eToro’s Wall Street honeymoon ends abruptly after first earnings call
Shares slide more than 10% as investors parsed a mixed set of results that showed growing user activity but declining profitability.
Less than a month after its high-profile Nasdaq debut, eToro has released its first earnings report as a public company, and the market reaction has been swift and unforgiving. Shares of the Israeli-founded trading platform dropped more than 10% following the announcement, as investors parsed a mixed set of results that showed growing user activity but declining profitability.
The platform, long associated with social trading and crypto exposure, saw modest growth in core metrics. As of May 31, the company reported 3.61 million funded accounts and $16.9 billion in assets under administration, up slightly from 3.58 million accounts and $14.8 billion in AUA at the end of Q1. These figures suggest that retail engagement remains resilient despite a volatile macro backdrop.
eToro’s Q1 net contribution, a key measure of revenue minus direct transaction-related costs, rose 8% year-over-year to $217 million, exceeding consensus estimates. Total revenue and income also climbed to $3.76 billion, compared to $3.38 billion in the same period last year.
Yet the headline growth belied a more sobering trend: cost inflation. Total expenses rose sharply to $3.68 billion, up from $3.31 billion a year ago. Marketing spend also surged to $61.2 million, up more than 60% year-over-year, as eToro ramped up promotion in anticipation of its IPO.
General and administrative costs, however, declined from $56.0 million to $49.5 million, indicating some success in operational streamlining. Still, the net impact was clear: adjusted EBITDA fell to $80 million from $87 million a year ago, with the EBITDA margin narrowing to 37% from 43%.
Earnings per share came in at $0.69, beating consensus expectations of $0.60, but below last year’s figure of $0.76.
This earnings report marks a stark contrast with the exuberance that surrounded eToro’s IPO just weeks ago. After two failed attempts, the company finally listed on May 14 with a valuation of $4.3 billion, soaring nearly 29% on its first trading day. Its debut was seen as a bellwether for the fintech sector, signaling renewed confidence in tech listings amid improving sentiment on Wall Street. eToro's valuation topped $6 billion over recent weeks, before falling back on Tuesday.
eToro’s successful IPO, led by Goldman Sachs and Jefferies with support from UBS, Citi, and others, raised $712 million in total, half through new shares and half via insider and investor sell-offs.
