Futu Holdings Limited (FUTU) Earnings

Management highlights

### Client Growth and Geographic Expansion - Added 225,000 net new funding accounts in Q1 2026, bringing total funding accounts to 3.59 million, up 34% year-over-year and 7% quarter-over-quarter. Total client assets were flat quarter-over-quarter but up 47% year-over-year, with double-digit sequential client asset growth in Japan, Australia, and Canada. - Margin financing and securities lending balance rose 8% sequentially to HK$72.9 billion at quarter end, driven by rising investor risk appetite. - Malaysia led all markets in net client addition for another quarter, supported by effective U.S. equities marketing and strong IPO product capabilities that capitalized on the active Malaysian IPO window. - International expansion is in full acceleration: overseas Moomoo funded accounts surpassed 2 million in Q1, with revenue more than doubling in five overseas markets, and average AUM per overseas client reaching ~$18,000, significantly higher than peer regional online platforms. Trading Activity and Market Dynamics - Total group trading volume hit a record HK$4.15 trillion, up 29% year-over-year and 4% quarter-over-quarter. U.S. stock trading volume remained broadly stable at HK$3 trillion, while Hong Kong stock trading volume rose 22% sequentially to HK$1 trillion driven by bottom-fishing activity amid market volatility. - Investment interest in AI shifted down the value chain from semiconductor names to AI infrastructure beneficiaries; active trading in China technology and newly-listed AI-related firms offset softer momentum in the consumer sector. - Client engagement strengthened amid precious metal volatility and geopolitical tensions, leading to the second-highest quarterly net asset inflow on record. Product and Business Expansion - PandaTrade (Futu's Hong Kong crypto exchange) officially obtained second-phase VATP approval from the Hong Kong SFC and commenced full operations, with a portion of existing crypto trading volume and AUM already migrated from Futu Securities. Future plans include adding security-backed margin financing for virtual assets, OTC trading, broader token support, staking services, and exploring institutional use cases to build out key Hong Kong Web3 infrastructure. - The product selection of fund products has been expanded: Futu became one of the first brokers in Hong Kong to offer space-economy-themed mutual funds, and launched local equity funds in Singapore under the MAS Equity Market Development Program. Retail subscriber numbers for structured products doubled sequentially, with new gold and oil-linked structured products launched. - 625 IPO distribution and IR clients are served as of quarter end, up 26% year-over-year; 12 IPOs saw over HK$100 billion in subscriptions on Futu's platform in Q1, with six issuers appointing Futu as overall coordinator for Hong Kong listings. - In the U.S., Futu officially received regulatory approval to operate a prediction market brokerage business, and will soon launch event contract trading (including sports-related products) to enhance value proposition for active traders. - As of May 2026, Futu has already supported South Korean stock real-time market data, and is on track to launch full South Korean equity trading first in Hong Kong and Singapore in June 2026, responding to strong client demand for exposure to Korean AI supply chain names. Regulatory and Compliance - Futu has already fully stopped new account openings for mainland Chinese identity holders, and strengthened account review and anti-fraud mechanisms, cumulatively rejecting tens of thousands of non-compliant applications over the past two years. - The company received an RMB 1.85 billion administrative penalty from the CSRC Shenzhen Bureau, which was fully reflected as an adjustment in Q1 2026 financial statements; management noted the penalty does not impact business fundamentals or financial stability.

Guidance

- Full-year guidance of 800,000 net new funding accounts remains unchanged, with management expecting the latest regulatory update to have no material impact on this target. - Malaysia is expected to achieve break-even within the next 6 to 12 months. - South Korean equity trading is expected to launch first in Hong Kong and Singapore in June 2026, with rollout to additional regions to follow. - Second quarter 2026: Net new funding accounts are expected to remain stable sequentially, with strong net inflow momentum maintained from Q1. AUM and total trading volume are both positioned to achieve double-digit sequential growth, supported by positive market performance and active client trading. Overall interest income is expected to remain broadly stable quarter-over-quarter.

Segment performance

Overall: Total revenue reached HK$5.9 billion, up 25% year-over-year. Total gross profit was HK$5.1 billion, up 29% year-over-year, with gross margin of 87.2% (up from 84% in Q1 2025). Net income after the regulatory penalty adjustment was HK$831 million; adjusted net income before the penalty was HK$2.9 billion, up 36% year-over-year. Brokerage commission and handling charge: Revenue of HK$2.6 billion, up 14% year-over-year, contributing 44.1% of total revenue. Interest income: Revenue of HK$2.7 billion, up 28% year-over-year, contributing 45.8% of total revenue. Approximately 40% of interest income comes from idle cash, 40% from margin financing, and the remainder from securities borrowing and lending. Other income: Revenue of HK$564 million, up 80% year-over-year, contributing 9.6% of total revenue. By geographic segment: Hong Kong contributed the second-largest share of net new funding accounts in Q1 2026, and holds over 50% market share among local Hong Kong residents. Malaysia led all markets in net new client addition for the quarter, with improving profitability on track to break even within 6-12 months. Singapore delivered double-digit sequential net new funding account growth, with a 3-year CAGR of over 50% in average client assets. Japan saw double-digit sequential growth in U.S. stock trading volume and 100% growth in U.S. options contract volume, with double-digit sequential client asset growth. Australia and Canada also achieved double-digit sequential client asset growth. As of Q1 end, over 55% of total funding accounts are under the overseas Moomoo brand, with Singapore and the U.S. contributing the majority of Moomoo's total client assets.

Risks & headwinds

- Regulatory changes for cross-border securities business involving mainland Chinese investors: while management expects no material impact on full-year results, the business faces ongoing compliance requirements that require steady implementation of adjusted operating processes. - Intensifying competition in the Hong Kong market from new entrants including incumbent banks and other fintech platforms, though management believes its established brand and product moat will offset this risk. - Market volatility impacting equity valuations of client holdings, which can lead to pressure on reported total client assets even amid steady net inflows. - Early-stage development of the virtual asset/crypto industry in Hong Kong and other regulated jurisdictions, which requires continued investment in product development and investor education before meaningful monetization can be achieved.

Analyst Q&A

• Q: What is the company's understanding of the latest updated cross-border securities regulatory requirements, and what impact will they have? What is the regional breakdown of net new clients and AUM? /

  A: These are industry-wide uniform regulatory adjustments, and Futu will actively comply with all requirements. As of Q1 end, mainland Chinese funding accounts represent ~13% of total accounts, 17% of total client assets, and contribute ~20% of total revenue. The two-year rectification period only restricts new deposits and purchases for mainland-based clients, not requiring account closures. Futu has already stopped new account openings for mainland clients years ago. The regulatory update is not expected to have a material impact on the full-year 800,000 net new funding account target. For regional breakdown, Malaysia and Hong Kong collectively contributed over half of Q1 net new funding accounts, with Singapore contributing the largest share among remaining markets. Over 55% of total funding accounts are under the overseas Moomoo brand, with Singapore and the U.S. contributing most of Moomoo's client assets. (769 characters)

• Q: Following the recent regulatory updates and disclosed administrative penalty, have credit lines, funding costs, or credit ratings with banking partners changed? What is the growth runway for mature markets like Hong Kong and Singapore? /

  A: All credit facilities remain intact, and ongoing discussions with rating agencies and bank partners have not resulted in any changes to credit ratings or terms; the upcoming annual S&P rating is expected to be stable. While user penetration is already high, there is massive untapped potential in growing client asset share. Total wealth management assets in Hong Kong and Singapore exceed HK$35 trillion and HK$34 trillion respectively, while Futu's total client assets are just over HK$1 trillion. Futu's deep product capabilities and brand equity position it to continue capturing share in these large, mature markets. (612 characters)

• Q: What opportunities does Futu see in the U.S. prediction market, and what is the company's strategic plan? What is the update on Hong Kong's VATP crypto business, and what is the long-term strategy? /

  A: Futu has obtained the necessary license to operate prediction market brokerage and clearing in the U.S., and has completed product development, with launch to U.S. retail clients coming soon. Prediction markets are more intuitive and flexible than traditional derivatives, which helps drive client acquisition, trading activity, and client conversion. Beyond capturing near-term growth, the business helps build core know-how in product design, risk management and operations to expand into other jurisdictions later. For the Hong Kong VATP business, PandaTrade is already fully operational post-approval, with plans to add OTC trading, more tokens, staking, and eventually tokenized securities trading, with the goal of becoming a key Hong Kong Web3 infrastructure. The crypto business across all regions is still in early stages, with long-term growth potential as traditional finance and crypto converge. (813 characters)