Nu Holdings Is Turning Growth into Profits
Taking a step back, despite the stock’s poor performance this year, Nu Holdings’ operating fundamentals continue to show significant progress in 2026.
Take Q2 2026, for example. On an FX-neutral basis, the Brazilian fintech saw gross revenue grow 39% year-over-year to $5.9 billion, while net income jumped 49% year-over-year to $1.1 billion. Not to mention an impressive ROE of 33% — well above that of traditional Brazilian banks like Itaú Unibanco ITUB +1.68% ▲, which reported an ROE of 24.3% in the same quarter. These figures show that, beyond acquiring customers, Nu Holdings is also monetizing them successfully.
In fact, Average Revenue Per Active Customer (ARPAC) now stands at around $17, with a monthly activity rate of 83.5%. This further shows that profitability continues to improve even as the customer base grows.
Nu’s Growth Story Is Far from Over
Nu’s growth story is far from over. Nu’s customer base has already reached 139 million globally. Of those, nearly 118 million are in Brazil alone — roughly 64% of the country’s adult population.
In fintech and digital banking, Nu’s scale and market reach in its home market are hard to match. Very few — if any — digital financial institutions in the Western world have managed to achieve this level of market penetration while keeping monthly cost to serve so low at about $1 per active customer, and generating over $1 billion in quarterly profits.
Nu Holdings has also been expanding internationally. It has been operating as a bank in Mexico since August, while the launch of digital financial products in the U.S. in September opened another avenue for growth. Consensus estimates now point to an impressive earnings per share (EPS) CAGR of 28.4% over the next three to five years — about 2.5x the broader financial sector median.
Why the Market Isn’t Rewarding Nu’s Growth
Several factors have kept NU’s stock from keeping pace with its operating progress. For example, in September, Itaú BBA downgraded NU from “Outperform” to “Market Perform.” It expects profit growth to slow from 32% in 2026 to just 14% in 2027. Among the reasons cited were weaker consumer spending in Brazil, possible regulatory restrictions on lending, and the costs of international expansion.
Second, credit quality deserves attention. Non-performing loans (NPLs) over 90 days rose from 6.5% to 6.9% in 2Q26, although management attributed much of this increase to seasonality.
Yet the final blow came more recently. October brought a political shock. Lula da Silva’s unexpected reelection as Brazil’s president triggered a sharp sell-off in Brazilian assets. NU fell nearly 17% on October 26, reflecting concerns about interest rates, exchange rates, and the country’s fiscal outlook.
After all, Brazil is still dealing with a benchmark interest rate of 13.75%, which could remain high for longer given the fiscal uncertainty. This matters a great deal to Nubank. According to Brazil’s Central Bank, the delinquency rate among individual borrowers rose from 4.9% to 6.0% over the 12 months through August 2026.
Although Nu’s management attributed much of the increase in its 90-plus-day NPL ratio to seasonal factors, the numbers help explain why the market is concerned. Higher interest rates for longer could put even more pressure on consumers’ ability to repay their loans. That could lead to larger provisions for credit losses and put Nu’s profit growth in 2027 at risk.
Nu’s Q3 Earnings Will Put Its Cheaper Valuation to the Test
It’s important to note that Nu Holdings is still a richly priced fintech — at least based on trailing multiples. Even after the recent decline, NU trades at around 17x trailing reported earnings and 4.6x book value. By comparison, Itaú trades at roughly 10x earnings and 2x book value.
However, looking only at historical multiples can be misleading. Based on consensus EPS estimates of $0.86 for 2026 and $1.11 for 2027, NU trades at approximately 14.46x and 11.16x those earnings, respectively. This implies about 29% EPS growth in 2027, making the valuation much more attractive if those estimates hold up.
That’s where the next earnings report, expected on November 12, comes into play. Consensus estimates point to EPS of around $0.23 for Q3 2026. More important than beating that estimate will be delinquency rates, the cost of credit, and management’s comments on 2027.
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