Interactive Brokers Group, Inc. (IBKR) Earnings

Management highlights

### Overall Financial and Operational Performance - The quarter achieved record levels across key metrics: commissions, net interest income, total net revenue, total accounts, new account additions, client equity, and daily trading volume. Pre-tax profit margin hit 77%, marking the seventh consecutive quarter with margins above 70%. - Client equity grew 40% year-over-year to $930 billion. Uninvested client cash balances rose 27% year-over-year to a record $182 billion, driven by 34% new account growth. Total assets grew 36% year-over-year to $247 billion, with no long-term debt outstanding; firm equity rose 20% to $22.3 billion. - Commissions rose 30% year-over-year to a new record. Net interest income rose 23% year-over-year to over $1 billion, driven by higher customer balances. Other fees and services grew 40% to $87 million. Adjusted other income came in at $66 million for the quarter. - Daily average trading volume reached 4.8 million trades, up 36% year-over-year. Option contract volumes rose 17%, stock share volumes rose 14%, and futures volumes rose 2% year-over-year. Overnight trading volumes nearly tripled year-over-year to 10.9 million trades. ### New Product and Market Launches - Launched trading access for Korea, becoming the first eBroker to offer access to the Korea Stock Exchange and Nextrade overnight ATS; Korean memory chip stocks saw high client demand. - Offered the SpaceX IPO directly to eligible UK and European retail clients, and expanded cryptocurrency trading across all of Europe (crypto was already available in the UK starting 2024). - Released IBKR Connector in partnership with Anthropic, OpenAI, and XAI, enabling clients to connect their AI chatbots directly to their IBKR accounts for portfolio analysis, research, and order preparation, with a strong early start. - Launched IBKR Prediction Markets, a unified platform that aggregates event contracts from ForecastX, CME, and Kalshi, focusing on economic, political, and climate-focused contracts to allow targeted hedging; does not offer sports or entertainment contracts. Also introduced trading in CBOE's new short-dated binary options on the S&P 500. ### Client Segment Growth and Improvements - The introducing broker pipeline remains very strong, matching last quarter's robust performance, with a growing number of new committed integrations; more new partners are existing firms expanding their offerings rather than new startups. - For the hedge fund segment, added portfolio manager video presentations to the hedge fund marketplace and simplified the investment acceptance process for funds, driving higher client engagement and investment flows. The High Touch program continues to receive positive client feedback. ### Internal and Regulatory Milestones - Received preliminary conditional OCC approval for a National Trust Bank charter, required to directly custody assets for mutual fund and ETF customers; the bank is expected to be operational by the end of 2026. - Expanded internal AI adoption to improve efficiency and maintain low-cost structure, enhancing client service, compliance, surveillance, and new account onboarding to support scaling with new client growth. - Adjusted the average duration of the firm's investment portfolio slightly longer after the short to medium-term U.S. dollar yield curve turned positive, while still maintaining a tight maturity match between assets and liabilities. The average duration remains under 30 days.

Guidance

- Management does not commit to a specific long-term account growth target, but has consistently delivered account growth above the prior 20% normalized target. - Management expects the National Trust Bank charter to be operational by the end of 2026. - Fully autonomous agentic AI trading will be offered in the future, with appropriate client guardrails and testing to ensure client understanding of risks before rollout. - The company will continue expanding access to perpetual futures products as more exchanges launch popular perpetual instruments, following successful adoption of Coinbase crypto perpetuals.

Segment performance

The transcript does not break out financial performance for distinct product segments with separate absolute revenue figures and revenue contribution percentages. All financial results are reported on a consolidated company-wide basis.

Risks & headwinds

- Forward-looking statements are inherently uncertain, and actual results may differ materially from projections due to factors outside the company's control, including changes to interest rates, geopolitical events, and market volatility. - There is uncertainty around the future direction of U.S. interest rates, with inconsistent monetary policy actions across global central banks; changes to benchmark rates directly impact annual net interest income. - Rapid margin balance growth could reflect excessive client risk-taking, though management reports continuous monitoring and is comfortable with current risk levels. - Chinese regulatory action against unlicensed brokerage activity for mainland Chinese investors could create reputational or operational risk, though Interactive Brokers has long been in full compliance with local regulations.

Analyst Q&A

• Q: With increased marketing spend and accelerated account growth above the historical 20% target, has marketing ROI improved, and can the company sustain higher than 20% account growth going forward? Also, is rapid margin balance growth a risk concern?

  A: Management states marketing ROI has not increased, just grown proportionally with higher spend. While management avoids overpromising, account growth has consistently exceeded 20% for some time after an earlier 30% growth prediction was followed by a pullback to 20%. For margin growth, management continuously monitors client risk and is comfortable with current levels, seeing it as healthy activity.

• Q: What is the current level of excess capital, and what is the status of the acquisition pipeline? Also, how have recent Chinese regulatory actions affected the company's Hong Kong business?

  A: Current excess capital after required buffers is ~$10.3 billion, up ~$1.1 billion from last quarter. While the number of potential acquisition targets offered by investment banks has increased dramatically, no targets have yet stood out as worthy of pursuing. The company has long complied with Chinese regulations, does not advertise in mainland China, and verifies non-mainland residence for accepted accounts. Following the regulatory clampdown on Tiger and Futu, the company has seen an uptick in account and asset transfers from those firms to Interactive Brokers.

• Q: What drove the decision to aggregate multiple prediction market venues on the IBKR platform, and what has early adoption looked like? Why have trades per account and commission per order stayed flat even with strong new account growth?

  A: The decision aligns with IBKR's core mission of providing client access to all global marketplaces; aggregating venues increases available liquidity for clients and attracts more institutional clients to the platform. The offering remains focused exclusively on economic, political, and climate event contracts, with no plans to add sports or entertainment contracts. Flat metrics are partially due to the strong current market environment that has boosted activity from both new and existing accounts, and variation from the mix of new accounts (large active hedge funds vs smaller accounts from introducing brokers) balances out over time.

• Q: How strong is the current securities lending performance, how much of the strength comes from the SpaceX IPO, and what is the outlook for coming quarters? What is the current state of ForecastX prediction market volume concentration?

  A: Securities lending growth is driven by two core factors: overall growth in customer positions and short interest that increases lendable supply, and temporary strength from high-demand hard-to-borrow specials like hot IPO stocks such as SpaceX. The company has built systems and teams to capture these opportunities when they arise, but the timing and level of specials are unpredictable. For ForecastX, volume is currently concentrated in temperature contracts, which matches the company's current product market focus; management plans to continue expanding weather-related offerings, including upcoming hurricane landfall contracts that will serve insurance industry hedging needs.

• Q: What has been the early outcome of launching Korean trading access, and what is the roadmap for IBKR's new agentic AI tools? Will autonomous trading be offered in the future?

  A: Entry to Korean trading was well-timed amid high global demand for Korean semiconductor stocks, and trading volumes have grown steadily since launch without any negative impact from the listing of a Korean ADR in the U.S. Early adoption of IBKR Connector is very strong, with significant client usage even before public launch; currently, the service uses a human-in-the-loop model, where AI prepares orders that clients must manually approve to prevent unintended trading. Fully autonomous agentic trading will be offered in the future, but only after proper guardrails are in place and clients complete testing to confirm they understand the risks of autonomous execution.