XP Inc. (XP) Earnings

Management highlights

- Overall Client and Business Highlights * Total client assets (combined AUM and AOA) reached 2.2 trillion reais, up 17% YoY. * Net new money totaled 28 billion reais for the quarter: 20 billion reais in retail net new money (meeting the soft quarterly target) and 8 billion reais in corporate and institutional inflows. * XP ended the quarter with 4.8 million active clients (up 1% YoY) and 18.4 thousand advisors (up 1% YoY). NPS reached 66 points, continuing a consistent recovery from prior quarter one-off events. * Return on equity rose 80 bps sequentially to 22.5%, and the Basel capital ratio stood at 20.3%, reflecting disciplined capital and risk management. - Long-Term Strategic Direction * XP's core ambition is to become the leading investment provider in Brazil by 2033, built on a comprehensive, full-spectrum financial ecosystem that serves all client needs beyond just product distribution. * For individual clients: XP is shifting to a comprehensive wealth planning model covering investment allocation, estate and succession planning, with a fee-based charging structure that now holds slightly more than 26% of total client assets. The firm is also expanding offshore investment capabilities and launching new products including ETFs and managed portfolios, while continuing to expand credit, banking, and insurance solutions. * For business clients: XP sees significant untapped opportunity among underserved small and medium-sized enterprises (SMEs). A new full SME platform, including credit cards, acquiring services, and collateralized credit, will go live September 1, 2026, delivering a complete, tech-enabled financial solution following XP's 2019 banking license acquisition. * All strategic expansion continues to follow a disciplined, step-by-step approach aligned with conservative risk management and capital requirements. - Capital Management Updates * Year-to-date 2026, XP has completed 1 billion reais in share buybacks under a closed program, has an additional 1 billion reais open buyback program currently being executed, and distributed ~500 million reais in dividends, for a total of ~2.5 billion reais in 2026 capital distribution. XP will also cancel 11.8 million treasury shares (≈2.3% of total outstanding shares).

Guidance

- XP reaffirms its target of double-digit full-year 2026 growth, and expects the gradually recovering fixed income primary pipeline to materialize into new offerings in coming quarters, depending on market conditions. * The firm maintains its soft quarterly average target of ~20 billion reais in retail net new money per quarter. * Management expects full-year 2026 efficiency ratio to remain flat year-over-year, with a flat efficiency ratio also a reasonable baseline assumption for 2027. * XP's target Basel capital ratio range is 16% to 19%; with the current ratio at 20.3%, management expects total 2026 capital distribution to exceed 50% of earnings, with a bias towards additional buybacks over dividends at current share prices. * Management expects Q3 2026 corporate revenue to remain at the strong level seen in H1 2026, and that primary capital market activity in Q3 2026 will stabilize at a level better than Q2 2026, but still softer than 2025 all-time highs. * Accelerated client growth in the mass digital retail segment is expected in 2027 following the upcoming launch of an AI-enabled upgraded service platform for this client tier.

Segment performance

Total gross revenue for Q2 2026 reached 5.1 billion reais, up 8% year-over-year (YoY) and 3% quarter-over-quarter (QoQ). 1. Retail segment: Total retail revenue was 3.9 billion reais, 8% YoY growth and 3% QoQ growth, representing 76.5% of total gross revenue. Within retail: Equities revenue grew 11% YoY to nearly 1.1 billion reais (down 2% QoQ); Funds Platform revenue grew 23% YoY and 7% QoQ; New verticals and other retail lines (including Float, International Platform, and FX) also contributed strong growth. Excluding market-to-market impacts on fixed income corporate credit, retail revenue grew 15% YoY in H1 2026. 2. Wholesale segment (including corporate, issuer services, and institutional revenues): Total wholesale revenue grew 32% YoY and 3% QoQ, representing 23.5% of total gross revenue. Within wholesale: The corporate sub-segment grew 117% YoY and 22% QoQ, driven by cross-selling of derivatives, FX, and credit solutions; Issuer services revenue declined YoY and QoQ due to a sharp drop in new fixed income primary offerings amid wider credit spreads and lower investor risk appetite; Institutional revenue grew YoY and was flat sequentially, impacted by lower trading volumes. SG&A totaled 1.6 billion reais, up 5% YoY and 2% QoQ. Adjusted earnings before taxes (EBT) was 1.6 billion reais, up 15% YoY and 10% QoQ, for an adjusted EBT margin of 32%. Adjusted net income was 1.4 billion reais, up 5% YoY and QoQ, with a net margin of 28.3%.

Risks & headwinds

- Ongoing global geopolitical tensions and residual market volatility have continued to impact results, leading to wider credit spreads and reduced primary capital market offerings, which negatively affected issuer services revenue in Q2 2026. * The current heavy mix of short-duration, daily liquid fixed income products (≈70% of fixed income sales, up from 30% one year prior) creates downward pressure on fixed income revenue margins, as daily liquid products carry lower upfront fees than longer-duration corporate bonds. * Mark-to-market volatility on investment banking and secondary facilitation fixed income books remains an ongoing risk; while XP has reduced the size of these holdings, further spread widening could still lead to future mark-to-market losses. * Expansion into new client segments (especially SME lending) carries inherent credit risk, though management mitigates this through a conservative, collateral-focused approach to all new lending activity.

Analyst Q&A

• Q: How will pre-election volatility impact H2 2026 revenues for retail and corporate segments, and can the strong H1 2026 corporate revenue level be sustained?

  A: Higher volatility typically lifts trading volumes, which will boost revenues for institutional and retail trading businesses in H2 2026, as XP holds 30-50% market share across most markets. Corporate revenue has grown steadily and conservatively since 2021, with a high-quality credit portfolio that has avoided recent credit event exposures; management expects the strong H1 revenue level to be sustained, with Q3 2026 also on track for a strong performance.\n

• Q: What is XP's long-term outlook for the wholesale banking business, is there a planned shift in credit expansion strategy, and what is the outlook for capital payouts?

  A: There is no change to XP's step-by-step, conservative strategy for wholesale and credit growth; the new CFO's background does not signal an accelerated shift in credit strategy. The upcoming SME platform launch is a continuation of the long-standing ecosystem expansion plan, and growth will remain gradual with ongoing caution around credit risk. With the current Basel ratio above the 16-19% target, additional capital distribution is planned this year, with a bias toward buybacks over dividends at current share prices.\n

• Q: What drove the decline in fixed income average fees, and what is the share of daily liquid fixed income products today?

  A: Two factors drove the fee decline: the current product mix is heavily concentrated in low-fee, short-duration daily liquid SELIC-linked instruments, and Q2 2026 saw large mark-to-market losses on investment banking fixed income books plus a near-total freeze in primary capital market activity. Around 70% of current fixed income platform sales are daily liquid products, up from 30% one year prior, which creates a double drag on revenue as daily products only generate low ongoing accrual fees rather than upfront duration-linked fees.\n

• Q: Can XP accommodate tech/AI investment and hires while keeping efficiency ratios flat, and what is the progress on upgrading mass retail client technology?

  A: To date, XP has successfully accommodated growing tech investment (concentrated in AI, cloud, and server infrastructure) while maintaining the planned flat efficiency ratio target. The upgraded AI-powered service platform for mass digital retail clients will launch in late Q3/early Q4 2026, enabling strong unit economics for smaller-ticket clients, with accelerated client growth in this segment expected to begin in 2027.