StoneCo Ltd. (STNE) - Deep Dive Research Report

Prepared 2026-06-24. Listing: Nasdaq (STNE), Class A ordinary shares. Domicile: Cayman Islands. Operations: Brazil. Reporting currency: Brazilian real (BRL). All figures sourced to company filings, the six most recent earnings calls, and the cited public sources.

Section 1: What the Company Does

StoneCo helps small Brazilian businesses get paid and run their money. At its simplest, when a bakery in São Paulo or a hardware store in Recife swipes a customer's card or accepts a PIX instant payment, Stone is often the company that captures that transaction, settles the money into the merchant's account, and takes a small cut. That is the payments business. On top of that, Stone has wrapped a digital bank account, working-capital loans, and (until recently) retail software, so that the same small merchant uses Stone not just to accept a card but to hold deposits, borrow against future receivables, and manage their shop.

The company exists because Brazilian payments used to be a closed, expensive oligopoly. For decades, card acquiring was controlled by bank-owned incumbents (Cielo, owned by Bradesco and Banco do Brasil; Rede, owned by Itaú), and a small merchant faced high merchant-discount rates, opaque receivables-advance fees, and machines that were rented on long contracts. André Street and Eduardo Pontes, who had already spent more than a decade in Brazilian payments (their earlier venture was Braspag), founded Stone in 2012 to attack that structure directly. Their wedge was not price alone. It was service: a dedicated, hyper-local sales-and-support model (the "Stone Green Angels"), faster settlement, and a transparent offer aimed at the merchants the big banks treated as an afterthought - the micro, small, and medium businesses, which Stone calls MSMBs.

Stone listed on Nasdaq in October 2018, raising roughly USD 1.1-1.2 billion, with Berkshire Hathaway and Ant Financial as pre-IPO anchor investors (Investopedia). Berkshire's participation gave the company unusual global visibility for a Brazilian SME-payments firm. Since then the business has evolved from a pure card acquirer into a financial-services platform: payments are still the front door, but the strategic prize is converting a merchant who only accepts cards into a "heavy user" who also banks, borrows, and keeps deposits with Stone. Management's framing is that Stone is becoming the principal financial-operating-system for the Brazilian entrepreneur, not just a card-machine vendor.

The technical hard part is twofold. First, distribution: serving millions of tiny merchants profitably requires a logistics and field-sales machine that took more than a decade to build, because each merchant is individually small and expensive to acquire and support. Second, credit underwriting: lending working capital to micro-merchants in a high-interest-rate emerging market is treacherous, and Stone has already lived through one near-death credit blowup (the 2021 over-the-counter registry/credit crisis that forced it to pause lending and take heavy losses). The current business is partly defined by the scar tissue from that episode.

A concrete walk-through. A small clothing retailer signs with Stone. A field rep installs a Stone card terminal, usually same-day. The merchant starts accepting Visa, Mastercard, and PIX. When a customer pays, Stone captures and settles the transaction, charging a merchant-discount fee (a percentage of volume). The merchant then opens a Stone banking account, where settlements land; Stone now earns float on those deposits. The merchant wants cash faster than the standard installment schedule, so Stone advances the receivables for a fee (prepayment). Six months in, with a track record of card volume Stone can see directly, Stone offers a working-capital loan repaid as a slice of daily card sales - low-friction because Stone controls the cash flow it is lending against. That single merchant now generates payment fees, float, prepayment revenue, and credit interest. That bundling - turning a payments client into a multi-product financial-services client - is the entire strategy.

"Whenever value-accretive opportunities are not immediately available, excess capital gets returned to shareholders." - CEO Mateus Scherer, Q1 2026 call (May 13 2026)

Section 2: Business Segments

StoneCo reports in two segments: Financial Services and Software (StoneCo Form 20-F FY2025, filed April 23 2026). The story of the last two years is the deliberate shrinking of Software (via divestitures) to concentrate the company on Financial Services. Within Financial Services, management runs the business as three tightly bundled product lines: Payments, Banking, and Credit. They are not separate reportable segments, but they are economically distinct enough to treat individually.

Financial Services - Payments (the front door)

This is card acquiring and PIX payment acceptance for MSMBs, plus a separate, lower-touch offer for larger key accounts (the "TON" sub-brand serves the smallest autonomous/nano merchants; the core Stone brand serves SMBs). What it does: captures, authorizes, and settles in-store and online transactions, and advances receivables. The core capability is the field distribution and service network - thousands of local reps and a logistics system that can install and support a terminal almost anywhere in Brazil, which is genuinely hard to replicate because it is a people-and-coverage business, not just software.

Payments is the volume engine and the customer-acquisition channel, but its standalone economics have been under pressure. Total payment volume (TPV) reached roughly BRL 137 billion in Q1 2026, growing only about 3% year-over-year - a sharp deceleration from the high-teens/low-twenties growth Stone posted in 2024-2025 (Q1 2026 call, May 13 2026). Management is explicit that payments is no longer where the incremental margin comes from; pricing has roughly stabilized after the 2024-2025 repricing waves, and the role of payments now is to win and hold the merchant so that banking and credit can be sold on top. Revenue mix: Financial Services is the overwhelming majority of the group after the Software divestitures; payments is the largest single revenue line within it, but its share of gross-profit growth is shrinking by design.

Financial Services - Banking (the deposit and float engine)

This is the Stone digital account: settlement balances, time deposits (CDBs), investment products, and cash-management tools for merchants. What it does: holds merchant money and earns a spread on it. The core capability is that the deposits are "sticky" because they arrive automatically as payment settlements - the merchant does not have to choose to fund the account, their sales do it for them. This is why deposits have consistently grown two to three times faster than TPV. Retail deposits reached about BRL 10.1 billion in Q1 2026, up 22% year-over-year, after closing 2024 at BRL 8.7 billion (versus a BRL 7 billion guidance) (Q4 2024 call, Mar 18 2025; Q1 2026 call, May 13 2026).

Banking exists as a distinct lever because of the interest-rate environment. With Brazil's Selic policy rate elevated near 15%, deposits are both a funding source for credit and a direct earnings driver. Management ran a "cash-sweep" strategy converting low-cost settlement balances into time deposits, and drove the blended funding cost down to about 87% of CDI (the interbank benchmark) from roughly 100% in early 2025 (Q1 2026 call, May 13 2026). Banking is the quiet margin engine: it monetizes the float that payments generates and funds the credit book cheaply.

Financial Services - Credit (the growth bet and the risk)

This is working-capital lending and merchant credit cards to the MSMB base. What it does: lends against the card receivables Stone can already see, plus secured products and BNDES-backed (Brazilian development bank) facilities. The core capability is informational: because Stone processes the merchant's sales, it has a real-time view of cash flow that a traditional bank lacks, which in principle allows better underwriting. Credit is the explicit growth bet - management has repeatedly said credit is where future earnings leverage comes from. The portfolio grew from about BRL 1.2 billion at end-2024 to BRL 3.2 billion by Q1 2026 (Q4 2024 call; Q1 2026 call).

Credit is also where the danger lives, and the recent calls show it. After rebuilding the book carefully post-2021, Stone hit deteriorating asset quality in early 2026: non-performing loans over 90 days rose to about 7% in Q1 2026 from roughly 5.2% the prior quarter, cost of risk jumped to 21.9%, and management tightened underwriting and skewed toward better-rated clients and secured products (Q1 2026 call, May 13 2026). Credit is the highest-return, highest-variance line, and management's credibility hinges on whether they can scale it without repeating 2021.

Software (being divested)

Historically this was POS and ERP software for retail and services verticals, CRM, e-commerce, and order-management tools, anchored by the 2020 acquisition of Linx (a major Brazilian retail-software company). What it did: sold and serviced vertical software to retailers, with the strategic thesis of cross-selling payments into the software base. The capability was a large installed base of retail software seats. But the cross-sell thesis underdelivered, Stone took a roughly BRL 3.6 billion goodwill impairment on the software assets, and management concluded the assets were worth more to a strategic owner than inside Stone. In 2025 Stone agreed to sell Linx to TOTVS for an enterprise value of about BRL 3.05 billion plus net cash, and SimplesVet (veterinary ERP) to PetLove for about BRL 140 million plus net cash (Q2 2025 call, Aug 7 2025). Software's role in the group is now essentially "asset to be monetized and exited," and the proceeds funded the 2026 special dividend.

Section 3: Products and Business Detail

The terminal and acceptance layer. Stone's most visible product is the card machine. The core Stone brand serves established small and medium merchants with full-service terminals, integrated settlement, and a dedicated relationship model. TON is the lighter, self-service, lower-price brand aimed at the smallest autonomous and nano-merchants - this is Stone's answer to PagBank's and Mercado Pago's entry-level machines. Both accept Visa, Mastercard, Elo, and other Brazilian card networks, plus PIX QR-code payments, which have exploded: PIX volumes on Stone's platform grew 49-95% year-over-year across recent quarters while card volume grew only mid-single digits to low-teens (Q1 2025 call, May 8 2025; Q3 2025 call, Nov 6 2025).

Receivables prepayment. A defining feature of Brazilian card payments is installment selling - a consumer pays in, say, 10 monthly installments, but the merchant wants the cash now. Stone advances those future receivables for a fee. This is a large, structurally Brazilian revenue line, and it is sensitive to interest rates: when the Selic rate rises, the cost of funding prepayment rises and Stone must reprice. The 2024-2025 "repricing waves" management refers to were largely about passing higher rates through to prepayment and merchant pricing (Q2 2025 call, Aug 7 2025).

Banking and deposits. The Stone account offers settlement, time deposits (CDBs), and investment products. The "cash-sweep" mechanism automatically converts idle balances into time deposits at near-zero incremental cost, lowering Stone's funding cost while shifting where revenue is booked (Q4 2024 call; Q1 2025 call). Management guides that each BRL 1 billion migrated to time deposits cuts funding cost by roughly 75-125 basis points annually (Q1 2025 call, May 8 2025).

Credit products. The catalogue spans merchant working-capital loans (repaid as a percentage of daily card sales), merchant credit cards, and increasingly secured lending and BNDES-backed facilities aimed at better-rated clients. As of Q1 2026 the book was about BRL 3.2 billion, of which the large majority is merchant working capital and a few hundred million is credit cards (Q1 2026 call, May 13 2026).

Process knowledge and the underwriting moat. What makes the credit product hard to copy is not the lending mechanics but the data and the collection mechanism: Stone underwrites using the merchant's own card-processing history and collects directly from the merchant's daily settlement flow, which it controls. A bank without the payments relationship cannot see or capture that cash flow as cleanly. The constraint is that this advantage only holds while Stone keeps processing the merchant's volume - churn in payments directly degrades the credit collateral.

Geography. Stone is a Brazil-only operator. Unlike some peers it has not pursued meaningful international expansion; its entire business is the Brazilian MSMB market. This is a concentration bet on a single country's macro, currency, and regulatory environment.

Milestones that changed the business: the 2018 Nasdaq IPO with Berkshire/Ant backing; the 2020 Linx acquisition (the software bet, later reversed); the 2021 credit crisis that forced a multi-quarter lending pause and heavy losses; the 2024-2025 rebuild of the credit book; and the 2025-2026 Linx/SimplesVet divestitures that refocused the company on financial services and funded the first-ever cash dividend.

Section 4: Customers

Stone's customers are Brazilian micro, small, and medium businesses - bakeries, clothing shops, restaurants, salons, hardware stores, autonomous traders. The active client base reached about 4.7 million by Q1 2026, up 13% year-over-year, though it dipped about 5% sequentially as elevated churn and tighter onboarding bit (Q1 2026 call, May 13 2026). This is a fragmented, long-tail base: no single merchant is material, and the relationship is with millions of individually tiny accounts.

The buying decision is made by the business owner personally - there is no procurement department at a bakery. The criteria are practical: how fast can I get a working machine, how fast does my money settle, how transparent is the pricing, and can I get a loan when I need cash. Stone's historical edge in winning these merchants was its field-sales and service model - human reps who show up, install same-day, and provide local support - which mattered enormously to owners who distrusted the impersonal bank-owned incumbents. The sales cycle is short (days), but the relationship, once established, deepens over months as the merchant adds banking and credit.

Why they choose Stone is now less about raw price (PagBank and Mercado Pago compete hard on price at the low end) and more about the bundle: a merchant who keeps deposits, takes a loan, and runs daily settlement through Stone gets a more useful product than a standalone cheap terminal. Management calls these "heavy users," and the heavy-user share has climbed to roughly 38% of the active base (Q2 2025 call, Aug 7 2025).

Switching costs are moderate and rising with bundling. A merchant who only uses a Stone terminal can defect easily - terminals are not technically sticky, and PIX further lowers terminal dependence. But a merchant whose payroll, deposits, and working-capital loan all run through Stone faces real friction to move, because the loan is collateralized by the card flow and the account holds their operating cash. The entire strategic point of banking-plus-credit is to manufacture switching costs that pure payments never had.

Concentration is essentially nil on the customer side - this is a granular, mass-market base, which is a strength (no single-customer risk) but also a weakness (customer acquisition and service are expensive per unit, and the base churns with the macro). The bigger concentration risk is the reverse: Stone is concentrated in one customer type (Brazilian small merchants) in one country.

Contract structure is largely transactional and recurring-by-behavior rather than locked by long contracts. Revenue is volume-based (a cut of every transaction), float-based (a spread on deposits), and interest-based (on the loan book). This makes revenue sensitive in real time to merchant activity and to interest rates, but it is also recurring in the sense that an active merchant generates fees every single day. ARPAC (average revenue per active client) was about BRL 247 per month in Q1 2026, down 11% year-over-year, reflecting both mix shift toward smaller TON merchants and the softer macro (Q1 2026 call, May 13 2026).

Section 5: Competitive Landscape

Brazilian merchant acquiring is one of the most competitive payment markets in the world, and the structure matters. There are three tiers of competitor: the bank-owned incumbents (Cielo, Rede, GetNet), the independent fintech challengers (Stone and PagBank), and the platform/wallet entrants (Mercado Pago, PicPay). PIX, the central bank's free instant-payment system, is the disruptive force sitting underneath all of them.

By number of merchant users (January 2026 data), the ranking was Cielo ~28%, PagBank ~26%, Rede ~25%, Stone ~22%, Mercado Pago ~14%, GetNet ~9%; by transaction volume it was Rede ~18%, Cielo ~17%, PagBank ~17%, Stone ~15%, Mercado Pago ~9%, GetNet ~5% (fintechs.com.br market-share data, Jan 2026). The important signal in that data is that Stone lost about 2 percentage points of share year-over-year on both measures, while Rede (Itaú) and Mercado Pago gained. Stone is no longer the share-taker it was in 2018-2021; it is now defending.

Where Stone wins: against the bank-owned incumbents (Cielo, Rede, GetNet), Stone still wins on service, transparency, and the integrated banking-plus-credit bundle for the small entrepreneur who feels underserved by a big bank. Its real-time cash-flow data gives it a genuine underwriting edge in credit that the platform wallets lack.

Where Stone loses or is exposed: against PagBank and Mercado Pago at the low end, Stone competes on price for nano-merchants and does not always win - both rivals are aggressive, and Mercado Pago has an enormous consumer wallet and e-commerce flywheel (via MercadoLibre) that Stone cannot match. Against Rede/Itaú, the incumbent is using a deep balance sheet, aggressive MDR pricing, and zero-fee receivables offers to retake volume share, which it has done. And PIX structurally erodes the card-acquiring economics that made Stone's early model lucrative, because a PIX payment carries far lower fees than a card transaction.

Barriers to entry are real but asymmetric. Building Stone's field-distribution and service network from scratch is hard and slow - that is a genuine barrier against a pure software startup. But the incumbents already have distribution (bank branches), and the platform players already have consumers, so the barriers do not protect Stone from the two competitor types that matter most. This is not a wide-moat situation; it is a contested oligopoly where Stone holds a strong but no longer dominant position, and where the underlying card-fee pool is being partly disintermediated by PIX.

Market caps are peer-size references only, with the as-of date shown; they move and are not valuation statements.

Section 6: Industry

Stone operates in Brazilian payments and SME financial services. Demand is driven by three things: the secular shift from cash to electronic payments among Brazilian small businesses, the growth of small-business formation and activity (highly sensitive to the Brazilian economy), and the penetration of banking and credit into a historically underbanked merchant base. Brazil is one of the largest card and digital-payment markets in Latin America, and the merchant-acquiring industry there processes well over a trillion reais of volume annually across the major players (Statista, LatAm acquirers by volume).

The single most important industry force is PIX, the Brazilian central bank's instant-payment system launched in 2020. PIX is free or near-free for consumers, ubiquitous, and has grown explosively - it is reshaping the payment mix away from cards. For acquirers this is double-edged: PIX volumes flow through Stone's terminals and QR codes (so Stone captures the merchant relationship), but PIX carries far thinner economics than card acquiring, compressing the fee pool the whole industry historically lived on. The industry's response is exactly Stone's strategy: move the money from per-transaction card fees toward banking float and credit interest, which PIX does not erode.

The second defining force is interest rates. Brazil's Selic policy rate has been very high (around 15%) through this period, which dominates the economics. High rates raise the cost of funding receivables prepayment and credit, but they also make merchant deposits more valuable as a funding source and inflate float income. Management quantified the sensitivity bluntly: every 100 basis points of Selic movement is worth roughly BRL 200-250 million in pre-tax earnings (Q3 2025 call, Nov 6 2025; Q1 2026 call, May 13 2026). The industry is therefore highly cyclical with respect to monetary policy, and a falling-rate environment is generally a tailwind for the credit-and-prepayment model while a rising/high-rate environment squeezes it and raises default risk among small merchants.

Regulation is heavy and active. The central bank (Banco Central do Brasil) regulates acquiring, the receivables-registry infrastructure (the 2021 registry overhaul was the proximate cause of Stone's credit crisis that year), PIX, and increasingly the open-finance agenda. Regulatory change is a structural risk factor: a single rule change to receivables registration or interchange can reshape economics overnight.

Cyclicality: the industry rises and falls with Brazilian consumer spending, small-business formation, employment, and rates. It is more defensive than discretionary retail (people keep buying groceries), but credit losses are strongly procyclical - in a downturn, small-merchant defaults spike, which is precisely the dynamic Stone flagged in early 2026.

Tailwinds: continued cash-to-electronic migration, deepening of banking/credit penetration among MSMBs, and an eventual rate-cutting cycle. Headwinds: PIX fee compression, intensifying price competition from bank-owned and wallet rivals, and the macro fragility of the Brazilian small-business sector.

Section 7: Growth Triggers

All triggers below are drawn directly from the six earnings calls and are forward-looking statements management made.

• Credit as the primary earnings driver as the book scales. Management has said across multiple calls that credit, not payments, is the engine of future gross-profit growth, expanding via secured products and BNDES-backed facilities toward better-rated clients (Q3 2025 call, Nov 6 2025; Q1 2026 call, May 13 2026). Repeated across calls.

  "We expect credit to become a larger earnings driver as the portfolio matures." - paraphrased management framing, Q3 2025 call (Nov 6 2025)

• Second-half 2026 reacceleration driven by execution, not macro. Management guided that 2026 performance is weighted to the second half as credit revenue and retention initiatives normalize, and explicitly said the bet is on churn reduction and execution rather than a macro recovery (Q1 2026 call, May 13 2026).

  "I don't think we're betting in the macro environment becoming better in the second half. I think it's more a matter of execution." - CEO Mateus Scherer, Q1 2026 call (May 13 2026)

• Funding-cost reduction via deposit migration (cash sweep). Migration of settlement balances into time deposits drove blended funding cost to ~87% of CDI from ~100% in early 2025, with further room to run; each BRL 1 billion migrated cuts funding cost ~75-125bps annually (Q1 2025 call, May 8 2025; Q1 2026 call, May 13 2026). Repeated.

• Banking/deposit growth outpacing TPV. Deposits have grown two-to-three times faster than payment volume, and management expects continued deposit-led monetization as the bundle deepens (Q4 2024 call, Mar 18 2025; Q2 2025 call, Aug 7 2025).

• Operating leverage from AI and logistics efficiency. Management cited AI adoption in customer service and logistics efficiency as a 2026 margin catalyst (Q3 2025 call, Nov 6 2025).

• Capital return from divestiture proceeds. The Linx and SimplesVet sales unlocked over BRL 4 billion, funding the 2026 special dividend and additional buybacks, with about BRL 1.4 billion of further repurchases committed through year-end 2026 (Q2 2025 call, Aug 7 2025; Q1 2026 call, May 13 2026).

• Long-term 2027 targets (set Q4 2024, since softened on TPV). Original 2027 guidance: MSMB TPV above BRL 670 billion, adjusted gross profit above BRL 10.2 billion, adjusted basic EPS above BRL 15 (Q4 2024 call, Mar 18 2025). Management later acknowledged softer-than-expected market growth introduces risk to the 2027 TPV figure while expressing continued confidence in the profitability targets (Q2 2025 call, Aug 7 2025).

Section 8: Key Risks

Credit cycle blowup (high probability of moderate damage; tail risk of severe damage). This is the central risk. Stone is deliberately scaling a working-capital loan book to micro and small merchants in a high-rate economy, and early 2026 already showed the strain: NPLs over 90 days rose to ~7% from ~5.2% and cost of risk spiked to 21.9% in a single quarter (Q1 2026 call, May 13 2026). The mechanism is direct - if Brazilian small businesses weaken, defaults rise faster than the loan book's spread can absorb, and Stone has lived through exactly this before in 2021, when a registry/credit failure forced it to halt lending and absorb heavy losses. Management is tightening underwriting, but the bet that defines the growth story is also the bet that could break it.

Management acknowledged the credit deterioration directly, raising provisions and tightening policy on micro and SME cohorts in Q1 2026 (Q1 2026 call, May 13 2026). The candor is reassuring; the trend is not.

Interest-rate sensitivity (high probability, two-directional). With every 100bps of Selic worth BRL 200-250 million pre-tax, Stone's earnings are heavily geared to Brazilian monetary policy (Q1 2026 call, May 13 2026). Persistently high rates raise funding costs and merchant defaults; the company benefits if rates fall, but it does not control the timing. This makes the earnings trajectory partly a macro call outside management's hands.

Payment share loss and PIX fee compression (high probability, structural drag). Stone lost roughly 2 points of acquiring share year-over-year while Rede and Mercado Pago gained (fintechs.com.br, Jan 2026), and PIX structurally compresses the card-fee pool. The mechanism is slow but persistent: the front-door payments business that recruits merchants is getting less profitable and more contested, which raises the stakes on successfully monetizing banking and credit instead.

Single-country, single-customer-type concentration (moderate probability, high impact if it triggers). Stone is entirely exposed to Brazil and to small merchants. A Brazilian recession, currency shock, or fiscal crisis hits every revenue line - payments volume, deposit growth, and credit quality - simultaneously. There is no geographic diversification to cushion it.

Execution risk through a full leadership transition (event-driven). The CEO, CFO, and COO roles all changed around March 2026: Pedro Zinner stepped down as CEO (becoming Chairman), CFO Mateus Scherer became CEO, treasury head Diego Salgado became CFO, and Sandro Bassili became COO (StoneCo CEO transition disclosure, Jan 7 2026). The succession is internal and continuity-minded, which reduces the risk, but a wholesale C-suite change at the same moment the credit cycle is turning is a genuine execution risk - the new CEO is steering through the hardest part of the credit book's life.

Regulatory change (low-to-moderate probability, potentially severe). The Brazilian central bank can reshape receivables-registry rules, interchange, or PIX economics with limited notice; the 2021 registry overhaul is the precedent for how quickly a rule change can damage Stone.

Section 9: Walk the Talk

The six calls used for this assessment are: Q4 2024 (Mar 18 2025), Q1 2025 (May 8 2025), Q2 2025 (Aug 7 2025), Q3 2025 (Nov 6 2025), Q4 2025 (Mar 2 2026), and Q1 2026 (May 13 2026). The most recent is within 90 days of today.

The story across these six calls is one of management that was credibly ahead of its profitability guidance for most of 2025, then ran into a genuine deceleration and credit deterioration in early 2026 that it had partly warned about. The pattern is "consistently conservative on profitability, but caught out on volume and credit."

Start with Q4 2024 (Mar 18 2025). Management set clear, simplified 2025 guidance: adjusted gross profit above BRL 7.05 billion (14% growth) and adjusted basic EPS above BRL 8.6 (18% growth), plus ambitious 2027 targets (TPV above BRL 670 billion, gross profit above BRL 10.2 billion, EPS above BRL 15). They also guided deposits would keep outgrowing TPV.

"Adjusted basic EPS above BRL 8.6 per share." - 2025 guidance, Q4 2024 call (Mar 18 2025)

By Q1 2025 (May 8 2025), they were comfortably beating that pace: gross profit up 19% (versus 14% guided) and EPS up 36% (versus 18% implied), driven partly by buyback-fueled per-share leverage. CEO Pedro Zinner: "we accelerated year-over-year growth to 36%, significantly above the 18% growth implied in our full-year outlook." That is a kept promise, and then some. They also flagged early that repricing would decelerate volume - an honest pre-warning.

By Q2 2025 (Aug 7 2025), confidence was high enough to raise guidance: EPS growth lifted from 18% to 32%, net income guidance from BRL 2.4 billion to BRL 2.6 billion. But the same call contained the first crack in the narrative - on the 2027 TPV target, Lia Matos conceded "overall market growth has been softer than expected, and that does introduce some risk to our 2027 TPV outlook." So management raised the near-term profit number while quietly hedging the long-term volume number. That is intellectually honest, but it is also the first sign that the volume thesis was slipping.

By Q3 2025 (Nov 6 2025), nine-month adjusted EPS was up 37% year-to-date and cost of risk had come down to 16.8% (within the mid-teens target they had guided in Q2), so the profitability and credit-quality promises were still being kept. Management leaned harder into the "credit is the next earnings driver" message.

Then Q4 2025 (Mar 2 2026) and Q1 2026 (May 13 2026) delivered the reckoning. TPV growth collapsed to ~3% (Q1 2026), ARPAC fell, the active base shrank sequentially, and cost of risk spiked to 21.9% with 90-day NPLs at ~7% - well above the "mid-teens" cost-of-risk world they had described through 2025. The 2027 TPV target they had hedged in Q2 2025 now looks clearly at risk. New CEO Mateus Scherer reiterated 2026 guidance but acknowledged it is back-half-weighted and dependent on execution rather than macro.

The honest scorecard: on the things they could control and had explicitly promised - profitability, EPS growth, capital return, deposit growth, the Linx divestiture, cost discipline - management delivered or over-delivered for five straight quarters. The Linx sale they promised to monetize (Q4 2024) was executed (Q2 2025) and returned to shareholders (Q1 2026), a clean kept promise. Where they were caught out was on payment volume and, more seriously, credit quality - and to their credit, they pre-warned on volume (Q2 2025) before it fully showed up. The credit deterioration in early 2026 is the one place where reality clearly ran ahead of management's prior, more benign cost-of-risk framing. This is a management team that does broadly what it says on profitability and capital allocation, tends conservative on guidance, but is now being tested on the credit book it chose to grow.

Section 10: Shareholder Friendliness Index

Dividends. For essentially its entire public life, StoneCo paid no regular dividend - all capital return ran through buybacks. The only cash dividend in the last three years is the extraordinary US$2.53 per share (about BRL 3.08 billion) special dividend funded by the Linx divestiture proceeds, paid May 4 2026 to holders of record April 24 2026 (StoneCo Form 6-K special dividend). Management explicitly stated this is non-recurring and does not establish an ongoing dividend policy. So the dividend "trend" is: zero, zero, then a one-time return of asset-sale proceeds. There is no payout ratio worth citing because there is no recurring dividend.

Buybacks and dilution. Buybacks are Stone's primary capital-return mechanism and the program has been real and executed, not just authorized. Over the trailing 12 months reported at Q1 2025, Stone repurchased about BRL 2.4 billion of stock (15.1 million shares in Q1 2025 alone), rising to roughly BRL 2.6 billion by Q2 2025 and about BRL 1 billion in the most recent 12 months reported at Q3 2025, at which point management said about 74% of an identified BRL 3 billion excess-capital pool had been returned (Q1 2025 call; Q2 2025 call; Q3 2025 call). The company had repurchased over 29 million shares under a BRL 2 billion authorization by late 2025. In the MoatMap window (the trailing ~90 days), Stone recorded about BRL 0.6 billion of ordinary buybacks in Q1 2026, with a further BRL 1.4 billion committed through year-end 2026 (Q1 2026 call, May 13 2026); the MoatMap database itself shows no separately tabulated repurchase rows in the last ~90 days, consistent with buybacks being executed at the corporate level rather than as individual insider filings. Net effect on share count: the count has been shrinking, against a roughly 279.5 million share base assumed in 2025 guidance, and per-share metrics have benefited materially from the repurchases (management repeatedly cited buybacks as a driver of EPS growth outpacing gross-profit growth).

Verdict: Returns Capital. Stone consistently returns excess capital to shareholders - aggressively via buybacks and, when a one-time windfall arrived, via a special dividend - with the single most important reason being its stated discipline of returning capital whenever it lacks value-accretive reinvestment opportunities.

Section 11: Insider Activities

The listing venue is Nasdaq, so the primary source is SEC Form 4 filings (StoneCo is a foreign private issuer, so insider reporting is lighter than for domestic filers, but officers do file). The MoatMap database block is the spine below; the most recent two weeks were cross-checked and no additional material open-market transactions beyond those listed were identified.

Buys - reading the signal. The standout is the new CFO. Diego Ventura Salgado bought about US$217,000 of stock across two open-market purchases on May 15 2026, just two days after the Q1 2026 print and only weeks after stepping into the CFO role in the March leadership transition - a very bullish signal. This is a meaningful purchase by the executive with the clearest possible view of the credit book and the funding picture, made immediately after a weak quarter when the stock had fallen (his buy price of ~$9.66 is well below the ~$14.33 at which the director was selling in March). A newly installed CFO putting six-figure personal capital into the stock right after a disappointing quarter and right after the credit deterioration was disclosed is the strongest insider signal in this report. It reads as conviction that the market has overreacted to the H1 weakness.

Sells - working out the why. Both sells are by Silvio Jose Morais, a director/officer, in modest size (roughly US$97,000-102,000 each), spaced about three months apart at materially different prices ($14.33 in March, $11.29 in June). The reason is not disclosed in the available filings. The pattern - regular, similar-sized sales by one insider across quarters - is most consistent with routine, pre-planned diversification or scheduled selling rather than a directional view on the business; the amounts are small relative to a senior executive's likely total holdings. Reason not disclosed, but the size and cadence point to housekeeping rather than alarm.

Net assessment. The activity is light and concentrated in two people pulling in opposite directions: one director making small, routine-looking sells, and the new CFO making a clear, sizeable, conviction open-market buy at a depressed price. The single most informative data point is the CFO purchase, because open-market buying by the finance chief immediately after a bad quarter and a credit scare is exactly the kind of signal that is hard to fake. On balance this is a mildly bullish insider picture - the buy carries more signal weight than the routine sells - though the overall volume of insider activity is too small to call it broad-based cluster buying.

Section 12: Scenarios

Bull case. Brazil's rate cycle finally turns and the Selic grinds down through 2026-2027. Every 100bps of cuts drops BRL 200-250 million straight toward pre-tax earnings, small-merchant defaults ease, and the credit book that looked scary in early 2026 starts compounding profitably again - this time underwritten more conservatively and skewed to secured and BNDES-backed lending. The new management team, having pre-positioned for a second-half-2026 reacceleration through churn reduction rather than betting on macro, delivers exactly that: active-client attrition reverses, the heavy-user share keeps climbing past 40%, and deposits keep growing two-to-three times faster than payment volume, funding credit at well below CDI. Payments stops being the story and becomes the customer-acquisition channel it was always meant to be, while banking float and credit interest carry gross-profit growth. The Linx distraction is gone, the balance sheet is clean and over-capitalized, and the company keeps shoveling capital back via buybacks at a depressed share price. The CFO's open-market buy turns out to have been the bottom. In two to three years Stone is a smaller-footprint but far more profitable financial-services company for Brazilian entrepreneurs, with credit as a proven, durable earnings engine.

Base case. Management delivers roughly what it guided: 2026 profitability holds up despite the soft first half, weighted to the back end, even as TPV growth stays stubbornly low and the 2027 TPV target quietly slips away. Credit quality stabilizes after the early-2026 scare as tighter underwriting flows through, with cost of risk settling back toward the high-teens rather than the low-twenties, but it does not return to the benign mid-teens world of 2025. Stone continues to lose a little acquiring share at the margin to Rede and Mercado Pago, but defends its core small-merchant franchise on service and bundling. Deposits and credit do the heavy lifting on gross profit; buybacks keep shrinking the share count and supporting per-share growth. The leadership transition proves to be the smooth internal continuity it was designed to be. The company ends up a steady, capital-returning, single-country financial-services platform - growing, profitable, but no longer the hyper-growth share-taker of its early years, and perpetually hostage to Brazilian rates and the small-business cycle.

Bear case. The early-2026 credit deterioration is not a blip but the front edge of a genuine cycle. Brazilian small businesses keep weakening under high rates, 90-day NPLs push past 7% and keep climbing, and cost of risk stays elevated, forcing Stone to slam the brakes on lending exactly as it did in 2021 - turning the company's chosen growth engine into a drag and torching the gross-profit narrative. Meanwhile PIX continues hollowing out card-acquiring economics, and Rede and Mercado Pago keep taking volume share, so the payments front door both shrinks and gets less profitable, leaving nothing to offset the credit pullback. The all-at-once C-suite change proves costly: a new CEO and CFO managing their first real credit downturn together misjudge provisioning or tighten too late. Deposits, which only grow while merchants stay active and confident, stall as the base churns. Capital return slows as the balance sheet absorbs losses. Stone ends up smaller, lower-growth, and structurally less profitable than the bundle thesis promised - a contested player in a commoditizing, PIX-disrupted market, with its one differentiated bet (credit) having blown up twice in five years.