Executive Summary / Key Takeaways

• Ecosystem-Driven Growth: Freedom Holding Corp. ($FRHC) is rapidly transforming into a comprehensive digital fintech ecosystem, integrating brokerage, banking, insurance, and lifestyle services through its SuperApp and specialized platforms. This strategy aims to enhance customer lifetime value and retention through seamless interoperability and AI-driven personalization.
• Robust Customer Acquisition: The company demonstrates strong customer growth, particularly in its Banking and Brokerage segments, with banking customers surging to 3.62 million and brokerage customers reaching 776,000 as of September 30, 2025. This expansion underscores the effectiveness of its digital-first approach in emerging markets.
• Strategic Diversification and Technology Investment: FRHC is actively expanding into new sectors like telecommunications and AI, exemplified by the acquisition of Astel Group Ltd. and the planned $2 billion Sovereign AI Hub in Kazakhstan. These investments, while impacting short-term profitability due to significant capital expenditures and regulatory changes, are foundational to its long-term digital ecosystem vision and competitive moat.
• Mixed Recent Financials Amidst Strategic Shifts: For the three months ended September 30, 2025, total revenue declined by 10% year-over-year to $526.10 million, and net income decreased by 66% to $38.70 million. This was primarily influenced by regulatory caps on insurance commissions, lower trading gains, and increased tax expenses due to Kazakhstani tax law changes, partially offset by strong brokerage and margin lending income.
• Liquidity and Capital Strength: Despite substantial investments and a dynamic operating environment, FRHC maintains a strong liquidity position, with net liquid assets of $5.10 billion as of September 30, 2025, and its regulated subsidiaries exceeding minimum capital requirements. This financial resilience supports its aggressive growth and expansion initiatives.

The Digital Frontier: Freedom Holding Corp.'s Ecosystem Vision

Freedom Holding Corp. ($FRHC) is rapidly evolving from a traditional financial services provider into a dynamic digital fintech ecosystem, primarily serving emerging markets across Central Asia, Europe, and North America. Founded with a mission to democratize access to financial markets, FRHC has built a world-class digital infrastructure that integrates securities brokerage, retail and commercial banking, insurance products, and a suite of lifestyle services including online payments, travel, ticketing, and e-commerce. This strategic pivot is designed to create a seamless, interconnected experience for customers, fostering deeper engagement and driving long-term value.

The company's historical journey, from its origins as BMB Munai, Inc. to its current diversified structure, underscores a consistent drive for expansion and technological integration. Key milestones, such as the divestment of Russian subsidiaries in February 2023 and the establishment of Freedom Telecom and Freedom Media, highlight a deliberate focus on high-growth regions and digital transformation. The inclusion of FRHC's common stock in the Russell 3000 Index during the first quarter of fiscal year 2026 further solidifies its growing market presence and investor recognition.

In the competitive landscape, FRHC operates against a diverse set of players. In retail brokerage and investment services, it faces established global firms like Interactive Brokers (IBKR) and Charles Schwab (SCHW), as well as fintech disruptors such as Robinhood (HOOD). While IBKR and SCHW often boast more sophisticated trading analytics and larger market shares in mature economies, FRHC differentiates itself through its deep penetration and localized expertise in emerging markets, particularly in Central Asia. Its comprehensive service suite, spanning banking, insurance, and lifestyle, allows it to capture a broader customer base and build stronger loyalty through integrated offerings, a qualitative advantage over more specialized competitors. For instance, while IBKR focuses on technological innovation in trading platforms, FRHC leverages its global network and regulatory licenses in diverse jurisdictions to offer tailored services that competitors with a narrower geographic focus may struggle to replicate.

Technological Moats and Strategic Innovation

At the heart of FRHC's strategy lies its cutting-edge technological infrastructure, designed to create a powerful competitive moat. The company's digital fintech platform leverages big-data analytics, proprietary scoring models, real-time fraud and sanctions screening, and machine-learning algorithms. These advanced capabilities analyze balance trends and purchase histories to personalize product recommendations, significantly boosting customer loyalty and retention. This integrated approach leads to "smarter targeting, faster fulfillment and fewer manual touchpoints which lowers acquisition cost and raises both customer lifetime value and retention."

The Freedom SuperApp serves as the retail front-end for all services, offering a single sign-on and biometric authentication for multicurrency accounts, credit, investment, card management, and a lifestyle marketplace. This marketplace includes ticketing, travel bookings (Freedom Travel), media content (Freedom Media), grocery delivery (Arbuz), and on-demand home services. The SuperApp also integrates customer wealth information into a real-time net worth view, generating secured loan offers and enabling automated tax declarations, providing a notably easier and more comprehensive user experience than many standalone financial apps.

For entrepreneurs, the Freedom Business mobile application provides 24/7 access to financial management tools, including current accounts, payroll management, and advanced acquiring functionalities like online POS terminal ordering and QR code payments. This platform also features an AI assistant and an AirShop partner marketplace builder, demonstrating FRHC's commitment to digital innovation across its customer segments.

Tradernet, FRHC's flagship online trading platform, offers access to a diverse array of financial instruments on major global exchanges. Its robust data platform provides real-time market data and analytics, supporting various trading activities. The back-end infrastructure is designed for high transaction volumes, security, and efficiency, incorporating advanced compliance and risk management features. This technological depth provides a strong foundation for FRHC to compete with technologically advanced brokers by offering a reliable and feature-rich trading environment.

FRHC's commitment to technological leadership extends to significant R&D initiatives and new technological developments. The company is actively expanding into the telecommunications market in Kazakhstan through its Freedom Telecom subsidiary, aiming to establish a new independent operator offering high-quality internet connectivity, fixed wireless access (FWA), WiFi, OTT streaming, IPTV, and cloud solutions. This expansion, which includes the acquisition of Astel Group Ltd. on April 30, 2025, for $20.60 million (with $1.74 million in goodwill), is expected to require substantial capital expenditures for network infrastructure and licenses. The stated goal is to expand the ecosystem's reach to areas where traditional banking channels are less efficient, creating a bundled offering with other digital products.

Furthermore, on November 7, 2025, FRHC signed an agreement with the Ministry of Artificial Intelligence and Digital Development of Kazakhstan to develop a $2 billion Sovereign AI Hub in Kazakhstan, powered by NVIDIA . This ambitious project underscores FRHC's strategic intent to accelerate Kazakhstan's and Central Asia's AI leadership, positioning the company at the forefront of AI innovation in the region. The potential impact for investors lies in the long-term competitive advantage derived from leveraging AI to further enhance its financial and lifestyle services, optimize operations, and potentially unlock new revenue streams from AI infrastructure.

Financial Performance and Operational Dynamics

FRHC's financial performance in the three and six months ended September 30, 2025, reflects a period of strategic investment and adaptation to regulatory changes, resulting in mixed results. For the three months ended September 30, 2025, total revenue, net, decreased by 10% year-over-year to $526.10 million, down from $586.10 million in the prior year. This decline was primarily driven by a 22% decrease in insurance premiums earned, net of reinsurance, to $125.20 million, largely due to a regulatory cap on commissions for policies linked to bank and microfinance loans. Additionally, net gain on trading securities fell by 46% to $37.10 million, attributed to a decline in Kazakhstan sovereign bond prices.

Despite these headwinds, the Brokerage segment demonstrated robust growth, with total revenue, net, increasing by 34% to $234.88 million for the three months ended September 30, 2025. This was fueled by a 28% increase in fee and commission income from brokerage services, reaching $137.60 million, driven by a significant rise in retail brokerage customers from 555,000 to 776,000. Interest income from margin loans also surged by 78%, reflecting heightened customer activity. The Brokerage segment contributed a net income of $126.63 million for the quarter.

Conversely, the Banking segment experienced a 48% decrease in total revenue, net, to $105.72 million, resulting in a net loss of $32.07 million for the quarter. This was largely due to a $20.80 million decrease in fee and commission income, a strategic outcome of the company's cashback-based loyalty program aimed at customer base expansion rather than immediate revenue generation. The decline also stemmed from unfavorable movements in trading securities and reduced interest income from a smaller trading portfolio. However, the number of banking customers at Freedom Bank KZ grew substantially, from 2.52 million to 3.62 million, indicating successful customer acquisition despite the revenue impact of the loyalty program.

The Insurance segment also saw a 15% decline in total revenue, net, to $150.89 million, and net income decreased to $8.51 million, primarily due to the aforementioned regulatory cap on commissions. The Other segment recorded a 9% increase in total revenue, net, to $34.61 million, driven by expansion into telecommunications and higher e-commerce activity at Arbuz. However, this segment posted a net loss of $64.36 million, impacted by decreased other income and foreign exchange operations.

Consolidated net income for the three months ended September 30, 2025, was $38.70 million, a 66% decrease from $114.50 million in the prior year. Total expenses increased by 2% to $465.62 million, primarily due to higher payroll and bonuses, insurance claims, and cost of sales. Notably, interest expense decreased by 18% to $102.30 million, reflecting a strategic decision to reduce exposure to market risk by liquidating a portion of the trading portfolio funded by repurchase agreements. Income tax expense, however, rose to $21.80 million, with the effective tax rate increasing to 36% from 10.90%, mainly due to new Kazakhstani tax legislation imposing a 10% income tax on certain sovereign securities. The company also incurred a foreign currency translation loss of $65.50 million due to the depreciation of the Kazakhstan tenge.

For the six months ended September 30, 2025, total revenue, net, saw a modest 2% increase to $1.06 billion, while net income decreased by 54% to $69.10 million. This longer-term view reinforces the impact of the strategic shifts and regulatory changes on profitability, even as the company continues to expand its customer base and invest in its digital ecosystem.

Liquidity and Capital Resilience

FRHC maintains a robust liquidity and capital position, crucial for supporting its aggressive growth strategy. Operations are primarily funded through existing cash, cash generated from operations, returns from proprietary trading, and proceeds from bond sales. The company proactively manages its leverage and liquidity risk through established committees, ensuring compliance with net capital and capital adequacy requirements across its diverse jurisdictions.

As of September 30, 2025, FRHC reported total assets of $10.35 billion, up from $9.91 billion as of March 31, 2025. Net liquid assets, defined as cash and cash equivalents, trading securities, and margin lending/brokerage receivables (net of repurchase obligations), stood at $5.10 billion. While a significant portion of trading securities and cash is subject to collateralization agreements, which can amplify risk during market volatility, FRHC mitigates this by maintaining a majority of tangible assets in readily convertible cash and securities.

Cash flows from operating activities for the six months ended September 30, 2025, were a strong $1.02 billion, primarily driven by a decrease in trading securities and an increase in brokerage customer liabilities. However, net cash used in investing activities was substantial at $684.60 million, reflecting significant investments in loan issuance ($306.50 million), held-to-maturity securities ($271.80 million), and fixed/intangible assets ($109.70 million). The increase in loan issuance, up by $211.40 million year-over-year, highlights the growth in Freedom Bank KZ's loan portfolio, spurred by new banking products and advertising campaigns.

Financing activities generated $219.70 million in cash flows, primarily from bank customer deposits ($413.70 million) and proceeds from debt securities issuance ($270.20 million), partially offset by net repayment of securities repurchase agreement obligations ($519.90 million). FRHC's subsidiary, Freedom SPC, has actively issued U.S. dollar, euro, and Chinese yuan denominated bonds, with an aggregate principal amount of $742.80 million outstanding as of September 30, 2025, to support its long-term funding and investment strategy, including the telecommunications expansion. All regulated subsidiaries consistently exceeded their minimum net capital and capital adequacy requirements as of September 30, 2025, demonstrating strong financial health.

Outlook and Risk Considerations

FRHC's forward-looking strategy is firmly anchored in the continued expansion of its digital fintech ecosystem and diversification into new growth areas. The planned $2 billion Sovereign AI Hub in Kazakhstan, powered by NVIDIA (NVDA), signals a significant commitment to leveraging advanced technology for future growth and competitive differentiation. This initiative, alongside the ongoing development of Freedom Telecom and Freedom Media, positions FRHC to capitalize on the increasing digitization of financial and lifestyle services in its operating regions. Management intends to retain future earnings to fund this operational development and expansion, indicating a focus on reinvestment over immediate dividend payouts.

However, this aggressive growth strategy comes with inherent risks. Geopolitical risk remains a significant concern, given FRHC's extensive operations in regions potentially affected by conflicts and related economic sanctions. Such events can lead to market volatility, trade disruptions, and increased cybersecurity threats, potentially impacting financial performance and operational stability.

Market risk, encompassing interest rate, foreign currency exchange, and equity price fluctuations, also poses a continuous challenge. The Kazakhstani economy's dependence on oil exports and its correlation with the Russian ruble expose FRHC to significant foreign currency translation losses, as evidenced by the $65.50 million loss in the recent quarter due to tenge depreciation. A hypothetical 10% adverse change in the U.S. dollar's value could result in a total loss of $70.80 million.

Credit risk, particularly from margin lending and banking loans, is another key area of exposure. While FRHC employs real-time margin compliance monitoring and holds collateral, the risk from customer short sales is theoretically unlimited. The loan portfolio, heavily reliant on government mortgage programs, is susceptible to macroeconomic downturns and potential defaults. FRHC's adoption of ASC 326 (CECL) requires continuous estimation of lifetime expected credit losses, which are sensitive to economic forecasts.

Furthermore, legal and compliance risk is elevated due to operating in numerous jurisdictions with complex and evolving regulatory structures. The recent change in Kazakhstani tax legislation, introducing a 10% income tax on certain sovereign securities, significantly impacted FRHC's effective tax rate, highlighting the sensitivity to regulatory shifts. The ongoing Einride arbitration case and employment disputes also represent potential legal liabilities, though the company contests these claims.

Conclusion

Freedom Holding Corp. stands at a pivotal juncture, transforming into a formidable digital ecosystem that spans financial and lifestyle services across diverse and rapidly developing markets. Its strategic investments in cutting-edge technology, particularly its SuperApp, Tradernet platform, and ambitious AI and telecommunications initiatives, are designed to create a powerful competitive advantage and drive long-term customer engagement. While recent financial results reflect the short-term impacts of these strategic shifts and a dynamic regulatory environment, the underlying narrative is one of robust customer acquisition and a strong commitment to digital innovation.

FRHC's ability to maintain a solid liquidity position and exceed regulatory capital requirements provides a crucial foundation for its aggressive growth trajectory. The company's unique positioning in emerging markets, coupled with its integrated digital offerings, presents a compelling investment thesis for those seeking exposure to a rapidly expanding fintech conglomerate. Investors should closely monitor the execution of its technological roadmap, the impact of geopolitical and macroeconomic factors on its core markets, and its ability to effectively manage regulatory and credit risks as it continues to build out its expansive digital future.