Nu Holdings Added Millions of Customers Again Last Quarter. Is the Stock Priced for That Growth?

Nu Holdings (NU -2.65%) is a leading digital banking platform in Latin America. Although it sports a market capitalization of $71 billion, there’s a good chance that U.S. investors haven’t heard of the company. But it’s a smart move to get familiar with Nu, as it has been a major disruptor in a big market.

This business is operating at an impressive level. It added 4 million customers last quarter, bringing the total to 139 million users, with 118 million in Brazil, its home market. Is the fintech stock priced for this growth?

Nu’s trajectory is characterized by rapid revenue and profit gains

Nu’s most recent financial results gave investors plenty of reasons to be bullish. During the second quarter, the company reported revenue of $5.9 billion, up 39% year over year on a currency-neutral basis. A higher customer count is the main driver of top-line gains.

It’s important to pay attention to the unit economics here. Nu’s monthly average revenue per active customer (ARPAC) increased 22% year over year to $17.10 in Q2. User growth will naturally decelerate as Nu scales, but it’s extremely encouraging to see improved monetization from the existing customer base, likely due to cross-selling.

There might be no more powerful catalyst lifting this business than the fact that Latin America has a large unbanked and underbanked population. And Nu is capturing the opportunity. For instance, 35% of its customers in Mexico have never had a bank account. And 52% of customers never had a line of credit. This is what disruption looks like.

Nu’s deposit base has also exploded, going from $18 billion in Q2 2023 to $45.3 billion today. This provides the funding to power it lending business. Deposits often are sticky, supported by high switching costs for customers.

Profitability is robust. Net income surged 49% to nearly $1.1 billion, exceeding $1 billion for the first time ever. And the net profit margin was 18.1%, better than the 16.4% posted in the second quarter of 2025.

Going back to the unit economics, it costs Nu on average $1 per month to serve each customer. That’s only 5.8% of the ARPAC. What’s more, the efficiency ratio, a bank’s measure of operating expenses relative to net interest income and fee income, was 20% in the second quarter, down from 50% four years ago. A lower number is better, demonstrating improving operating leverage.

Shares aren’t trading at an expensive valuation

As of Aug. 18, Nu shares trade 23% below their peak, a high-water mark established in January. They have fallen 14% just this year. However, the stock has risen by more than 80% during the past 36 months, bypassing the S&P 500 index over the same period.

It still trades at a compelling valuation. Investors can buy Nu at a forward price-to-earnings ratio of about 20. The business is growing rapidly, but it doesn’t appear that the market is fully appreciating the growth story. This is a compelling setup for prospective investors.

There are risks to be aware of, though. Operating in Latin America, a developing region with volatile currencies, commodity-based economies, and unstable political and regulatory backdrops, introduces greater uncertainty. This is particularly true for a lender. Macroeconomic conditions in Latin America often are less stable than in the U.S.

Furthermore, Nu’s $39 billion credit portfolio deserves some attention. Of this figure, 66% is credit cards, and 26% comes from unsecured loans, two product lines with a higher-risk profile. Non-performing loans, those that were 90 days or more past due, stood at 6.9% as of June 30. This metric has steadily increased during the past few years, but management doesn’t appear too concerned.

Still, I believe it’s worth considering Nu as an investment. Strong growth and a low starting valuation can result in winning returns.