Rebuilding the financial system around AI, not adding AI to it
In the first quarter of 2026, Nubank delivered a 41 percent rise in net profit — a figure that, in most seasons, would mark a triumph. Yet markets are rarely moved by what is; they are moved by what was expected. A $109 million shortfall against analyst forecasts was enough to erase nearly a tenth of the company's market value in a single after-hours session, reminding us that growth, unaccompanied by certainty, can still unsettle. The episode captures a broader tension in modern finance: the distance between a company's genuine progress and the story the market has already written for it.
- A 41% profit surge to $871M sounds like victory — until you learn the market had penciled in $980M, and the stock fell 9% before the night was over.
- Delinquency rates on loans 15 to 90 days past due jumped from 4.1% to 5.0% in a single quarter, rattling investors already watching a credit portfolio expanding at breakneck speed.
- The CFO explained that aggressive lending forced early provisioning — a strategic choice that protected long-term health but quietly strangled the bottom line in the short term.
- Mexico crossed into operational breakeven for the first time, 135 million customers were on the books, and ROE outpaced rival Itaú — signals of momentum that the miss narrative threatened to drown out.
- Founder David Vélez pushed back against fears of AI disruption by revealing Nubank is not adapting to AI — it is rebuilding its entire infrastructure around it, with proprietary NuFormer models already live in production.
- U.S. expansion is being deliberately throttled, capped at under 100 basis points of efficiency ratio through 2027, as leadership bets that disciplined AI transformation outweighs the appeal of geographic reach.
Nubank's first quarter of 2026 arrived with numbers that told two stories at once. Net profit reached $871 million, up 41 percent from a year earlier, carried by a credit portfolio that had grown 40 percent to $37.2 billion and total revenues that hit a record $5.3 billion. Return on equity climbed to 29 percent, outpacing larger rival Itaú. By most measures, the company was accelerating.
But analysts had expected $980 million. That $109 million gap proved costly — the stock fell more than 9 percent in after-hours trading in New York, a swift reminder that markets price expectations as much as outcomes.
Behind the miss was a deliberate strategic move. CFO Guilherme Lago explained that the pace of credit expansion forced the company to build provisions earlier than anticipated, compressing margins. Delinquency on loans 15 to 90 days past due rose from 4.1 to 5.0 percent — attributed partly to seasonal patterns and partly to a conscious push into higher-risk lending segments where Nubank's improved risk models gave it confidence. Loans delinquent beyond 90 days edged down slightly, a modest counterweight to the concern.
The company ended March with 135.2 million customers globally. Mexico, now home to more than 15 million of them, reached operational breakeven for the first time — a quiet milestone amid the louder noise of the earnings miss.
Founder and CEO David Vélez used the moment to address a deeper investor anxiety: whether artificial intelligence would erode Nubank's edge. His answer was pointed. The company is not grafting AI onto existing systems — it is constructing its infrastructure around AI from the start. Its proprietary NuFormer model suite is already live in production across credit cards and unsecured lending in Brazil and Mexico. Meanwhile, U.S. expansion is being kept deliberately lean, capped at under 100 basis points of the efficiency ratio through 2027, as leadership signals that profitable transformation takes precedence over territorial ambition.
Nubank posted a net profit of $871 million in the first quarter of 2026, a 41 percent jump from the same period a year earlier. The earnings announcement came Thursday, and on the surface, the numbers looked solid. But the market saw something else: a miss. Analysts gathered by LSEG had expected $980 million. The gap—$109 million short—was enough to send the stock plummeting more than 9 percent in after-hours trading in New York.
The profit growth came as the company's credit portfolio expanded at a remarkable clip, climbing 40 percent year-over-year to reach $37.2 billion. That aggressive lending pushed total revenues up 42 percent to a record $5.3 billion, with net interest income hitting a new high of $3.25 billion. The return on equity climbed to 29 percent, up two percentage points from the prior quarter, and still outpacing larger rival Itaú, which reported a 24 percent ROE. On paper, these were the metrics of a company firing on all cylinders.
But the rapid credit expansion came with a cost. Guilherme Lago, the company's chief financial officer, explained to Reuters that the accelerated lending forced Nubank to set aside provisions earlier than planned, dampening the bottom line. More troubling for investors was the deterioration in asset quality. Delinquency rates for loans 15 to 90 days past due climbed to 5.0 percent from 4.1 percent in the previous quarter. Lago attributed the rise partly to seasonal patterns typical of the first quarter and partly to deliberate moves into higher-risk lending segments where improved risk models gave the company confidence to extend credit at attractive returns. Delinquency beyond 90 days ticked down slightly, from 6.6 percent to 6.5 percent, offering a small counterweight to the concern.
The company's adjusted net interest margin compressed by one percentage point to 9.5 percent during the quarter, though it remained up 0.2 points for the year. The efficiency ratio improved to 17.6 percent from 19.9 percent the quarter before, buoyed by the growing loan book. By the end of March, Nubank had amassed 135.2 million customers globally, including more than 15 million in Mexico, where the company had just reached operational breakeven for the first time.
Investor anxiety extended beyond the earnings numbers themselves. The stock has fallen 24 percent over the year, weighed down partly by questions about how artificial intelligence might reshape Nubank's business model. David Vélez, the company's founder and chief executive, addressed the concern directly. He said the company is not simply layering AI onto its existing financial infrastructure—it is rebuilding that infrastructure around AI from the ground up. Nubank's proprietary foundation model suite, called NuFormer, is already operating in production for credit cards in Brazil and Mexico, and for unsecured lending in Brazil. The company is proceeding with caution on its U.S. expansion, limiting investment there to less than 100 basis points of its consolidated efficiency ratio in both 2026 and 2027, a signal that management is prioritizing profitability and AI transformation over geographic reach in the near term.
Notable Quotes
We are not adding AI to the financial system; we are rebuilding the financial system around AI. NuFormer, our proprietary foundation model suite, is operating today for credit cards in Brazil and Mexico, and for unsecured lending in Brazil.— David Vélez, founder and CEO of Nubank
The profit was impacted by accelerated credit growth, which required the company to recognize provisions earlier than planned.— Guilherme Lago, chief financial officer, to Reuters
The Hearth Conversation Another angle on the story
The profit grew 41 percent, but the stock fell 9 percent. How do you square that?
Because the market was pricing in even more. Analysts expected $980 million; Nubank delivered $871 million. That $109 million gap is what moved the needle.
But why would the company miss by that much if credit was growing so fast?
The speed of that growth is exactly the problem. When you're lending aggressively, you have to reserve for losses sooner. The company was forced to set aside provisions early, which ate into profit.
And the delinquency numbers—are those a sign the lending got reckless?
Not necessarily reckless. The CFO says some of it is seasonal, and some is intentional—they moved into higher-risk segments because their risk models improved. But investors are spooked by the macro environment. When the economy softens, delinquency tends to rise, and that's what they're watching.
So what's the real story here—is this a company hitting a wall, or just a quarter that disappointed?
It's a company navigating a tighter spot than it was a year ago. The fundamentals are still strong, but margins are compressing, credit quality is deteriorating, and the market is nervous about AI disruption. They're being cautious on the U.S., focused on AI, and hoping the macro picture stabilizes.