eToro Group Ltd. (ETOR) Q3 2025 Earnings Call Transcript

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Overview

The earnings call summary reveals strong financial performance with increased EPS and a solid cash position, supporting operational flexibility. Product development and business updates are promising, with AI and crypto offerings showing growth. Market strategy is robust, focusing on long-term growth in the U.S. and Asia. Although management was vague on some specifics, the overall sentiment from analysts was positive. Shareholder returns through buybacks and potential acquisitions are also favorable. Despite some uncertainties, the positive aspects outweigh the negatives, indicating a likely positive stock price movement.

Key Financial Performance

Net Contribution $215 million, up 28% year-over-year. The increase is attributed to the scalability and resilience of eToro's diversified business.

Adjusted EBITDA $78 million, up 43% year-over-year. This reflects solid operating margins of 36%, driven by disciplined financial management and growth in revenue.

Funded Accounts 3.73 million, up 16% year-over-year. Growth is attributed to strong user acquisition, retention efforts, and a disciplined marketing approach.

Assets Under Administration $20.8 billion, up 76% year-over-year. Growth was fueled by new deposits and strong user investment returns in crypto and equities.

Net Trading Contribution from Crypto $56 million, up 229% year-over-year. This was driven by higher invested amounts per trade and increased crypto activity, especially in July and August.

Net Trading Contribution from Capital Markets $73 million, down 21% year-over-year. The decline is due to a shift in investor activity from capital markets to crypto.

Net Interest Income $62 million, up 44% year-over-year. Growth was driven by a 52% increase in higher interest-earning assets, including customer cash deposits and margin books.

eToro Money Contribution $21 million, up 50% year-over-year. Growth was driven by an increase in total money transfers.

Adjusted Operating Expenses (OpEx) $137 million, flat quarter-on-quarter. This reflects disciplined cost management.

Adjusted Selling and Marketing Expense $47 million, representing 22% of net contribution. Approximately 70% of this expense is dynamic, providing flexibility.

Adjusted R&D and G&A Operating Expenses $36 million and $54 million, respectively. These expenses reflect ongoing investments in innovation and operational efficiency.

Adjusted Diluted EPS $0.60, up from $0.51 in the third quarter of 2024. This reflects improved profitability.

Cash, Cash Equivalents, and Short-term Investments $1.2 billion. This strong cash position supports operational flexibility and potential M&A opportunities.

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Operating Highlights

AI-driven product development: eToro is leveraging AI to enhance its platform, focusing on crypto, tokenization, and AI-driven tools. The launch of eToro apps allows users to create and share investment tools.

Copy Trading in the U.S.: eToro launched its flagship Copy Trading product in the U.S., aiming to increase user engagement and platform traction.

Pro Investor Program: The program supports professional investors, with over 130 pro investors managing more than $1 million each, and the top investor managing $250 million.

AI-driven insights: AI tools provide users with professional-grade technology for decision-making and strategy creation.

Global market expansion: eToro expanded access to NASDAQ Nordic Exchanges and plans to increase exchange access to over 30 by 2026. Futures trading was expanded in Europe.

U.S. market growth: New funded accounts in the U.S. surpassed 2024 levels, with a 3x increase in crypto volumes due to expanded offerings.

Localization efforts: eToro localized offerings in the UAE, Singapore, and Australia, and expanded cashback rewards in the U.K. and Europe.

Financial performance: Net contribution grew 28% YoY to $215 million, adjusted EBITDA rose 43% YoY to $78 million, and assets under administration reached $20.8 billion, up 76% YoY.

Marketing efficiency: Disciplined marketing efforts contributed to a 16% YoY growth in funded accounts, reaching 3.73 million.

Operational cost management: Adjusted operating expenses remained flat quarter-on-quarter at $137 million.

Share repurchase program: eToro announced a $150 million share repurchase program to deliver shareholder value.

Focus on macro trends: eToro is targeting younger, digital-first generations and the tokenization of assets, aligning with long-term market trends.

M&A opportunities: The company is exploring mergers and acquisitions to drive inorganic growth.

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Risk or Challenges

Market Conditions: Potential risks from shifts in investor activity between crypto and capital markets, as seen in the decline of net trading contribution from capital markets by 21% year-over-year.

Regulatory Hurdles: Expansion into new markets like the U.S. and Asia may face regulatory challenges, especially with the introduction of new products like Copy Trading and advanced crypto offerings.

Economic Uncertainties: Dependence on macroeconomic trends such as generational wealth transfer and digital asset adoption, which may not materialize as expected.

Competitive Pressures: Growing competition in the trading and investing space, particularly in the U.S. market, where eToro is expanding its presence.

Strategic Execution Risks: Challenges in successfully integrating new products like AI-driven tools, tokenized assets, and advanced crypto offerings into the platform while maintaining user engagement and operational efficiency.

Supply Chain Disruptions: Not explicitly mentioned, but potential risks could arise from technological or operational disruptions affecting platform performance.

Financial Risks: Dependence on crypto trading, which grew 229% year-over-year, introduces volatility and potential revenue fluctuations due to market conditions.

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Guidance & Outlook

Revenue and Margin Projections: eToro expects long-term adjusted EBITDA margins to increase from current levels, with a focus on diversified and profitable revenue growth.

Global Expansion: eToro plans to expand market access globally, increasing the number of exchanges from 22 to over 30 by 2026. The company is also focused on further localizing offerings in key markets and expanding in underpenetrated regions.

U.S. Market Growth: eToro is expanding its U.S. presence, with new funded accounts surpassing 2024 levels. The company introduced Copy Trading and expanded its crypto offerings in the U.S., expecting these to drive future growth.

AI and Product Innovation: eToro is leveraging AI to enhance user engagement and decision-making. The company launched AI-driven tools and apps, enabling users to create and share investment strategies. AI capabilities are expected to deepen user engagement and improve performance.

Wealth Management Expansion: eToro launched new subscription models and expanded savings products in the U.K. and Australia. The company sees significant opportunities in the wealth management market, valued at trillions of dollars globally.

Crypto and Tokenization: eToro is developing advanced crypto products, including a crypto wallet and tokenized U.S.-listed equities, enabling 24/5 trading. These innovations aim to increase client engagement in the crypto industry.

Macro Trends and Generational Wealth Transfer: eToro is positioning itself to benefit from a $150 trillion generational wealth transfer and a $100 trillion shift to digital assets over the next 20 years. The company expects younger, digital-first generations to drive growth in equities and crypto investments.

Share Repurchase Program: eToro announced a $150 million share repurchase program, reflecting confidence in its long-term growth prospects and commitment to shareholder value.

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Shareholder Return Plan

Share Repurchase Program: eToro announced a $150 million share repurchase program. This decision reflects the company's confidence in its long-term growth prospects and its commitment to delivering value for shareholders. The company believes its stock is undervalued and, given its significant cash generation, has the flexibility to buy back shares.

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Key Q&A

Q:Why did eToro decide to launch its new subscription offering?

A:eToro launched the subscription offering to provide premium benefits such as unique features, better service, discounts, cashback, and crypto cashback. It consolidates subscription models from past acquisitions and has already seen positive uptake.

Q:Can you provide details on account growth, including regional contributions and trends?

A:eToro achieved double-digit growth with increased deposits and engagement. While not breaking down geographically, they see strength in core markets and positive signs in new regions. There is also an increase in the size of new funded accounts and first-time deposits.

Q:What are eToro's plans and offerings related to artificial intelligence?

A:eToro introduced an AI studio for Pro investors to create tools for portfolio analysis, automated strategies, and dashboards. They aim to transition users to automated and quantitative strategies, enhancing returns and trade velocity. Examples include apps like a Warren Buffett persona for portfolio rebalancing.

Q:Why not focus more on Europe, where eToro has a leading share, instead of expanding in the U.S. and Asia?

A:eToro focuses on long-term growth and aims to build a significant presence in the U.S. and Asia. However, they also double down on growth in strong regions like Europe, UAE, and Australia, using a data-driven approach to maximize ROI.

Q:What is the account growth target for eToro, and how does it plan to achieve it?

A:eToro aims for double-digit growth in funded accounts, leveraging market growth and expanding in strong regions and new markets like the U.S. They are revamping their U.S. product strategy and introducing global products like CopyTrader and crypto assets.

Q:What contributed to the strong crypto volumes in the quarter, and what are the dynamics within ECC?

A:Strong crypto volumes were driven by new tradable assets in the U.S. and global crypto market momentum. ECC was impacted by a shift in trading volumes between asset classes, with increased stock trading leading to a lower take rate.

Q:What are eToro's capital allocation priorities?

A:eToro has a strong balance sheet with $1.2 billion in cash and short-term investments. They are focusing on share buybacks due to undervaluation and exploring acquisitions to add value to customers and expand in different regions.

Q:What is eToro's approach to prediction markets and potential partnerships?

A:eToro is exploring both organic and inorganic opportunities in prediction markets, including partnerships with leaders like Kalshi and Polymarket. They aim to focus on financial, geopolitical, and economic events to help customers with trading strategies and portfolio-related opportunities.

Q:How does eToro plan to scale CopyTrader in the U.S., and what is the expected uptake?

A:eToro plans to promote CopyTrader within the app, increase attachment rates, and build a base of great investors in the U.S. They aim to increase lifetime value and share of wallet, scaling marketing efforts profitably. The global uptake of CopyTrader is about one-third of clients.

Q:What is eToro's view on banking services and the long-term opportunity?

A:eToro aims to be a financial super app, focusing on trading, investing, and savings. They provide virtual bank accounts, interest rates, FX conversion, and Visa debit cards to increase customer attachment and lifetime value. They incentivize spending with stock back rewards.

Q:What drove the 16% growth in funded accounts, and what is the seasonality in the business?

A:Growth was driven by user acquisition and retention, including re-engaging past customers with new products. Seasonality shows stronger Q1s and Q4s, influenced by market conditions in crypto and capital markets.

Q:What are the expense and interest income trends for eToro?

A:Expenses are expected to remain flat quarter-on-quarter. Interest income trends show growth in customer balances across asset classes, offsetting the impact of rate cuts and leading to potential revenue growth.

Q:Review of Unclear Management Responses

A:Management avoided providing a geographic breakdown of account growth, citing only general strength in core and new markets. They also did not provide specific details on the uptake of CopyTrader in the U.S., stating it was too early to assess. Additionally, they did not break down the retention and acquisition components of funded account growth.

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Earnings Word Cloud

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ETOR Transcript

eToro Group Ltd. (ETOR) Q3 2025 Earnings Call Transcript

Positive11-10

ETOR Report

eToro Group Ltd. 6-K

6-K

2025-07-03

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