On August 13, Nu Holdings Ltd. (NYSE:NU) reported second-quarter results built around a number the digital bank had never posted before: $1.1 billion in net income, up 49% year over year and 17% from the first quarter. The company also crossed 139 million customers across Brazil, Mexico and Colombia, and a newly approved banking license turned what had been a credit-first fintech in Mexico into a full-scale bank. Behind that headline figure sits a business leaning harder on artificial intelligence and new customer tiers to keep growth compounding, even as expenses and past-due loans both crept higher in the same period.
Finding New Gears For Growth
Profitability improved across nearly every measure management pointed to. Net interest margin expanded 180 basis points to 22.9%, and risk-adjusted net interest margin jumped to 12.4% from 9.5% the prior quarter, driven mostly by credit income and a lower cost of credit. Return on equity held at 33% even as the company kept investing in three markets at once. Nubank is also trying to capture more of each customer’s wallet rather than just adding new ones.
In July, it launched Croma, a subscription tier aimed at a “Super Core” segment between its mass-market base and its Ultravioleta high-income brand, where purchase volumes grew 41% year over year. It already counts 6.8 million small-business customers, more than any other financial institution in Brazil. Mexico may be the bigger story long term. At a similar stage of adult-population penetration, Nubank’s Mexican customers are generating $12.3 in average revenue per active customer versus $5.6 in Brazil at that same point, and the company reached breakeven there in six years versus eight in Brazil.
Underneath all of it sits NuFormer, the company’s proprietary AI model, which management said now handles more than 60% of Brazilian customer-support conversations at ratings on par with humans, after a redesign that quadrupled training and inference speed.
Where The Cracks Are Showing
Not every metric moved in the right direction. Loans more than 90 days past due rose 35 basis points to 6.9%, which the company attributed to the normal seasonal migration of earlier delinquencies rather than a shift in underlying credit quality. Operating expenses jumped 20% sequentially to $806 million as real estate and marketing costs shifted between quarters and international expansion spending picked up, pushing the efficiency ratio to 19.5% after an unusually low 17.6% in the first quarter that management had already flagged as not sustainable.
The allowance for credit losses grew to $6.6 billion, with roughly half of the increase tied to deliberate expansion into higher-risk borrower segments rather than pure portfolio growth. There is also a new cost line on the horizon: the company plans to spend no more than 100 basis points of its efficiency ratio testing a U.S. entry over the next 12 to 30 months, an unproven bet in a market where Nubank has no track record yet.
How Wall Street Is Betting
Hedge fund ownership fell from 104 funds to 92 in the most recent quarter, a pullback even as the stock delivered its strongest earnings on record. Short interest sits at just 3.44% of float, a level that suggests little organized skepticism despite the drop in institutional holders. As of August 27, shares trade at a forward P/E of 21.01, a multiple that assumes continued double-digit growth rather than pricing in the delinquency and expense trends flagged above. That combination leaves the market’s read on Nubank somewhat unsettled.
The Next Test For Nubank
Nubank’s first billion-dollar quarter shows a company that has found several new levers at once: a banking license in Mexico, a fresh subscription tier in Brazil, and an AI platform its executives say is compounding gains across the business. Whether that combination holds up depends on two things playing out as management expects. For the growth story to keep working, Mexico’s monetization curve and the new customer tiers need to scale the way Brazil’s did.
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