Uruguayan payments giant dLocal (NASDAQ:DLO) reported record-breaking second-quarter earnings, with Total Payment Volume (TPV) surging 53% year-over-year to $9.2 billion and revenue climbing 50% to $256.5 million. Yet beneath the strong headline figures, its African operations remain volatile, with Egypt — once a key growth market — experiencing a sharp downturn while South Africa and other regions pick up the slack.
The shift highlights both the risks of emerging-market expansion and the growing influence of global e-commerce players like Temu, which are reshaping digital payments in key African economies.
Egypt’s Shine Fades
After several quarters of stellar performance, dLocal’s Egyptian business faltered in Q2 2025. The company attributed the slowdown in its Africa & Asia segment to a “partial volume loss due to a large merchant implementing redundancies in the market,” alongside lower foreign exchange (FX) spreads following a currency devaluation. In essence, a major merchant (possibly a large corporate or fintech partner) could have reduced operations, impacting transaction volumes.
The impact was significant: Egypt contributed to a $3 million drop in gross profit, marking a stark reversal from its previous trajectory. In Q3 2024, Egypt’s revenue had surged 318% year-over-year to $18.6 million, compensating for dLocal’s collapsed Nigerian operations. Even in Q1 2025, Egypt posted a 58% revenue increase. The sudden decline highlights how quickly fortunes can shift in high-growth, high-risk markets.
South Africa’s Surprise Rise & The Temu Effect
While Egypt stumbled, South Africa and other African markets delivered strong results. The “Other Africa & Asia” segment — excluding Egypt — saw gross profit grow 36% quarter-over-quarter and 90% year-over-year, driven by volume growth and lower processing costs in South Africa.
This rebound is notable given that in Q1 2025, dLocal had flagged rising processing costs in South Africa due to rand volatility and regulatory expenses. The Q2 recovery suggests either cost stabilisation or a surge in transaction volumes — potentially linked to the rapid rise of Chinese e-commerce platforms like Temu.
Recent data shows that Temu and Shein now hold a combined 3.6% share of South Africa’s retail, clothing, textile, footwear, and leather (CTFL) market, accounting for 7.3 billion rand ($405 million) in sales in 2024. Their aggressive pricing and digital-first approach have disrupted local retail, pushing more transactions online — a trend benefiting payment processors like dLocal.
A Recurring Pattern of Volatility
dLocal’s African challenges are not new. In 2024, Nigeria’s revenue collapsed by over 80% after a naira devaluation, turning a once-lucrative market into a minor contributor. Similarly, Argentina’s peso devaluation impacted dLocal’s bond portfolio, dragging net income down 7% year-over-year despite an 85% jump in operating profit.
The company has since reduced its Argentine exposure by over 80%, shifting funds into U.S. treasuries — a move that reflects its broader strategy of hedging against emerging-market risks.
Strategic Moves in Turbulent Waters
To mitigate these risks, dLocal is making structural changes. It is transitioning to a majority-independent board and announced the $150 million acquisition of AZA Finance, a Nairobi-based B2B fintech specializing in cross-border FX and treasury services. The deal aims to strengthen dLocal’s African infrastructure, particularly in managing currency volatility.
Meanwhile, its partnership with Temu — finalized in March — could prove pivotal. The Chinese e-commerce giant’s rapid expansion in South Africa has boosted digital payment volumes, offsetting declines elsewhere. If Temu continues gaining market share, dLocal stands to benefit as its payment processor.
Key Takeaways for Africa
- South Africa’s Rise: Strong commerce growth (+36% QoQ) suggests increasing digital payment adoption, likely fueled by e-commerce.
- Egypt’s Struggles: Volume loss from a major merchant and FX instability (-21% QoQ) highlight concentration risks.
- Temu’s Influence: The platform’s success in South Africa indicates shifting retail dynamics, with cross-border e-commerce driving payment volume growth.
The Road Ahead
dLocal remains bullish, raising its full-year guidance for TPV and revenue. However, Egypt’s stumble is a reminder that emerging markets are fraught with unpredictability.
For now, South Africa’s resilience — and the rise of partners like Temu — offers a counterbalance. But as dLocal expands, its ability to navigate currency shocks, regulatory changes, and shifting merchant landscapes will determine whether its African rollercoaster stabilizes or continues its wild ride.