Executive Summary / Key Takeaways

• Multi-Asset Moat Creates Rebalancing Advantage: eToro's diversified platform across crypto, equities, commodities, and currencies enables customers to shift activity between asset classes, turning what would be cannibalization for single-asset brokers into a strength. This dynamic was evident in Q3 2025 as a 229% surge in crypto trading contribution offset a 21% decline in capital markets revenue, while total net contribution still grew 28% year-over-year.

• AI-Powered Social Trading Flywheel Accelerates US Engagement: The US launch of Copy Trading in Q3 2025, combined with AI initiatives like Tori and Alpha Portfolios, creates network effects that drive user retention and trade velocity. Approximately one-third of global users already utilize Copy Trading, and management anticipates similar adoption in the world's largest capital market, where year-to-date new funded accounts have already surpassed 2024 levels.

• Margin Expansion Despite Competitive Pressure: Adjusted EBITDA margins expanded 370 basis points to 36% in Q3 2025, driven by a flat cost base and revenue diversification. Management's commitment to maintaining operating expenses while scaling revenue suggests path to further margin expansion, even as competition from Robinhood (HOOD) and Interactive Brokers (IBKR) intensifies.

• Share Buybacks Signal Undervaluation Confidence: The $150 million repurchase authorization, with $50 million executed via accelerated share repurchase in November 2025, reflects management's belief that the stock is undervalued. With $1.2 billion in cash and strong free cash flow generation, the company has ample dry powder for both capital returns and potential acquisitions.

• Key Risks: Crypto Volatility and US Execution: While crypto concentration provides growth upside, it also creates earnings volatility risk. The success of the US expansion hinges on converting early traction into sustainable market share against entrenched competitors, making execution the critical variable for the thesis.

Setting the Scene: The Social Trading Pioneer Evolves

eToro Group Ltd., founded in 2006 in Bnei Brak, Israel, pioneered social investing long before retail trading became mainstream. The company's core insight was that investing could be collaborative rather than solitary, transforming the traditional brokerage model into a social network where users learn from and copy successful investors. This foundation explains eToro's current positioning as a multi-asset platform that derives strength from user engagement rather than transaction volume alone.

The retail brokerage industry has fragmented into two camps: single-asset pure-plays like Robinhood that dominate specific verticals, and traditional incumbents like Interactive Brokers that serve professional traders. eToro occupies a unique middle ground, offering stocks, crypto, forex, commodities, and derivatives across 22 global exchanges while layering on social features that create switching costs. This matters because the next generation of investors, who are digital-first and crypto-native, demand both asset breadth and community-driven insights. eToro's 3.73 million funded accounts and $20.8 billion in assets under administration represent a mid-tier position that punches above its weight in user engagement.

Industry tailwinds favor eToro's model. Retail participation in non-US markets remains below US levels, creating a long runway as younger generations enter investing. The anticipated $150 trillion generational wealth transfer over the next two decades will flow to digital-native investors who prefer platforms offering both crypto access and social validation. Meanwhile, the crypto market's maturation—exemplified by eToro's US staking launch and expansion to over 100 crypto assets—provides a differentiated revenue stream that pure equity brokers cannot replicate.

Business Model & Strategic Pillars

eToro operates across four strategic pillars that reinforce each other: trading, investing, wealth management, and neo-banking. The trading pillar generates revenue through net trading contributions from crypto ($56 million in Q3 2025, up 229%) and capital markets ($73 million, down 21%). The decline in capital markets revenue wasn't a sign of weakness but rather evidence of the platform's rebalancing strength, as investors rotated into crypto during its Q3 rally. Management explicitly views this dynamic as a competitive advantage, noting that pure crypto companies lack the ability to capture value when customers shift back to equities.

The investing pillar centers on Copy Trading, which approximately one-third of global users actively employ. This feature allows novices to automatically mirror the trades of over 4,000 Pro Investors, including 130 who manage more than $1 million in assets. The top Pro Investor grew assets from $50 million to over $250 million in 2025 alone, demonstrating the ecosystem's monetization potential. The US launch in Q3 2025 is particularly significant because it brings this proven engagement tool to a market where eToro has already achieved disciplined user growth without heavy marketing spend.

Wealth management represents eToro's push into higher-margin, sticky assets. The new eToro Club subscription model, UK Cash ISA expansion, and Australian superannuation integration via Spaceship target markets worth over $2.5 trillion and $1.3 trillion respectively. These products transform eToro from a trading app into a financial home, increasing customer lifetime value and reducing churn during market downturns.

The neo-banking pillar, through eToro Money, grew contribution 50% year-over-year to $21 million. The eToro Money card, which offers 4% cashback on stock purchases in Europe and the UK and now 1% on new crypto deposits, saw a 2.4x quarterly increase in issuance. This "super app" strategy keeps capital within the ecosystem, preventing users from transferring profits back to traditional banks and creating a closed-loop that compounds assets under administration.

Technology & AI Integration: The Next Network Effect

eToro's AI initiatives go beyond buzzwords to create tangible network effects. The launch of eToro apps enables users to build, share, and scale their own investment tools, democratizing quant-driven strategies previously limited to hedge funds. Seven Alpha Portfolios—AI-powered strategies built on eToro's proprietary retail trading data—give users access to institutional-grade analysis. This matters because it transforms users from passive consumers into active contributors, enriching the platform's data moat with each interaction.

Tori, the AI companion, and the AI analyst story adopted by over one-third of Club members serve as engagement multipliers. At a Pro Investor Summit, management demonstrated how investors can "vibe code" tools that create personas of Warren Buffett, Benjamin Graham, and Cathie Wood to rank and rebalance portfolios. This capability drives higher trade velocity and potentially higher returns for customers, which in turn increases platform activity and fee generation. The strategic implication is clear: AI lowers the barrier to sophisticated investing while increasing user stickiness.

The technology strategy directly counters competitive threats. Against Robinhood's simplicity, eToro offers depth. Against Interactive Brokers' professional tools, eToro offers accessibility. The AI layer creates a new dimension of differentiation that pure execution-focused brokers cannot easily replicate, as it requires both proprietary data and a social architecture to deliver value.

Financial Performance as Strategy Validation

Q3 2025 results provide clear evidence that eToro's multi-asset, AI-enhanced strategy is working. Net contribution grew 28% year-over-year to $215 million, with adjusted EBITDA up 43% to $78 million. The 370 basis points of margin expansion to 36% demonstrates operating leverage, achieved while keeping adjusted operating expenses flat at $137 million quarter-over-quarter. This validates management's thesis that revenue can scale faster than costs, particularly as higher-margin segments like crypto and interest income grow.

The segment mix shift tells a crucial story. Crypto's 229% contribution growth to $56 million was partially offset by capital markets' 21% decline to $73 million, yet the net result was still 28% growth. Interest income rose 44% to $62 million on 52% growth in interest-earning assets, providing a stable, rate-agnostic revenue base. eToro Money's 50% growth to $21 million shows the neo-banking strategy is gaining traction. This diversification means eToro is not beholden to any single asset class's performance, reducing earnings volatility compared to pure-play crypto or equity brokers.

Balance sheet strength underpins strategic flexibility. With $1.2 billion in cash and short-term investments against minimal debt, eToro can fund the $150 million buyback program while retaining capacity for acquisitions. The $57 million in quarterly free cash flow generation provides additional dry powder. This financial position is particularly important as competitors like Robinhood and Interactive Brokers have much higher debt-to-equity ratios (1.89 and 1.45 respectively), giving eToro a more stable capital base for long-term investments.

Competitive Positioning: Breadth vs. Scale

eToro's competitive landscape reveals a deliberate trade-off between breadth and scale. Robinhood dominates with 26.8 million funded customers and $333 billion in platform assets, dwarfing eToro's 3.73 million accounts and $20.8 billion AUA. However, Robinhood's concentration in US equities and basic crypto limits its ability to capture value when users rotate into forex, commodities, or international markets. eToro's coverage of 22 exchanges (expanding to over 30 in 2026) creates a structural advantage for globally-minded investors.

Interactive Brokers serves as the professional alternative, with 4.13 million accounts and $757.5 billion in client equity. Its 79% operating margin reflects a low-cost, high-volume model that eToro cannot match on price. Yet IBKR's complexity deters retail novices, while eToro's social layer reduces the learning curve. The "so what" is that eToro occupies a middle market—more sophisticated than Robinhood's casual traders, more accessible than IBKR's professional tools—where community features drive retention that pure execution platforms cannot replicate.

Plus500 (PLUS) and IG Group (IGG) represent regional CFD specialists with declining or slow user growth. eToro's 16% funded account growth and 76% AUA growth significantly outpace these peers, demonstrating that its multi-asset, social model resonates better with modern investors. The key risk is that this positioning leaves eToro vulnerable to attack from both ends: Robinhood could expand internationally, while IBKR could simplify its retail offering.

Outlook & Execution Risk

Management's guidance reveals ambitious but achievable targets. The commitment to double-digit funded account growth annually, supported by a flat cost base, implies continued margin expansion. This is not a "growth at all costs" strategy but a disciplined approach that prioritizes profitable scaling. The US market will be the proving ground, as Copy Trading's launch is expected to drive engagement similar to the one-third adoption rate seen globally.

The crypto outlook is particularly bullish, with management citing a "very positive US administration towards the crypto industry" and new product rollouts as tailwinds. The 3x quarter-over-quarter increase in US crypto volumes demonstrates early traction. However, this optimism must be tempered against crypto's historical volatility, which could quickly reverse the segment's 229% growth.

Execution risks center on two variables: US market penetration and AI tool adoption. The US brokerage market is saturated with entrenched competitors offering lower prices. eToro's social features must overcome price sensitivity, requiring demonstration of tangible value through better returns or engagement. Similarly, the AI initiatives, while promising, require user education and trust-building. If adoption lags, the technology investment may not translate into revenue growth.

Risks and Asymmetries

The most material risk is crypto concentration. While management views the multi-asset platform as a mitigant, crypto still represents a meaningful portion of revenue and trading activity. A prolonged crypto winter could depress overall net contribution growth, even if capital markets activity recovers. This asymmetry works both ways: crypto upside provides leveraged growth, but downside creates earnings volatility that pure equity brokers avoid.

US execution risk is equally critical. The US market represents the largest opportunity but also the most competitive landscape. Robinhood's 10% user growth and 100% revenue growth demonstrate the scale of spending required to compete. eToro's disciplined marketing approach, while protecting margins, may limit speed of adoption. If US funded account growth stalls, the double-digit growth target becomes reliant on mature European markets, capping the long-term story.

Regulatory risk looms across multiple jurisdictions. The company operates across 75 countries, each with evolving rules around crypto, CFDs, and social trading. While eToro's broad licensing is a moat, it also creates compliance complexity that pure US-focused brokers avoid. Any major regulatory setback in a key market like the UK or Australia could disrupt the wealth management expansion.

Valuation Context

Trading at $43.01 per share, eToro appears reasonably valued relative to growth and profitability. The 17.48 P/E ratio compares favorably to Robinhood's 54.98 and Interactive Brokers' 31.16, suggesting the market has not fully priced eToro's growth trajectory. The 0.16x EV/Revenue multiple is significantly lower than Robinhood's 27.45x and IBKR's 2.24x, indicating either skepticism about the business model or a genuine value opportunity.

Cash flow metrics support the bull case. The 14.17x price-to-free-cash-flow ratio is in line with traditional financial services, while the 2.70x price-to-book ratio reflects tangible asset value. With $1.2 billion in cash and minimal debt (0.04 debt-to-equity ratio), eToro has the balance sheet strength to weather downturns and invest in growth. The $150 million buyback program, representing 4.2% of the $3.6 billion market cap, provides a tangible return of capital while signaling management's confidence.

Peer comparisons highlight the valuation disconnect. Robinhood trades at a massive premium despite similar trading tailwinds, while eToro offers broader asset selection and international diversification. Interactive Brokers commands higher multiples due to its professional focus and superior margins, but eToro's 36% adjusted EBITDA margin and 76% AUA growth suggest it is closing the gap. The key question is whether the market will reward eToro's unique positioning or continue to price it as a second-tier retail broker.

Conclusion

eToro has evolved from a social trading pioneer into a multi-asset, AI-powered ecosystem that turns user engagement into a self-reinforcing competitive advantage. The Q3 2025 results validate this strategy: 28% net contribution growth, 370 basis points of margin expansion, and 76% AUA growth demonstrate that breadth and community can trump pure scale. The US launch of Copy Trading and AI tools provides a clear catalyst for sustained double-digit account growth, while the $150 million buyback signals management's conviction in the story's durability.

The investment thesis hinges on execution in the US market and resilience during crypto downturns. If eToro can replicate its one-third Copy Trading adoption rate in the US while maintaining cost discipline, margins should continue expanding toward peer levels. Conversely, failure to gain traction against Robinhood's scale or a sharp crypto reversal could expose the platform's mid-tier positioning. For investors, the critical variables are US funded account growth and crypto volume stability—two metrics that will determine whether eToro's ecosystem moat translates into sustained earnings power and multiple re-rating.