A Wealth Platform Just Proved It’s Not a One-Trick Broker: So Why Is It Still Priced Like One?

The quarter just landed, the growth numbers are hard to argue with, and the market still hasn't updated its notes. Here's the gap nobody's pricing in.

XP Inc. (NASDAQ: XP) posted gross revenue growth in the high single digits and profit growth that outran it, which is exactly the combination you want to see.

The company grew earnings before taxes considerably faster than revenue, and margins expanded on both a quarterly and yearly basis. That’s not an accident. It’s what happens when a business adds new profit centers instead of squeezing the old one harder.

Client assets kept climbing at a double-digit clip, net inflows stayed strong, and the advisor network kept growing. None of that is exciting on its own.

Together, it tells you the core engine (people bringing XP their money) hasn’t slowed down even while the company bolts new businesses onto the platform.

What management is signaling next

CEO Thiago Maffra didn’t hedge on the target: double-digit growth for the year, leaning on a more diversified revenue base rather than any single business line carrying the load.

He also introduced the company’s new CFO on the call, a routine transition but worth knowing since finance leadership changes tend to draw extra scrutiny for a couple of quarters.

Management flagged that costs will tick up in the back half of the year on seasonal factors, normal stuff.

The more interesting signal is what they’re spending on: artificial intelligence, cloud infrastructure, and two new product launches (a small-business banking platform and an AI-powered advisor) both landing shortly after the quarter closed.

That’s a company investing in growth, not managing for a soft landing.

Brokerage isn’t the whole business anymore

XP built its name as an investment platform, and that’s still the anchor. But look at where growth actually came from this quarter: the wholesale banking business, which serves corporate clients with derivatives, credit, and foreign exchange, grew more than 30%, and the corporate segment alone more than doubled year over year.

That’s the part sell-side coverage keeps underweighting. When analysts frame XP purely as a brokerage tied to trading volumes, they’re describing a company that ceased to exist a few years ago.

The current version has banking, insurance, retirement, credit cards, and a fast-growing corporate lending arm layered on top of the original wealth platform.

The new stuff is scaling, not experimenting

A small- and medium-business platform (cards, payment acquiring, and collateralized credit) just went live. An AI-powered financial advisor aimed at digital retail clients launched right after quarter-end.

These aren’t science projects. Management is explicit that the SME segment is where the next leg of growth comes from, since those business owners have been underserved by traditional banks.

You’re watching a company convert a single-product user base into a full financial relationship, one product launch at a time.

That’s the kind of expansion that either works and re-rates the multiple, or doesn’t, and you find out fast. So far, it’s working.

Buybacks are doing real work here

XP is sitting on more capital than it needs by its own admission, and management is returning it aggressively. The company has been executing back-to-back buyback programs and paying dividends, with total 2026 capital distributions already running into the billions of reais.

It’s also canceling a meaningful chunk of treasury shares outright, which permanently shrinks the share count instead of just parking stock on the balance sheet.

That matters because per-share earnings grew noticeably faster than net income itself this quarter. The buyback isn’t cosmetic. It’s compounding shareholder value on top of actual business growth.

The capital ratio has room to give more

XP’s core capital ratio sits well above its own target range, and management has said plainly they’re comfortable bringing it down through continued distributions. Translation: the buybacks and dividends aren’t a one-quarter story.

There’s a structural reason to expect more capital coming back to shareholders as the ratio normalizes toward target.

Profitability held up despite real headwinds

This wasn’t a clean quarter. Wider credit spreads created mark-to-market losses on XP’s trading book, and a slump in debt issuance activity hit the segment that helps companies raise money in capital markets.

Management was upfront that, stripping out those effects, underlying growth would have looked meaningfully stronger.

The fact that margins still expanded through that noise says something about the underlying business. XP didn’t need to cut costs aggressively to make the math work. Efficiency held roughly flat even as headcount and technology spending both increased.

The one lingering soft spot

Fixed income products, historically a strong fee generator, have shifted hard toward lower-margin, short-duration instruments.

Clients are parking money in daily-liquidity products instead of the higher-fee options that used to dominate that shelf.

Management says this trend may be stabilizing, but it’s not resolved yet, and it’s worth watching as the one part of the business still working against the margin story instead of for it.

Adjusted per-share earnings grew noticeably faster than net income itself this quarter. That gap is real, but it’s not free money. It’s the buyback program doing its job: fewer shares outstanding means the same profit gets divided into a bigger number per share.

That’s not a red flag. Buying back stock at a discounted valuation while the business keeps growing is a genuinely good use of capital. But you shouldn’t read the per-share growth rate as a clean proxy for how fast the underlying business is actually expanding.

The business itself is growing solidly. The per-share number is growing faster because management is shrinking the share count on top of that. Both things are true, and only one of them tells you how the operations are actually performing.

Currency and macro exposure cut both ways. XP’s earnings are generated in Brazilian reais and reported in dollars, so currency swings can distort the numbers you see even when the underlying business is fine.

A sharp move against XP’s home currency would make a solid quarter look mediocre on paper.

Rate cycles determine where client money flows. When local interest rates are high, client cash tends to sit in safe, low-fee instruments instead of moving into the higher-margin products that actually drive XP’s revenue.

As that cycle shifts, it directly affects which products clients are buying, and it’s already visible in this quarter’s fixed-income mix.

Credit spread volatility isn’t fully behind them. XP still carries a trading book that’s exposed to swings in corporate credit spreads. Management has trimmed the size of that book, which limits the downside compared to prior quarters, but it hasn’t eliminated it.

Competition is not standing still. XP operates in a crowded field, from digital-first fintech challengers to established banks pushing further into wealth management. XP’s scale and advisor network are real advantages, but they’re not moats that can’t be tested.

This is a business quietly doing the hard part right: diversifying revenue, expanding margins, and returning capital, all at the same time, while the market keeps pricing it like nothing has changed since it was a single-product brokerage.

The setup is straightforward.

You’re being asked to own a company growing faster than most established US wealth managers and financials, at a valuation that doesn’t reflect that growth, with management actively shrinking the share count while you wait for the market to catch up.

The corporate and wholesale banking growth alone should be enough to force a re-rating if it keeps showing up quarter after quarter.

The honest risk is patience. Currency swings and rate-cycle timing can make quarterly headlines look worse than the underlying business actually is, and that noise is exactly what’s kept this stock cheap.

If you can look past a rocky headline number here and there and focus on the trend, this is a name worth owning. If quarter-to-quarter volatility isn’t your style, size the position accordingly and give it room to work.

Looking to buy? XP is trading well off the high end of its 52-week range, and the growth and capital return story both argue for a real discount closing over time.

Scale in rather than going all at once, since currency- and rate-driven swings can create better entry points along the way.

Already own it? Hold and watch two things: whether the corporate and wholesale banking growth keeps showing up next quarter, and whether the fixed-income mix stabilizes. Both are the real tells on whether this quarter was a turning point or a one-off.

Main risk to respect: Currency and interest-rate cycles can make a fundamentally strong quarter look weak on the surface. Don’t let a single noisy print shake you out of a thesis that’s actually playing out underneath the headline numbers.

That's our coverage for today; thanks for reading! Reply to this email with feedback or any names you want me to check out.

Best Regards,
—Noah Zelvis
Undervalued Edge