Nu Q1 2025 Earnings Update!
Strong Customer Gains, Exploding Deposits, and Affordable Valuation!
Nu is a disrupting company operating in a large, dynamic, and volatile region. While this makes them an extremely exciting investment, it also makes Nu difficult for Wall Street to understand.
Last quarter, Wall Street panicked, sending the stock down 8% after earnings.
Why, you ask?
Because of a 1.8% decrease in monthly ARPU, a 35.6% increase in interest cost, and a 17.2% increase in loan loss provision.
As I said in my analysis, these were shortsighted concerns, and this quarter, Nu proved me right, delivering a stellar earnings report!
Stock is up 10% as ARPU grew 8.9% Y/Y, and net deposits exploded 456% Y/Y!
Nu continues to deliver strong results despite tough macroeconomic conditions in Latin America, especially in Brazil, where persistent inflation is dampening consumer spending, and Trump’s Trade War threatens to damage the country's export-dependent economy.
In this article, I will review Nu’s Q2 2025 financial results. If you are interested, I wrote a full Deep Dive about Nu, which covers all of the most important aspects an investor needs to know about the company.
Let’s dig in!
1. Customer Level Results
2. Brazil
3. Mexico
4. Colombia
5. Deposits and Loan Portfolio
6. Revenue
7. Profitability
8. Valuation
9. Conclusion
1. Customer Level Results
Nu continues to gain customers faster than anyone could have imagined just a few years ago.
The number of customers grew by 17.4% Y/Y and 3.5% Q/Q to 122.7M, an increase of 4.1M!
83% of these customers are monthly active customers, the same as last year. In fact, the activity rate has been flat for 3 years, which indicates that Nu keeps adding high-value active customers.
This is quite impressive, as one could expect a slight decrease in activity rate after expanding into two new countries and adding tens of millions of new customers.
Moreover, this quarter, we saw some interesting new customer disclosures from the company.
Credit card remains Nu’s bread and butter, growing active customers by 11% to 55M.
But the exciting part is that Nu continues to grow in other categories much faster. This clearly indicates that Nu’s strategy of offering market-attractive credit card perks to attract users and then upselling them other products is working.
Investment and crypto customers grew 70% and 41% Y/Y!
Latin America has historically lagged behind developed countries in capital market participation. Nu is enabling millions of users to invest in their future. The wealth that these investments create will trickle down to Nu as customers increase the usage of other services.
Unsecured loan customers grew 56% Y/Y to 13.6M, while secured loan customers exploded 158% Y/Y to 6.8M. This indicates that Nu’s alternative loan offerings are attractive to customers.
The strong secured loan growth is driven by Nu’s entry into the payroll secured government employee and pension loan industry. The repayments of these loans are deducted from the cash inflow before it is deposited into the recipient's bank account, thus Nu classifies them as secured.
Furthermore, Nu disclosed that they now have 3M high-income customers, an increase of 13% Y/Y!
While growing smaller than the overall customer number, high-income customers are crucial to drive ARPU growth and increase profitability. These customers are more likely to use Nu’s more profitable, credit card, lending, crypto, and investment products. As Nu is reaching saturation in the mass market segment in Brazil, the company will probably seek to attract more high-income customers.
Next, we see that business customers grew 23% Y/Y to 5.2M. This is a crucial vertical for Nu as the economies of Latin America are dominated by these small businesses. As these businesses modernize, they often start paying employee salaries through Nu, thus helping Nu onboard new retail customers.
Overall, each active customer generated $12.2 monthly ARPU in Q2, an increase of 8.9%
In the graph above, we can see a strong acceleration from Q1 2025, when the company posted a decrease in ARPU by 1.8%. This fall in ARPU caused quite a lot of panic in the Nu investor base, as ARPU growth is a key bull thesis for the company.
This was largely driven by Nu gaining a lot of new, and temporarily under-monetized users in Mexico and Colombia!
This is what I said last quarter:
This quarter, we saw exactly that as significant growth in both countries directly contributed to the recovery of the ARPU.
On an FX-neutral basis, ARPU actually grew 18% Y/Y.
Per the above graph, it takes Nu between 48 to 60 months to get a new customer to the $12.2 ARPU, whilst long-term customers generate double the ARPU.
Cost to serve an active customer decreased 11% Y/Y or 3% FXN to $0.8.
If we compare the cost to serve an active customer to ARPU, we see that after 1 month, a customer is already at break-even in servicing costs!
If we assume a linear growth in ARPAC from month 1 to 12, in the first year, an active customer will generate Nu $34.2 in revenue, but it would cost only $9.6 to service.
This leaves a lot of room for Nu to utilize marketing if organic customer growth slows down!
2. Brazil
Brazil, as Nu’s home and Latin America’s largest country by population and GDP, remains a huge opportunity for the company!
This quarter, Nu didn’t disclose the exact customer growth, but we can make some guesses.
As of Q2 2025, Nu has around 107M customers in Brazil, serving around 60% of the adult population!
At such a scale, it is becoming harder and harder to acquire new customers, as realistically, it would be crazy if the share of the adult population reached 70%. For a single bank to have 70% of the country as customers would be insane.
Thus, it is quite clear that the focus in the future will shift from user growth to user monetization.
Total revenue in Brazil grew 24.5% Y/Y, to $2.62B!
As we can see below, growth reaccelerated from 12.8% in Q1 2024 but is still significantly below historical growth rates of 50-80%. As I said in the Q1 review, the first quarter of the year is always seasonally weak, as consumer spending slows down post Christmas and New Year.
Now that Nu is no longer in its hypergrowth phase and is somewhat maturing, it will be affected more by seasonality. Previously, the effects of seasonality didn’t affect them as much, as they were small and were growing very aggressively. It is easy to grow 30% even in a seasonally slow quarter if you have a small revenue base.
Unfortunately, this quarter, Nu did not disclose detailed loan origination statistics for Brazil. My guess is that since expansion in Mexico and Colombia is going steadily, the company wants to emphasize its business as a portfolio of loans, rather than just Brazil.
Looking at the deposits, Brazil showed strong growth, attracting $3.4B in new deposits to reach a balance of $27.8B!
This was an increase of 28% Y/Y, or 13.9% Q/Q. This was one of the best results in recent quarters, with net deposits growing by 162%.
In the earnings call, this increase in deposits was attributed to “increased share of wallet,” not higher funding costs. Simply put, Nu doesn’t need to offer a higher interest rate on deposits than the prior year to attract deposits. The offering is already compelling enough for existing customers to move a larger share of their savings to Nu.
Additionally, the company said that some of this increase is also attributable to gaining more affluent customers. As we saw earlier, high-income customers rose 13% Y/Y, and they could be responsible for an outsized share of this growth.
3. Mexico
As of Q2 2025, Nu Mexico has 12M customers, around 13% of the adult population.
This is an increase of 54% Y/Y and 233% in just 2 years!
While I doubt that Nu can reach as high a penetration as Brazil’s 60%, I am confident there is still a lot of growth left in Mexico.
A reminder that Nu received a full Mexican banking license just last month. Previously, they operated under a non-bank financial institution license (SOFIPO), which is a special Mexican regulatory framework that allows FinTechs to provide some banking services, but with a lot of limitations.
A full banking license enables Nu to offer more services to its clients. This helps it to attract more customers and increase wallet share with existing customers. We are starting to see the results this quarter as Nu Mexico added $1.3B in deposits!
Now they have a deposit balance of $6.7B, an increase of 103% Y/Y and 24.1% Q/Q.
As we can see in the graph above, this was the best net deposit quarter in the last 5 quarters, indicating accelerated deposit growth.
Furthermore, revenue in Mexico grew 40.2% Y/Y to $175.7M.
While this is strong growth, it is about the same as the 40.4% growth in Q 2024, but slower than the 48.1% growth in the prior quarter. I would have liked the growth to accelerate, especially considering the new banking license.
While that didn’t happen this quarter, I still believe that revenue growth acceleration in Mexico is likely!
Firstly, customer growth of 54% was larger than the 40.2% revenue growth. This means that there is a large base of not fully monetized customers.
Secondly, the strong deposit growth of 103% means that the company has plenty of capital to issue loans.
Thirdly, Nu had an incredible success attracting credit card users in Mexico.
The company gained 2.3M credit card customers, an increase of 52% Y/Y. Most stunningly, Nu was responsible for 28% of the category growth in the country, despite only having a 7% market share in Q2 2024. These newly acquired customers will start using credit cards, generating fees and interest income for the company.
Fourth, and most importantly, the TAM in Mexico is large and yet to be really penetrated. The country still suffers from low banking access, especially in rural and low-income areas.
Depending on the source, an estimated 66M adults don’t have a bank account. Nu is in a great position to attract this cohort to their platform, in the same way as they did in Brazil.
Additionally, I would like to bring attention to the picture below from Nu’s Q1 2025 earnings presentation.
Despite Nu growing enormously in the last few years, their presence in Mexico is still largely insignificant, with the company only having around a 2% market share in bank cards and less than 1% in personal loans and retail deposits.
There is just so much growth left on the table!
4. Colombia
Nu hasn’t disclosed the exact customer figure, but it is probably around 4M.
Nu Colombia has already onboarded 9% of the adult population, quite impressive considering they only began operations 5 years ago.
A large share of the growth is driven by strong credit card adoption, with credit card customers growing 34% Y/Y to 1.4M!
This quarter, Nu Colombia reached $2.1B in deposits, an increase of 905% Y/Y and 16.7% Q/Q!
As we can see in the graph, this is a 10x growth in the deposit base in just a year!
Nu didn’t disclose anything else about Colombia, as the business is still small.
I will be paying close attention to see how Colombia develops. So far, user and deposit growth have been stronger than in Mexico and Brazil at this age in the market.
5. Deposits and Loan Portfolio
Total Nu deposit balance grew 45% Y/Y to $36.6B, driven by a whopping 456% growth in net deposits.
On an FX-neutral basis, deposits grew 41% Y/Y.
Q2 2025 net deposits of $5B were driven by a 373% increase in net deposits per customer!
Banks grow their deposit base for essentially only one reason, to issue more loans to generate interest income. And this quarter, Nu originated a lot of loans, but less than I would have liked.
Loan originations grew 55% Y/Y and 43% on FXN basis to $3.6B. While on a Y/Y basis, this seems like strong growth, I am a bit disappointed by the slow 2.8% Q/Q growth, as on an FXN basis, originations even decreased 1% Q/Q.
This means that measuring in local currency, Nu issued less in loans in Q2 2025 compared to the prior quarter!
Total loan portfolio grew 44% Y/Y and 40% FXN to $27.3B.
200% FXN growth in secured loans and 70% FXN growth in unsecured loans were the main contributors to the loan portfolio growth. Meanwhile, the credit card loan share of the portfolio decreased from 76% in Q2 2024 and 68% in Q1 2025 to 67% this quarter.
This change in the portfolio mix displays Nu’s strategy to originate less risky, higher-quality, longer-term loans.
$15.7B of this loan portfolio generates interest, or 57.5%, a large increase from 49.5% in Q1 2024!
This means that Nu is less reliant on revolving credit card balances that are paid off monthly and don’t generate interest.
The quality of their loan portfolio remains stable.
The share of 15-to-90-day nonperforming loans decreased from 4.7% to 4.4% Q/Q, and from 4.5% in Q2 2024.
90+ day NPL increased from 6.5% in Q1 to 6.6%, while on a Y/Y basis the ratio decreased from 7% in Q2 2024.
Such delinquency ratios in a tough macro environment in Brazil demonstrate the quality of Nu’s underwriting!
6. Revenue
Total revenue grew 28.7% to $3.67B, driven by a 31.3% increase in interest income and a 16% increase in fee income!
However, net revenue (which I defined as Fees + Interest income – interest cost (NII) – provision for loan losses) grew only 14.2% Y/Y to $1.63B.
*(Some have questioned why I do it differently than Nu reports. I do this to for me and to make Nu bank more comparable to other banks)*
The main causes of this lower growth were a 54.8% increase in interest costs and a 33.2% increase in provision for loan losses, both growing much more than the total revenue!
As a result of an increase in interest costs, the net interest margin (NIM) declined from 19.8% in Q2 2024 to 17.7% this quarter, with net interest income (NII) growing 22.2% to $2.1B.
The higher interest costs were largely caused by Nu more aggressively growing its deposit base in Mexico and Colombia. Nu didn’t disclose it this quarter, but last quarter, Brazil’s NIM remained stable Y/Y at 21.8%.
Let’s remember that because of banking regulations, deposits from one country can’t be used for loans in another. This means that Nu must build a new capital base in each country.
Provision for loan losses increased more than the NII (33.2% vs 22.2%) because of a strong growth in the overall loan portfolio and a larger share of unsecured loans in the portfolio (25% vs 21%). IFRS 9 requires banks to estimate and recognize future loan
losses immediately when a loan is issued.
Here is what the CFO said in the Q2 2025 earnings call:
“This will significantly increase credit card limits in Brazil throughout the remainder of 2025. As a result, we recognized provisions this quarter, front-loading expected credit losses, which have not yet been fully offset by the corresponding growth in the interest earning portfolio and related revenues, naturally creating a temporary timing mismatch.”
When a bank issues a lot of loans like Nu did, it books high loan loss provisions before it generates any meaningful interest income from these loans.
Additionally, unsecured loans default at a higher rate, thus they require a higher upfront loss provision.
Furthermore, because Nu is building a new deposit base in Mexico and Colombia, its interest expenses are growing much faster than its interest income, and this is causing the net interest margin to fall.
In the above graph, I have placed interest income and interest cost Y/Y growth rates. As we can see, interest cost has grown faster than interest income for 3 quarters in a row. I think this trend could stabilise now as NIM increased Q/Q from 17.5% to 17.7%. Q3 2024 NIM was 18.4%, so Y/Y comparisons will look better.
Here is what the CFO said in the Q2 2025 earnings call:
“In Mexico and Colombia, we continue investing to become the leading and most loved retail financial institution in these countries. While these investments, however, are naturally weighing on the short term margins, we believe they are critical to unlocking long term value. Looking ahead, we see further room for margin expansions as we optimize the balance sheet, gradually reallocating liquidity from cash into credit, and lower our cost of funding in Mexico and Colombia.”
NIM will increase as Nu 1) issues more loans from the existing deposit base, 2) lowers the cost of funding by attracting a cheaper deposit base.
7. Profitability
In Q2 2025, Nu generated $637M in net income, up 30.7% and 42% FXN Y/Y!
Unfortunately, this quarter, Nu didn’t disclose how much of this was made in Brazil. Last quarter, Nu lost $12M in Mexico and Colombia. Probably, these regions are still unprofitable, as Nu would have announced it if it were otherwise.
The chart above shows that Nu is a powerhouse of profitability with no signs of slowing down. However, while the net income margin decreased Q/Q from 40.4% to 39.2%, it is still above the 34.2% of Q2 2024.
ROE, which basically measures a bank’s return from its net assets, remained stable at 28%.
Most banks can only dream of such a high ROE. This level of profitability can only be possible with incredible operational efficiency.
As we already discussed earlier, the cost per active customer decreased 11% Y/Y from 90 cents to 80 cents. On an FXN basis, the cost decreased 3%.
Nu is better at using technology to serve a large number of customers than possibly any other bank in the world!
Nu’s efficient operating model allows low prices and high profits. This is a potent combo for explosive global growth!
8. Valuation
After rising 10% after earnings, Nu is up 24.2% in the past year and has a market cap of around $64B.
Currently, the company trades for a P/E of 27, which I find extremely fair considering the growth potential of this company.
In my Nu Deep Dive published on April 10, 2025, I made a valuation model. I don’t see any reason to change the assumptions in it, so for now I will just update the model with the latest stock price. Check my Deep Dive to see a full explanation of it.
In short, the model sees a potential upside of 135-253% by 2030!
Wall Street analysts expect that Nu will grow earnings by 141% by 2027, resulting in a 2027 P/E of 12. Barring any extreme events or huge underperformance, I think Nu is set for a healthy rally over 2026-2027.
9. Management Team Additions
Recently, Nu added 3 new people to its management team.
Roberto Campos Neto was hired as a Vice-Chairman and Global Head of Public Policy. He was previously the president of the Brazilian central bank and was instrumental in bringing the PIX payment system to life.
Additionally, the company added Ethan Eismann as a Chief Design Officer and Eric Young as a CTO.
I think these hires are clearly meant to strengthen the team before Nu expands to more countries in Latin America and beyond. Especially hiring two senior American executives is meant to “Americanize” the company to prepare it for global launch and attract more institutional investors to increase the stock price.
“We're in the we're in the middle of an AI transformation that we're taking extremely seriously, and we wanna take advantage of all these opportunities that are up ahead. And so I think as we bring somebody like Ethan with his knowledge of having run products for hundreds of millions of customers, and the same as Eric, we are just getting prepared for the next stage. So to summarize, I do think these additions are helping us both strengthening the market leading position we have in Brazil and Latin America by upping up our game and also prepare us to really go play in the big leagues as we think about internationalization over the next few years.” Nu Ceo David Velez
Could this even mean that Nu is preparing to launch in the US?
Maybe.
10. Conclusion
In conclusion, Nu is a strong shape, and the market’s reaction after hours is appropriate.
The 1.8% decrease in monthly ARPU last quarter was temporary, as shown by the 8.9% growth in Q2 2025.
Strong growth in users means that Nu’s customer portfolio is now younger and less developed, and it will take some time for these customers to use more products.
A 54.8% increase in interest cost was the result of dedicated efforts to grow their deposit base in Mexico and Colombia!
We can see the results of this strategy in the explosion of the deposit balance, growing 103% Y/Y in Mexico and 950% in Colombia.
This is a clearly developed strategy to strengthen the balance sheets of Mexican and Colombian entities, with the goal of rapidly growing their loan books. This was not caused by a deteriorating capital position.
In the next few years, the interest costs in these markets will likely decrease as Nu attracts cheaper deposits from retail customers.
33.2% increase in loan loss provision was driven by frontloading loan losses as per IFRS 9!
Nu issued a lot of new loans, losses are booked now, but interest will be collected in the next quarters and years.
Shift towards a loan portfolio less based on credit cards and more on interest-bearing loans bodes well for Nu’s future profitability.
Overall, trading for a P/E of 27, I find Nu to be an incredibly attractive long-term investment for patient long-term investors.
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