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StoneCos Q1 2026 Results Highlight Credit-Risk Worsening and Guidance Uncertainty
StoneCo Ltd. (NASDAQ: STNE) announced its first‑quarter 2026 earnings on May 14, a performance that underscored rising credit‑risk pressure and cast doubt on the company’s 2026 outlook.
Revenue topped expectations, coming in at $3.58 billion versus analysts’ $3.55 billion forecast. However, earnings per share slipped to $2.19 from the anticipated $2.28, a 3.95 % miss. The gap widened further when the company’s operating margin contracted in the quarter.
StoneCo’s earnings call transcript revealed that higher provisioning costs drove the margin squeeze. The firm said its cost of risk climbed to 21.9 %, 90‑day non‑performing loans (NPLs) approached 7 %, and quarterly provisions rose by more than 50 %. These numbers point to a deterioration in the quality of StoneCo’s credit portfolio, which grew 25 % sequentially to BRL 1.8 billion—largely driven by a 41 % jump in merchant working‑capital loans.
The payment‑processing segment, which has benefited from Brazil’s rapid adoption of the Pix instant‑payment platform, did not meet expectations. StoneCo’s 2026 guidance assumes a lower year‑end Selic rate, Brazil’s benchmark overnight rate, but the current Selic environment—marked by higher rates—introduces a significant risk factor. The Central Bank of Brazil’s monetary‑policy committee has kept rates above the 2026 target, raising funding costs for StoneCo and amplifying the impact of higher provisioning.
In mid‑April, an analyst from DM Martins Research downgraded StoneCo to a Hold, citing the same credit‑risk trends and weak execution. The analyst noted that StoneCo’s valuation—approximately 4.4 times trailing earnings—appears attractive, but the combination of rising risk, weak payments growth and the Selic‑related guidance uncertainty makes the stock a cautious hold.
Bank of America analysts also trimmed StoneCo’s 2026 and 2027 earnings estimates by 9 % and 13 % respectively, citing elevated funding costs and higher provision charges for credit losses. The rating cut reflects broader market concerns about the fintech’s ability to maintain profitability amid tightening macro conditions.
StoneCo’s management reiterated its focus on expanding the credit side of its business while maintaining disciplined underwriting. The company said it will continue to monitor credit quality closely and adjust provisioning as needed. However, the earnings call did not provide new guidance for the credit portfolio or for payments growth, leaving investors uncertain about the trajectory of the company’s core businesses.
The company’s performance is set against a backdrop of a rapidly growing digital payments ecosystem in Brazil. Pix transactions reached almost R$3.4 trillion in Q1 2026, representing roughly one‑quarter of the country’s annual GDP. StoneCo’s share of this market has been growing, but the firm’s margin compression and heightened credit risk suggest that competition and regulatory pressures may limit further expansion.
StoneCo’s valuation remains low relative to peers, but the company’s weak execution and rising guidance risk have tempered enthusiasm. Investors will likely watch the upcoming Q2 earnings call for updates on credit provisioning, payments growth, and any adjustments to the 2026 guidance. The company’s next quarterly report, scheduled for the end of June, will be a key indicator of whether StoneCo can reverse the trend in credit risk and restore confidence in its growth prospects.
In summary, StoneCo’s Q1 2026 results confirm the analyst’s earlier assessment that credit risk is worsening, operating leverage is disappointing, and the Selic‑driven funding environment adds uncertainty to the company’s guidance. While the stock’s valuation remains attractive, the combination of these factors supports a Hold recommendation for now.
Revenue topped expectations, coming in at $3.58 billion versus analysts’ $3.55 billion forecast. However, earnings per share slipped to $2.19 from the anticipated $2.28, a 3.95 % miss. The gap widened further when the company’s operating margin contracted in the quarter.
StoneCo’s earnings call transcript revealed that higher provisioning costs drove the margin squeeze. The firm said its cost of risk climbed to 21.9 %, 90‑day non‑performing loans (NPLs) approached 7 %, and quarterly provisions rose by more than 50 %. These numbers point to a deterioration in the quality of StoneCo’s credit portfolio, which grew 25 % sequentially to BRL 1.8 billion—largely driven by a 41 % jump in merchant working‑capital loans.
The payment‑processing segment, which has benefited from Brazil’s rapid adoption of the Pix instant‑payment platform, did not meet expectations. StoneCo’s 2026 guidance assumes a lower year‑end Selic rate, Brazil’s benchmark overnight rate, but the current Selic environment—marked by higher rates—introduces a significant risk factor. The Central Bank of Brazil’s monetary‑policy committee has kept rates above the 2026 target, raising funding costs for StoneCo and amplifying the impact of higher provisioning.
In mid‑April, an analyst from DM Martins Research downgraded StoneCo to a Hold, citing the same credit‑risk trends and weak execution. The analyst noted that StoneCo’s valuation—approximately 4.4 times trailing earnings—appears attractive, but the combination of rising risk, weak payments growth and the Selic‑related guidance uncertainty makes the stock a cautious hold.
Bank of America analysts also trimmed StoneCo’s 2026 and 2027 earnings estimates by 9 % and 13 % respectively, citing elevated funding costs and higher provision charges for credit losses. The rating cut reflects broader market concerns about the fintech’s ability to maintain profitability amid tightening macro conditions.
StoneCo’s management reiterated its focus on expanding the credit side of its business while maintaining disciplined underwriting. The company said it will continue to monitor credit quality closely and adjust provisioning as needed. However, the earnings call did not provide new guidance for the credit portfolio or for payments growth, leaving investors uncertain about the trajectory of the company’s core businesses.
The company’s performance is set against a backdrop of a rapidly growing digital payments ecosystem in Brazil. Pix transactions reached almost R$3.4 trillion in Q1 2026, representing roughly one‑quarter of the country’s annual GDP. StoneCo’s share of this market has been growing, but the firm’s margin compression and heightened credit risk suggest that competition and regulatory pressures may limit further expansion.
StoneCo’s valuation remains low relative to peers, but the company’s weak execution and rising guidance risk have tempered enthusiasm. Investors will likely watch the upcoming Q2 earnings call for updates on credit provisioning, payments growth, and any adjustments to the 2026 guidance. The company’s next quarterly report, scheduled for the end of June, will be a key indicator of whether StoneCo can reverse the trend in credit risk and restore confidence in its growth prospects.
In summary, StoneCo’s Q1 2026 results confirm the analyst’s earlier assessment that credit risk is worsening, operating leverage is disappointing, and the Selic‑driven funding environment adds uncertainty to the company’s guidance. While the stock’s valuation remains attractive, the combination of these factors supports a Hold recommendation for now.
