FUTU Q1 Earnings Fall Y/Y Due to RMB1.85B CSRC Penalty, Revenues Miss

Futu Holdings FUTU reported first-quarter 2026 net income of HK$6.00 ($0.77) per American Depositary Share, down 60.7% year over year.

Total revenues rose 24.7% year over year to $746.9 million but missed the Zacks Consensus Estimate of $773 million by 3.33%.

The quarter reflected a split between strong operating momentum and a sizable regulatory-related charge.

FUTU’s Q1 in Detail

Brokerage commission and handling charge income increased 14.3% year over year to $336.9 million, driven by higher trading volume, partly offset by a decline in blended commission rate. Management flagged a softer sequential trend in brokerage commissions, as trading activity skewed toward higher-priced U.S. stocks and options.

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Interest income grew 28% year over year to $338 million, supported by margin financing, bank deposits and the securities borrowing and lending business.

Other income rose 79.8% year over year to $72 million, reflecting strength in currency exchange income alongside IPO financing and fund distribution service income.

FUTU’s Key Metrics

Funded accounts increased 34.3% year over year to 3,590,325, while total trading volume climbed 29.1% to a record HK$4.15 trillion.

Futu added 225,000 net new funded accounts during the quarter, lifting the total to 3,590,325. Brokerage accounts increased 26.8% year over year to 6,284,404, while total users rose 14.9% to 30.2 million, underscoring continued platform scale.

Client asset metrics held up well despite market volatility. Total client assets increased 47.2% year over year to HK$1.22 trillion, and daily average client assets were HK$1.27 trillion, up 60.8% from the year-ago period. Total trading volume reached HK$4.15 trillion, including HK$3.00 trillion in U.S. stocks and HK$1.01 trillion in Hong Kong stocks. Meanwhile, margin financing and securities lending balance rose 44.9% year over year to HK$72.9 billion, driven primarily by stronger risk appetite. This pushed the margin financing and securities lending balance up 8% sequentially at quarter end.

FUTU’s Operating Details

Total costs were US$95.6 million, largely stable year over year. Gross profit rose 29.4% year over year to US$651.3 million. In the first quarter of 2026, gross margin expanded to 87.2% from 84% from the prior year quarter.

Interest expenses declined 11.6% year over year to US$52.9 million, primarily due to lower expenses associated with the securities borrowing and lending business, while processing and servicing costs increased 25.0% to US$21.7 million, mainly reflecting higher cloud service fees.

Total operating expenses increased 25.1% year over year to US$201.1 million. Research and development expenses rose 24.1% year over year to US$61.1 million, reflecting higher R&D headcount to support strategic initiatives and new markets.

Selling and marketing expenses increased 21.3% year over year to US$71.0 million, due to higher customer acquisition costs alongside growth in new funded accounts. General and administrative expenses climbed 30.3% year over year to US$69.0 million, primarily due to higher G&A personnel to support business development.

Income from operations increased 31.5% year over year to US$450.3 million. Operating margin improved to 60.3% from 57.2% in the first quarter of 2025, supported by strong top-line growth and operating leverage.

Net income decreased 61.2% year over year to US$106.0 million. Net income margin fell to 14.2% from 45.6% in the year-ago quarter. Non-GAAP adjusted net income, which excludes share-based compensation expenses, declined 58.5% year over year to US$117.3 million. The company reflected an aggregate proposed CSRC penalty of approximately RMB1.85 billion in its first-quarter financial statements as an adjusted subsequent event under U.S. GAAP.

Story Continues

FUTU’s Balance Sheet

As of March 31, 2026, cash and cash equivalents were HK$16.49 billion (US$2.1 billion) compared with HK$10.47 billion as of Dec. 31, 2025. Cash held on behalf of clients was HK$114.78 billion (US$14.64 billion), while loans and advances (current) increased to HK$73.69 billion (US$9.39 billion), reflecting a larger balance supporting platform activity.

Borrowings rose modestly to HK$15.71 billion (US$2 billion) as of March 31, 2026, from HK$12.14 billion as of Dec. 31, 2025, reflecting continued financing activity to support platform operations and margin lending growth.

FUTU’s Zacks Ranks & Stocks to Consider

FUTU currently has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader Zacks Finance sector are Ameris Bancorp ABCB, Acadia Realty Trust AKR and ProAssurance PRA.

Ameris Bancorp, Acadia Realty Trust and ProAssurance each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Ameris Bancorp’s 2026 EPS is pegged at $6.70, up 11.85% year over year.

The Zacks Consensus Estimate for Acadia Realty Trust’s 2026 EPS is pegged at $1.24, down 6.06% year over year.

The Zacks Consensus Estimate for ProAssurance’s 2026 EPS is pegged at $1.25, down 22.84% year over year.

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This article originally published on Zacks Investment Research (zacks.com).

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