Like most technology-centric companies, Latin America’s e-commerce powerhouse MercadoLibre (MELI +0.94%) is using artificial intelligence to improve its results. As CFO Martín de los Santos commented during the company’s fourth-quarter earnings call, “We are seeing clear evidence that our investments in artificial intelligence are accelerating revenue.”
The numbers confirm his claim. On a constant-currency basis, MercadoLibre’s Q4 revenue growth accelerated to a year-over-year pace of 47%.
Also like so many other companies investing in AI, however, this one’s spending is uncomfortably steep. Although MercadoLibre didn’t detail exactly how much it invested in artificial intelligence last year, these outlays are a big reason that this company’s 2025 net income only improved about half as much as its sales did. That’s the chief reason its stock is down 35% from last May’s peak.
Today’s Change
(0.94%) $16.66
Current Price
$1792.40
Key Data Points
Market Cap
$91B
Day’s Range
$1744.97 – $1801.62
52wk Range
$1593.21 – $2645.22
Volume
19K
Avg Vol
580K
Gross Margin
44.50%
For investors who can see the bigger picture, however, this sizable pullback is a buying opportunity.
Savvy spending
Sure, this heavy spending hurts. But it’s the right kind of spending, particularly as it pertains to artificial intelligence.
Case in point: Late last year, MercadoLibre launched an AI-powered customer service agent to assist users of its online payment platform Mercado Pago. It’s now taking care of nearly 90% of customer queries and requests without involving any human employees, ultimately lowering customer service costs.
MercadoLibre is also using artificial intelligence to optimize delivery routes for its logistics and shipping service, Mercado Envios, generate credit scores for consumers without a formal credit history, support sellers using its e-commerce platform, and more.
But is it all worth the price being paid in the meantime?
Take the leap of faith
The difficult part for current and would-be shareholders here is seeing a light at the end of the tunnel. Buying and/or sticking with MELI stock right now requires something of a leap of faith.
That’s a leap most growth investors should be willing to take, though.
It’s an admittedly overused comparison. Nevertheless, in many ways where MercadoLibre is today is where Amazon was over a couple of decades ago — spending a fortune in the name of growth, but in so doing, ensuring its future dominance of the fast-growing online shopping market that was (at the time) still highly fragmented. It was worth it for the company, and for Amazon shareholders.
Image source: Getty Images.
It’s not the exact same kind of spending, mind you. Amazon’s biggest expenditures back then were on warehouses and distribution centers, while MercadoLibre is investing heavily in a range of digital tools. But that’s OK. Companies should invest in the most relevant and helpful tools available at any given time. Right now, that’s AI.
More to the point for interested investors, think bigger-picture. This big spending is temporary. The benefit of it, however, can be permanent, eventually paying for itself many times over.
Management is confident this will be the case, anyway. As Martin de Los Santos also said during Q4’s earnings call: “[W]e are not going to hesitate to invest [in growth] even if we put some short-term margin pressure. But in the long term, we continue to be very optimistic about the margin profile of our business as we continue to scale the business and as some of the investments that we’re making continue to mature.”
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