Interactive Brokers Q2 Profit Jumps 16%

Key Points

• Adjusted EPS of $0.51 beat estimates by $0.04, while revenue of $1.48 billion surpassed expectations.

• Customer accounts soared 32% to 3.87 million.

• Trading volumes and daily average revenue trades (DARTs) both set new highs.

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Interactive Brokers Group (NASDAQ:IBKR), a global electronic brokerage known for its technology-powered, low-cost trading, reported fiscal 2025 second-quarter results on Thursday, July 17, that topped analysts' consensus expectations. Adjusted EPS of $0.51 beat the analyst estimate of $0.47, and revenue of $1.48 billion topped the expected $1.37 billion. Results showed double-digit growth in both revenue and net income, with customer accounts, trading volumes, and assets all reaching record levels.

The quarter also saw increased expenses in some areas and rising competitive pressure on commission margins, but the company maintained industry-leading profit margins and continued to grow its global footprint.

Source: Interactive Brokers: Note: Analyst estimates for the quarter provided by FactSet. YOY = Year over year. bps = basis points.

Business Model and Strategic Priorities

Interactive Brokers is a technology-driven brokerage firm offering global access to stocks, options, futures, foreign exchange, bonds, mutual funds, exchange-traded funds (ETFs), and cryptocurrencies across more than 160 market centers. It serves a mix of individual investors, hedge funds, proprietary trading groups, financial advisors, and introducing brokers.

The company’s core focuses are proprietary technology, broad global reach, cost efficiency, and regulatory compliance. Its automated trading and risk management systems provide fast, low-cost execution. Customer service spans advanced trading platforms, international regulatory compliance, and support for specialized client needs. Competitive pricing and the breadth of the product lineup have helped attract a fast-growing and diverse global customer base.

Highlights from the Quarter

Interactive Brokers' customer account total set a new record of 3.87 million, up 32% year over year, alongside 34% higher customer equity at $664.6 billion. Daily average revenue trades (DARTs), which measure how many trades clients make per day, rose 49% to 3.55 million. Stock trading volumes increased 31%, with options up 24% and futures up 18% compared to the year-ago period. Customer margin loans, which let investors borrow funds to invest, reached $65.1 billion, growing 18%.

Commission revenue increased 27% year over year, helped by a surge in transaction volumes across asset classes. However, the average commission per order slipped by 12% to $2.65, reflecting greater capture of liquidity rebates from certain exchanges. Net interest income rose 9% to $860 million, fueled by higher balances and increased securities lending, and included a $26 million one-time tax recovery benefit. Other fees and services decreased 9%, mainly due to a drop in risk exposure fees -- charges for clients who hold positions that introduce more risk for the company.

Total non-interest expenses climbed 7% to $376 million from the prior year. Higher general and administrative costs stood out, rising 17% due to an $8 million boost in advertising. Employee compensation and benefits increased to $163 million from $146 million, reflecting a modest staff increase of 3% over the prior year. Despite these increases, the pretax profit margin improved to 75% as adjusted, up from 73% as adjusted a year ago, showing operational efficiency even as costs rose. Income before taxes hit $1.1 billion, 25.5% higher than a year ago.

The company continued rolling out new product types and features, including 24-hour trading for a growing set of securities and more cryptocurrencies. It expanded its platform for Asian and European users and added new order types like "overnight plus day" to meet client demand for greater flexibility. These additions are part of the push to deepen its international business and help clients trade around the clock. Management reported particular strength in client acquisition across Asia and Europe.

One-time items had a notable impact this quarter. The $26 million tax recovery, as well as a $42 million swing in "other income" unrelated to the core brokerage operation, both boosted reported net revenue (GAAP). This move fits with the company’s stated policy of targeting a payout yield between 0.5% and 1% relative to the stock price.

Looking Ahead

Management did not issue specific forward guidance for revenue, earnings, or expense growth for the upcoming quarter or fiscal year. However, leadership reiterated plans to expand 24-hour trading, grow offerings in Asia and the Middle East, and extend the reach of its technology platform. Key trends to monitor will include competitive pressure on commission margins, further shifts in interest rates, and expense discipline, especially around marketing outlays.

Investors should keep a close eye on customer acquisition trends and the steady build-out of global product capabilities. As the company increases its spending on advertising and technology, margin performance and cost efficiency will remain central to the financial story.

Note: Revenue and net income are presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Interactive Brokers Group. The Motley Fool recommends the following options: long January 2027 $175 calls on Interactive Brokers Group and short January 2027 $185 calls on Interactive Brokers Group. The Motley Fool has a disclosure policy.