Nu Holdings: $1B Profit and U.S. Expansion Make It a Buy

Nu Holdings, the Latin American digital banking leader, reported a milestone in the second quarter: net income surpassed $1 billion for the first time, reaching $1.1 billion. That's a 49% year-over-year increase on a currency-neutral basis, driven by 39% revenue growth. The company now serves over 140 million customers, primarily in Brazil, Mexico, and Colombia.

Nu's business model is firing on all cylinders. It costs just $1 per month to serve each customer, while generating $17.10 in monthly revenue per user. These stellar unit economics support strong profitability and customer retention, as users become more entrenched with additional products.

On September 10, Nu launched its first U.S. offerings through a partnership with Lead Bank, including a high-yield deposit account, credit card, and multi-currency digital account. The company received conditional approval for a national bank charter in January, expected in 2027.

However, U.S. expansion will take time. CFO Rob Livingston noted that building credit and risk models for the U.S. market will take 12 to 30 months. For now, Nu's financial results will continue to be driven by Latin America, where it sees the biggest opportunity.

Analysts are highly optimistic, with consensus estimates projecting $1.43 in earnings per share by 2028, 147% higher than 2025. But as a lender, Nu faces credit risk tied to macroeconomic conditions, and the U.S. market is hyper-competitive with established banks and digital players.

The $1 billion quarterly profit milestone demonstrates Nu's ability to scale profitably. Its low-cost, high-revenue-per-user model creates a competitive moat and strong operating leverage. As customers adopt more products, switching costs increase, further boosting monetization and loyalty.

The U.S. launch, while small initially, opens a massive new market and diversifies Nu's geographic footprint. It also showcases the company's ambition to become a global fintech player. However, near-term contributions will be minimal, and execution risks are high given intense competition.

Nu's stock trades about 20% below its record high, presenting a potential buying opportunity for long-term investors. The analyst consensus points to robust earnings growth, but credit risk remains a key concern. Investors should monitor Nu's asset quality and provisioning trends, especially in Brazil, where economic conditions can impact loan performance.

Overall, Nu's strong fundamentals and growth prospects make it an attractive fintech stock, but volatility may persist as it invests in U.S. expansion.