(Updates throughout with more detail on earnings)
SAO PAULO, Oct 29 (Reuters) - Brazil's largest card processor Cielo SA reported lower-than-expected net income in the third quarter on Tuesday, as the company sacrificed profitability for volumes as it fights off new competition.
Cielo posted a profit of 358 million reais for the three months ended Sept. 31, a 50% drop from a year ago and missing analysts' estimates of 376.6 million reais.
Volumes processed rose around 11% compared with a year earlier, and 4.4% compared with the previous quarter. That gave the company its third consecutive quarter of volume expansion and its fourth consecutive quarter of adding new clients.
Still, Cielo earnings before interest, taxes, depreciation and amortization fell 37% from a year earlier, to 724 million reais, as operating expenses grew.
In October, Cielo launched digital payments accounts, targeting small businesses, in a move to fend off upstarts such as Nubank, Mercado Pago and PagSeguro Digital Ltd.
Cielo's shares are down 6% this year amid fierce competition among card processors.
Chief Executive Officer Paulo Caffarelli is expected to provide more details on the company's strategy on Wednesday in a meeting with journalists.
Cielo is the first Brazilian card processor to report third-quarter results.
Reporting by Carolina Mandl and Tatiana Bautzer Editing by Chris Reese and Jane Wardell