gains across a few key counterparts, very large global companies that have increased the volume they flow through us. This confirms that even relative share of wallet of our existing merchants allows for significant room to grow. When we see that happen, you have this kind of acceleration in TPV. It sets up tough comps for next year, but there are plenty of merchants and global opportunities where if we continue to execute well and deliver performance and cost, we can see similar massive ramp-ups. On take rate, when merchants have significant spikes in volume they rapidly hit new pricing tiers. That's still incremental gross profit to us and positive, but it does drive down the headline take rate. Were you to back out that one very large ride-hailing merchant's mix gains at a lower take rate, take rate would have been relatively flat sequentially. That doesn't necessarily signal a bottom, Tito, but it does show there may be an asymptotic shape to this. More importantly, incremental TPV at incremental gross profit is the financial model here, not managing to any specific take rate.
Our next question is coming from the line of Jamie Friedman of Susquehanna International Group.
So in terms of the annual operating profit growth guidance, I know there were a couple of one-timers that you're calling out, foreign exchange and tax. I apologize if I missed this, but did you quantify the effect of those? If not, could you?
I think you're referring to how to think about tax in the remainder of the year. There was the one-time tax impact that we booked in Q1; it's not repeatable. If you normalize for that item in Q1, the tax rate was about 15% in the first half, around 16% overall. What I was trying to say is that the normalized tax rate in the first half should be a good example of what we would expect for the remainder of the year. In terms of FX, we talked about the FX headwind we saw on volume, and that is included in some of the presentations we shared. But it's difficult to predict how FX will impact the remainder of the year from a volume or gross profit perspective.
So the operating profit guidance of 27.5% to 32.5% growth for the year is unchanged. I may be mistaken, but I thought that you had mentioned... When you say the matrix slide, you're talking about the bridge, right? Operating profit... even so, we would have seen the year coming in around the upper range of the original guidance and potentially would have also raised guidance on operating profit. I got you. Okay. All right. Sorry to belabor that, but I think that is something investors are really focused on. And then, in terms of the local-to-local, pay-ins, payouts and local-to-local cross-border layout, how should we think about the composition of those dimensions and their impact on take rates?
Payouts in general have a lower take rate. They're instrumental many times in generating liquidity for us and having a better margin on the pay-in business, but they are lower take rate. Local-to-local flows don't have the FX component that cross-border does, and those are also lower take rate. Ride-hailing typically has a strong mix of local settlement because they need cash in market to settle to the driver. Therefore, those are lower take rates. That explains why if you back out that very large ramp-up from a local-to-local ride-hailing merchant, you would have gotten flat take rate on the rest of the book. These comments are sequential observations.
Next question will come from Guilherme Grespan of JPMorgan.
My question is on the outlook for the second half and going forward, Pedro. The message is clear that costs could slow a little bit. But how much are costs tied to the strong commercial performance you're printing? There's a positive effect here. We always want companies to cut costs, but in some way there's a positive effect on revenues as you invest in headcount expansion. How do you think about the trade-off between slowing costs and maintaining strong TPV and revenue momentum?
There's always a relationship between what you're investing and how you're growing. However, we highlighted three factors that drive the ability to manage costs for the second half. One, you will no longer have the prior year tax impact. Two, marketing spend because of the World Cup campaign was heavily tilted to the first half and doesn't repeat in the second half. And three, operating leverage that we're expecting to see from the deployment of many automations and AI-driven replacements across the organization in the second half. The first two factors are already confirmed. The third is the one that we need to confirm as it plays out and is driven by automation deployment. This doesn't necessarily have a detrimental impact to top line growth because this is where the leverage is coming from. The World Cup marketing has long-term benefits on merchant relationships rather than immediate revenue pass-through, so we remain confident this is a business model that can deliver strong growth and operating leverage into the future.
Just a quick follow-up on FX. You mentioned FX played a bit against you at the beginning of the year. But most emerging market currencies had a positive tailwind year-to-date. Why was this a headwind in the first half?
If you think about the footprint of our resources, some of our expenses are in countries whose currency has appreciated against the dollar, such as Brazil and Uruguay. That produced the FX impact we showed in the first half. It's not the most material impact on OpEx growth; the majority came from the investments made in the second half of last year.
Our next question will be coming from Pedro Leduc of Itau BBA.
Congrats on the quarter. Pedro, I'm trying to puzzle things together. You're pacing on a much stronger TPV and gross profit trajectory while choosing to reinvest. Going into 2027 with more momentum, how should we think about carrying the reinvestment posture into 2027? Should we expect more reinvestment or relatively similar levels?
You're picking up on something important. I don't want to get too ahead of guidance for 2027, but the year is playing out with more expenses in the first half than the second. We've called out World Cup and the prior year tax issues. You'll see strong operating leverage exiting Q4. Be careful with grabbing Q4 margin structures and assuming that rate continues into all of 2027 linearly. 2027 should have spend better spread out across the year. We'll address 2027 when we issue guidance. Full year 2027 versus 2026, we're committed to consistent operating leverage, but the Q4 exit rate may not map linearly to the full year 2027. I hope that helps.
The next question is coming from the line of Matthew Coad of Truist.
One more on the take rate. The monetization bridge slide shows about a five basis point impact from lower FX spreads in Vietnam and overall volatility. Could you unpack that a bit more? Would you expect this to reverse in the back half or for this headwind to go away? Also, the implied guide for the take rate in the back half is 75 basis points versus 72 this quarter. I'm trying to connect the dots because usually the take rate is a bit lower in Q4.
There are pockets of the emerging world that at times show very large FX spreads because of macro volatility. For periods it's been Argentina, others Egypt, others Bolivia or Nigeria. At the beginning of this year we saw that in Vietnam, and spreads in that market compressed significantly when comparing Q2 to Q1. This is inherent to certain smaller, more volatile markets that have periods of very high profitability. Volatility should lessen into the back half unless there are new quick dislocations of currency values. A lot of this happened in Mozambique and Vietnam specifically. So while there is inherent variability, we don't expect the same level of volatility in future quarters unless new events occur.
When you gave the 2026 guidance, you broke down incremental TPV into share of wallet gains, new countries, new merchants and new products. Could you update on how the new merchants and new products are trending relative to initial expectations? Also, could you double-click on the merchant of record solution and where you see product-market fit?
No material changes directionally. If we updated the data you would see more performance from share of wallet gains in the existing book, less from new merchants and less from new products. New merchants are more of a mix thing because a few existing merchants had very strong share of wallet gains that exceeded forecasts. For new products, they're slightly behind where we'd like them and there's work to be done. Merchant of record, dMore, is an attempt to offer a broader portfolio and see which products stick. It places more of the burden of setting up a local entity, filing taxes and collecting taxes on us and less on the merchant. It allows merchants to accelerate go-to-market in a new country because they don't have to deal with payments under dMore and don't have to deal with many other statutory and tax issues. We're doing more of the heavy lifting when opening operations in a new emerging market, and such products allow us to capture a higher take rate.
Next question is coming from the line of Camila Villaça Azevedo of UBS.
Congrats on the results. On the regional and vertical analysis for Brazil and Argentina, while we saw strong TPV and gross profit there, Mexico saw a sequential decrease in gross profit. Could you provide more detail on the cost pressures and volume price tiers affecting the Mexico market?
Mexico continues to have very strong TPV growth and had very strong revenue growth of 64% year-on-year. The top line is strong which points to this being primarily a cost issue. The decline in gross profit in Mexico is due to a decline in our pricing power, which has been modest, and not being able to push down our cost structure as much as needed. Our cost structure in Mexico as a percentage of TPV is slightly up. We need to negotiate better with processing partners and manage the Mexican cost base more effectively. I feel relatively confident we'll deliver on that, and doing so should align gross profit growth closer to revenue growth.
Camila has left the stage. Our next question is coming from the line of Neha Agarwala of HSBC.
You mentioned that you're gaining more share with existing merchants, which is driving strong TPV momentum. What is allowing you to gain this share? Is it the conversion rates you provide, the breadth of the platform, or something else? Please put in hierarchies the key things allowing you to win more business. Also, would this translate into more accelerated take rate pressure as margins hit tiered pricing quickly, as we saw this quarter?
It's a combination of conversion rate, price and the service model and quality of service. Different merchants and verticals prioritize different things. Very low-margin businesses are more price sensitive, higher-margin businesses focus more on conversion and service. Given our sustained TPV growth, we're delivering value across conversion, service model and price. The very rapid ramp-up of one global merchant is an example: because we have a multi-market relationship with them, we're able to ramp them up quickly at a lower take rate, but it's still significantly accretive to gross profit. As TPV grows, we can often lower our cost of processing and improve net take rate across the rest of the book. Given what we're seeing today, our expectation is not of accelerating take rate decline into the end of the year. We're seeing deceleration in the rate of take rate decline while TPV and gross profit grow.
Could part of the take rate decline this quarter be reversed in Q3 because it was driven by mix shift and FX-related volatility? Could we see some easing in Q3?
Implied in our revised guidance is not a reversal of take rate; it is a deceleration in the rate at which take rate declines. We've raised TPV guidance, and we raised the gross profit range, which reflects stronger volume and accretive gross profit deals, rather than a change in the underlying take rate dynamics.
Thank you. That does conclude today's conference call. Thank you all for joining. You may now disconnect.