Breaking Down StoneCo Ltd. (STNE) Financial Health: Key Insights for Investors

You're looking at StoneCo Ltd. (STNE) and wondering if the recent earnings momentum is a sustainable trend or just a short-term blip, and honestly, that's the right question to ask a fintech in a volatile market.

The company defintely showed its focus on profitability is paying off, with Q3 2025 GAAP Earnings Per Share (EPS) hitting $0.48, a solid beat over the $0.41 consensus, which led management to raise its full-year 2025 adjusted basic EPS guidance to more than $1.74. But, you have to balance that against the Total Payment Volume (TPV) growth slowing to about 8% year-over-year in Q3, a clear trade-off from their repricing strategy, even as the active client base for Micro and Small- and Medium Businesses (MSMB) grew by 17% to nearly 4.58 million. We need to dive into what this TTM revenue of $2.37 billion really hides about their financial health, especially with the average analyst price target now sitting at $20.27 per share, because a strong bottom line doesn't automatically fix all the structural risks.

Revenue Analysis

You're looking for a clear picture of how StoneCo Ltd. (STNE) actually makes its money, especially after all the strategic pivots. The direct takeaway is that the company is successfully prioritizing profitability over raw volume, with its Financial Services segment driving the top-line growth through effective repricing, even as the shift to instant payments like PIX creates a near-term headwind to traditional card transaction revenue.

For the first three quarters of the 2025 fiscal year, StoneCo Ltd. has demonstrated solid growth, with Q3 2025 revenue reaching approximately R$3.57 billion (around $667.2 million), marking a year-over-year increase of about 17%. This is a strong indicator, considering the company's strategic decision to focus on higher-margin clients and services. The core of their business is split into two main segments.

• Financial Services: This is the powerhouse, focused on payment solutions, digital banking, and credit for Micro, Small, and Medium Businesses (MSMBs).
• Software: This segment provides Point of Sale (POS), Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and e-commerce tools.

The Financial Services segment is defintely the primary revenue engine and the key growth driver in 2025. Here's the quick math: in the first quarter of 2025, Financial Services segment revenues grew a robust 20% year-over-year, accelerating from the prior quarter. By comparison, the Software segment revenue grew at a solid, but slower, 11% year-over-year rate. The strategy is clear: cross-sell financial services-like banking and credit-to the existing software client base to deepen monetization and increase the average revenue per user (ARPU).

The year-over-year revenue growth rate has been healthy, though analyst forecasts for the full 2025 fiscal year vary, ranging from a conservative 6.1% to a more optimistic 9.8%. The actual reported quarterly growth rates are much higher, with Q1 2025 total revenue and income up 19% year-over-year, reaching R$3,669.9 million. This shows management is executing well, but the market is still cautious about the full-year trajectory. One key action to watch is the company's repricing initiatives, which are directly responsible for the segment's accelerated growth in Q1 2025.

What this estimate hides is a significant shift in the revenue mix and funding structure. StoneCo Ltd. is actively managing its funding costs through a cash sweep strategy, converting client retail deposits into on-platform time deposits. For example, in Q1 2025, R$6.3 billion out of R$8.3 billion in retail deposits were moved into time deposits. This strategy is brilliant for profitability-it lowers financial expenses-but it also means the company stops recognizing the associated floating revenue, creating a drag on the top-line revenue number that is more than offset by the improvement in the bottom line. Also, the company has been streamlining its focus by divesting non-core software assets, such as selling Linx to Totus and SimpliVet to PetLove, which further focuses revenue on core payments, banking, and credit.

To fully grasp the impact of these changes on the company's long-term value, you should be Exploring StoneCo Ltd. (STNE) Investor Profile: Who's Buying and Why?

Here is a snapshot of the segment growth, showing where the real momentum is:

Profitability Metrics

You want to know if StoneCo Ltd. (STNE) is a profitable machine or just a high-volume business. The short answer is they've successfully pivoted back to strong, expanding profitability in 2025, but you need to watch the margin mix. The company's strategic focus on client monetization and cost control is paying off, translating into double-digit growth in adjusted profit.

For the third quarter of 2025 (Q3 2025), StoneCo Ltd. reported total revenue and income of R$3,566.8 million, marking a solid 16.5% year-over-year (YoY) increase. This top-line growth is important, but the real story is how much of that revenue they keep.

Gross, Operating, and Net Margins

The core profitability metrics for the quarter ending September 30, 2025, show a healthy picture. Your first look should be at the gross margin, which is how efficiently they deliver their service before overhead. StoneCo Ltd.'s Gross Margin for Q3 2025 stood at a strong 75.91%.

However, the Operating Margin, which factors in administrative and sales costs, is lower but shows a massive recovery. The Trailing Twelve Months (TTM) Operating Margin, as of November 2025, was 6.72%, a huge turnaround from the -7.99% reported at the end of 2024. That's a clear sign of improved operational efficiency and cost discipline.

Finally, the bottom line: Net Profit Margin. For the most recently reported quarter ending September 30, 2025, the Net Profit Margin was 19.82%. This is a strong result, particularly when you consider the adjusted net income from continuing and discontinued operations reached R$689.9 million, a 17.6% YoY increase.

Trends and Operational Efficiency

StoneCo Ltd. has been on a deliberate, multi-year path to prioritize profit over growth at any cost, and the trends confirm this is working. While the TTM Gross Margin of 75.13% (ending June 2025) is high, the margin has seen a long-term decline of about -1.5% per year, which is typical as a company scales and competition heats up. The company is managing this pressure by being defintely smart about costs.

Operational efficiency improvements are the key driver for the net profit surge.

• Funding Costs: They are actively shifting funding toward client deposits, which is a cheaper source of capital than market borrowing, directly lowering financial expenses.
• Pricing: Effective repricing initiatives across their client base drove a 19% YoY increase in gross profits in Q1 2025, outpacing their full-year guidance.
• Administrative Control: They've reported improved efficiency in administrative expenses, which helped accelerate operating income growth.

The Trailing Twelve Months (TTM) Gross Profit, ending September 30, 2025, reached $1.906 billion, up 2.84% YoY. This growth is slower than in prior years, but it's a healthier growth built on better margins, not just volume.

Industry Comparison and Outlook

Compared to the competition, StoneCo Ltd.'s profitability is competitive and, in some areas, superior. The company's Gross Margin of 75.91% is well above the 40% threshold that Warren Buffett suggests indicates a durable competitive advantage in software and FinTech.

For 2025, StoneCo Ltd. expects its adjusted gross profit to grow by 14% and adjusted earnings per share (EPS) to grow by 18% YoY. This is a strong forecast, especially when you look at a competitor like PagSeguro (PAGS), which is projecting a lower gross profit growth between 7% and 11% and EPS growth of 11-15% for the same period. StoneCo Ltd. is clearly outperforming its rival's guidance. Plus, the company's Consolidated Return on Equity (ROE) expanded to 24% in Q3 2025, a strong sign of capital efficiency.

Here's the quick math: They are growing profit faster than a key competitor while maintaining a high gross margin, and they are doing it by strategically managing their cost of funding. Now that you have a clear picture of their profitability, you can dig deeper into their business model. Exploring StoneCo Ltd. (STNE) Investor Profile: Who's Buying and Why?

Next Step: Finance should model the impact of a 100 basis point drop in the Brazilian CDI rate on pre-tax earnings, given the management's guidance of a potential R$200-250 million boost.

Debt vs. Equity Structure

When you look at StoneCo Ltd. (STNE), the first thing to understand is how they finance their rapid growth. They operate in a high-interest rate environment in Brazil, which makes the balance between debt and equity financing a critical indicator of risk and efficiency. The takeaway is that StoneCo is using a healthy, yet elevated, level of financial leverage (debt) to fuel its expansion, a strategy that pays off when their return on equity (ROE) remains strong, which it has been.

As of the third quarter of 2025, StoneCo's debt structure shows a calculated reliance on borrowed capital. Their total debt, which includes both long-term and short-term obligations, stood at approximately $3,012 million. This is a substantial figure, but it's the ratio to equity that tells the real story.

Here's the quick math on their leverage, based on the September 2025 financials:

Their Debt-to-Equity (D/E) ratio for the quarter ending September 2025 was approximately 1.38 (Total Debt / Total Stockholders Equity). For a high-growth FinTech company in a capital-intensive market like Brazil, a D/E ratio in the 1.0 to 1.5 range is defintely manageable and often strategic. It means for every dollar of shareholder equity, the company has taken on about $1.38 in debt. This is higher than a purely asset-light software company, but for a business that also provides credit and processes payments, it's a sign of aggressive, but controlled, growth financing.

The company doesn't just rely on traditional loans. They actively use Mission Statement, Vision, & Core Values of StoneCo Ltd. (STNE). to guide their capital allocation. StoneCo has been involved in securitization transactions-packaging future receivables into tradable securities-which is a key way payment processors manage liquidity and capital structure. Also, a significant part of their funding strategy involves the strategic use of client deposits, which helps improve efficiency by lowering their average funding spreads.

On the equity side, StoneCo has been diligent about returning capital, indicating a mature capital allocation policy. They maintained a disciplined approach to share buybacks, having returned BRL 2.8 billion to shareholders in the 12 months leading up to Q3 2025. This follows the announcement of a new R$ 2 billion share repurchase program in November 2024. This action signals confidence that the stock is undervalued and is a direct, tangible way to reward shareholders.

• D/E Ratio of 1.38 signals controlled financial leverage.
• Debt is balanced with BRL 2.8 billion in recent share buybacks.
• Securitization transactions are a core part of their liquidity strategy.

The balancing act here is clear: StoneCo uses debt to seize market opportunities in a high-growth sector, but simultaneously uses equity-friendly actions like buybacks to manage their capital structure and signal financial strength.

Liquidity and Solvency

You need to know if StoneCo Ltd. (STNE) has enough short-term cash to cover its immediate bills, especially as they continue a rapid expansion into credit and banking. The short answer is yes, StoneCo Ltd. maintains a healthy liquidity position, but you need to pay close attention to the negative operating cash flow trend in the 2025 fiscal year.

The company's ability to cover its short-term debt is strong, which is exactly what you want to see in a high-growth fintech. Their current ratio, which measures current assets against current liabilities, sits at a solid 1.43 as of the most recent quarter. This means StoneCo Ltd. has R$1.43 in current assets for every R$1.00 of current liabilities. The quick ratio (or acid-test ratio), which excludes less-liquid assets like inventory, is also robust at 1.20. Anything above 1.0 suggests immediate liquidity is not a concern.

Here's the quick math on their working capital (Current Assets minus Current Liabilities) based on the latest figures, which shows a significant buffer:

• Current Assets: R$52.9 billion
• Current Liabilities: R$37.1 billion
• Working Capital: R$15.8 billion (BRL)

This positive working capital of over R$15 billion confirms the company has a substantial margin of safety for its near-term obligations, defintely a green flag for solvency. The increase in client deposits, which reached R$9 billion in Q3 2025, also strengthens the balance sheet by providing a stable, low-cost funding source for their operations and credit portfolio expansion.

The cash flow statement, however, tells a more nuanced story about where this liquidity is coming from. While the balance sheet is strong, the trailing twelve months (TTM) cash flow from operations (OCF) is negative, estimated at R$-1.05 billion for the 2025 fiscal year. This means the core business, on a pure cash basis, is not yet funding itself, a common, though still risky, trait for growth companies.

The cash flow trends break down like this:

The critical strength is the company's Adjusted Net Cash Position, which stood at R$3.5 billion at the end of Q3 2025. This net cash position provides a significant cushion against the negative operating cash flow, allowing them to continue investing in their credit portfolio, which grew 27% sequentially to R$2.3 billion in Q3 2025. The liquidity is there, but it's being managed aggressively to fuel growth, not generated purely from operations. You should keep a close eye on the OCF turning positive over the next few quarters. To understand who is betting on this growth story, you can read more here: Exploring StoneCo Ltd. (STNE) Investor Profile: Who's Buying and Why?

Valuation Analysis

You're looking at StoneCo Ltd. (STNE) and asking the right question: Is this stock a bargain or a trap? Based on the latest fiscal year data through November 2025, the short answer is that StoneCo looks undervalued compared to its growth trajectory, but you have to be comfortable with the volatility.

The company's valuation metrics suggest a compelling entry point, especially when you factor in its recent push for profitability. Your traditional valuation multiples-Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA)-tell a story of a business that has successfully navigated a challenging macroeconomic environment and is now being rewarded with a lower multiple than you might expect for a high-growth fintech.

• P/E Ratio (Trailing Twelve Months): A TTM P/E of just 10.42 as of November 2025 is very low for a growth stock in the financial technology (fintech) space.
• P/B Ratio: The Price-to-Book ratio sits at 1.75, which is reasonable and suggests the market isn't wildly overpaying for the company's net assets.
• EV/EBITDA: The Enterprise Value-to-EBITDA ratio is a lean 4.29, indicating the business is generating strong operating cash flow relative to its total value.

Here's the quick math: A Forward P/E of 6.93 suggests analysts expect a significant jump in earnings per share (EPS) over the next year, which is a classic signal of potential undervaluation if the company hits those targets.

Stock Price and Market Sentiment

The stock price trend over the last 12 months shows significant recovery and volatility, which is typical for a Brazilian-focused fintech. The stock has seen a 52-week low of $7.72 and a high of $19.95, demonstrating a massive swing in sentiment. Still, the stock price has increased by a strong +62.46% in the last 52 weeks, closing recently around $14.68 as of November 20, 2025. That's a huge move, but it still puts the current price closer to the middle of its recent range.

What this estimate hides is the sharp drop after the Q3 2025 earnings release, which is a reminder that the market is highly sensitive to any signs of slowing growth or rising credit risk. You defintely need to keep an eye on their credit portfolio, as outlined in their Mission Statement, Vision, & Core Values of StoneCo Ltd. (STNE).

Analyst Consensus and Income View

From an income perspective, StoneCo is a growth stock, not an income stock. The dividend yield is 0.00% with a payout ratio of 0.00% because the company does not pay a dividend. They are reinvesting every dollar back into the business to fuel expansion, which is what you want to see from a high-growth company.

The Wall Street consensus leans positive, with a 'Moderate Buy' rating. Out of 11 analysts, 7 rate it a Buy and 1 a Strong Buy, versus only 2 Sells and 1 Hold. The average 12-month price target is $17.21, which suggests a forecasted upside from the current price.

The numbers suggest the stock has strong fundamental support and a clear path to higher earnings, but the stock price volatility means you need to be prepared for near-term swings. Your next step should be to look at the Q3 2025 earnings call transcript to understand the specific credit and macroeconomic risks that caused the recent price drop.

Risk Factors

You're looking at StoneCo Ltd. (STNE) because the growth story is compelling, but you must anchor that optimism in the real risks. Honestly, the biggest challenge for StoneCo is the constant tug-of-war between its operational execution and the volatile Brazilian macro environment. They are performing well, but the external pressures are defintely real.

The core risk is financial leverage and the cost of capital. While the company is profitable, its Q4 2024 debt-to-equity ratio stood at a high 109.51%. Plus, the high interest rate environment in Brazil-the basic interest rate has been a factor-drives up their financial expenses. In Q3 2025, StoneCo's financial expenses increased by 28% year-over-year, representing a significant 280 basis points increase as a percentage of revenues. That's a direct hit to the bottom line.

Here's the quick math: higher interest rates make their funding more expensive, even with their strong deposit base. This affects their ability to lend and their overall margin.

External and Operational Headwinds

StoneCo operates in an intensely competitive fintech arena. They face off against giants and nimble players like PagSeguro Digital (PAGS). This competition pressures their pricing, which, combined with their strategy to prioritize profitability, leads to a slower growth rate in Total Payment Volume (TPV). For instance, in Q3 2025, TPV growth was around 8% year-over-year, and while MSMB TPV was stronger at 12% year-over-year, a sustained slowdown is a clear risk.

Another major internal risk is credit quality. The company has been expanding its credit portfolio, which reached BRL 2.3 billion in Q3 2025, a 27% sequential jump. But with that expansion comes risk. You need to watch the Non-Performing Loan (NPL) ratios closely; in Q3 2025, NPLs over 90 days were 5.03%, and NPLs 15 to 90 days reached 3.12%. That's a number that can sour a growth story fast.

• Competition: Pressures pricing and TPV growth.
• Macro: High interest rates increase funding costs.
• Credit: NPLs over 90 days hit 5.03% in Q3 2025.

Mitigation and Forward Action

Management is not sitting still; they are executing a clear strategy to counter these risks. They are prioritizing profitability over sheer volume growth, and the results are showing in the margins. Adjusted gross profit grew 15.2% year-to-date in Q3 2025. This is a deliberate trade-off: less TPV growth for better profit quality.

To reduce funding costs, they implemented a cash sweep plan, moving retail deposits into on-platform time deposits. In Q1 2025, they moved R$6.3 billion out of R$8.3 billion in retail deposits this way. That's smart treasury management.

Plus, they are focused on capital efficiency, returning $1 billion to shareholders via buybacks over the last twelve months. They also raised their 2025 adjusted basic EPS guidance to more than R$9.6 ($1.74), up from R$8.6, which shows confidence in their current path. You can read more about their long-term vision here: Mission Statement, Vision, & Core Values of StoneCo Ltd. (STNE).

The table below summarizes the key financial risk metrics and the corresponding mitigation actions for 2025:

Growth Opportunities

The core takeaway for StoneCo Ltd. (STNE) is simple: the company is shedding non-core assets to double down on its profitable payments and financial services ecosystem in Brazil. Analysts are forecasting 2025 revenues of roughly R$15.6 billion, which is a solid 17% increase over the prior year, and statutory earnings per share (EPS) are expected to hit around R$7.56.

This isn't about chasing volume at any cost anymore; it's a clear shift to prioritizing profitability over transaction volume (Total Payment Volume or TPV). The company's updated 2025 guidance reflects this, projecting adjusted EPS growth between 18% and as high as 32%, a defintely bullish sign of margin expansion.

• Focus on core payments, banking, and credit.
• Divestitures unlocked over 25% of market cap.
• EPS growth forecast is up to 32% for 2025.

Strategic Focus and Capital Discipline

You've seen StoneCo make some tough, but smart, choices lately. The strategic divestitures of non-core software assets-like selling Linx to TOTVS and SimplesVet to PetLove-are the clearest signal of this focus. These sales generated cash and allowed management to concentrate resources on their integrated platform for micro, small, and medium-sized businesses (MSMBs). This platform, which combines payments, banking, and credit, is the company's key competitive advantage.

Also, the firm is getting smarter about its funding costs. They executed a cash sweep plan, converting a significant portion of retail deposits into on-platform time deposits to reduce financial expenses. In the first quarter of 2025 alone, R$6.3 billion of the total R$8.3 billion in retail deposits were moved, strengthening their low-cost funding base. Plus, the company has been active with share buybacks, reducing the outstanding share count by 39.2 million shares, which naturally boosts EPS for existing shareholders.

Product Innovation and Ecosystem Expansion

Growth isn't just about cutting costs; it's about building a stickier product. StoneCo is aggressively expanding its financial services segment, which is driving a lot of the revenue growth. The active client base grew by a healthy 17% year-over-year in Q1 2025, largely due to successful cross-selling.

Their ability to innovate locally is a huge advantage. For example, the integration of Pix QR Code technology into their POS systems has been a major tailwind, with Pix transactions growing by an impressive +95% year-over-year. They are also building a robust credit portfolio, which expanded to R$1.4 billion, offering working capital loans and new microcredit solutions to their merchant base. This is how they turn a simple payment client into a full-service banking client. You can read more about the investor base driving this growth here: Exploring StoneCo Ltd. (STNE) Investor Profile: Who's Buying and Why?