MercadoLibre's Biggest 2026 Risk Isn't Growth -- It's Margins

When investors think about MercadoLibre (NASDAQ: MELI), the conversation usually starts with growth. Revenue continues to expand above 30%. Gross merchandise volume is climbing. Mercado Pago is scaling rapidly across Latin America.

So growth is not going to be the problem. But margins might be.

As MercadoLibre heads into 2026, the most significant risk to the investment thesis isn't slowing demand. It's the possibility that industry economics are quietly resetting lower.

Image source: Getty Images.

The shipping war is getting expensive

In 2025, MercadoLibre made a deliberate choice: Defend relevance over profitability.

The company lowered its free shipping threshold in Brazil from 79 reais to 19 reais. It absorbed higher logistics costs. It leaned into promotions to counter aggressive competitors like Shopee and Temu.

These moves worked in the short term. Volumes continued to increase. Engagement remained strong, and revenue continued to grow. To put it into perspective, revenue surged by 37% in the first nine months of 2025.

But its operating margin compressed, falling to 9.8% in the third quarter of 2025, down from 10.5% in the same period a year earlier. The concern isn't that one quarter came in light. The concern is that free shipping and heavy promotions may become the baseline expectation rather than a temporary tactic.

If that happens, the entire marketplace model becomes structurally less profitable.

Why structural margin compression matters

Platform businesses are powerful because of operating leverage. As scale increases, incremental costs should decline, and margins should expand.

But if competition forces sustained shipping subsidies and lower seller fees, scale doesn't translate into leverage. It translates into higher fixed costs and thinner spreads. So even if MercadoLibre could continue growing revenue at 25% to 30% annually, the company still struggles to meaningfully expand its operating margin.

That could change how investors value the business. High-growth companies with expanding margins command premium multiples. High-growth companies with flat or declining margins do not.

What investors should watch in 2026

The key question isn't whether revenue growth slows. It's whether margins stabilize.

Here are the signals that matter:

• Operating margin trend: Does it stop declining?
• Fulfillment cost per order: Is logistics efficiency improving with scale?
• Advertising contribution: Is higher-margin revenue offsetting shipping pressure?

If MercadoLibre can show improving unit economics while maintaining growth, the long-term thesis strengthens considerably.

If margins remain stuck or drift lower, investors may need to rethink assumptions about its long-term earnings.

What does it mean for investors?

MercadoLibre is still one of the most important companies in Latin America's digital economy. Its ecosystem remains powerful. Its growth remains strong.

But heading into 2026, the debate is no longer about whether the company can grow. It's about whether that growth can translate into durable profitability.

Investors should keep an eye on how that evolves in the coming quarters.

Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends MercadoLibre. The Motley Fool has a disclosure policy.