Etoro Research:
eToro: Getting Paid to Wait for America
- 1. The Thesis, Stated Plainly
- 2. What eToro Actually Is
- 3. The Mid-2026 Snapshot
- 4. Operating Leverage, Shown Not Told
- 5. Why a Bad Month in Crypto Doesn't Sink This
- 6. The Monthly Pulse Data
- 7. The Superapp, and Where AI Actually Fits
- 8. The US Question
- 9. TradeZero: Buying the Keys, Not Renting Them
- 10. Why TradeZero Specifically
- 11. The Sell-Off We Think the Market Got Wrong
- 12. From Twelve Funding Rounds to Nasdaq
- 13. Who's Actually Behind This
- 14. What You're Actually Paying
- 15. What Could Go Wrong
- 16. Muffett's Take
1 The Thesis, Stated Plainly
Here's the case in four sentences, before we spend the rest of this note backing each one up with numbers. eToro built the best social investing platform in the world outside the United States, and it has spent years quietly, methodically clearing the regulatory path to bring that same platform fully into the one market that actually moves the needle on its earnings. It just bought a US broker-dealer that hands it the last missing pieces of infrastructure to do exactly that. It's profitable, growing net income at 77% a year, and trading at roughly ten times trailing earnings — a multiple you'd expect from a company in decline, not one compounding like this. And the stock just got cheaper for reasons that have almost nothing to do with any of that. We think that's a gift, not a warning sign.
2 What eToro Actually Is
If you've never used it, eToro is a multi-asset trading and investing platform — stocks, crypto, commodities, currencies, options — built around a genuinely different idea from every legacy brokerage: your trading activity is public, searchable, and copyable. The platform's signature feature, CopyTrader, lets any user automatically mirror the trades of top-performing investors on the platform in real time, for a cut of nothing extra beyond the normal trading economics. It turned investing from a solitary, intimidating activity into something closer to a social feed, and it built a large, loyal, global user base doing it — 4.28 million funded accounts and $19.2 billion in assets under administration as of mid-2026. This isn't a story about a company trying to find product-market fit. It's a story about a company that found it years ago, overseas, and is now working through the harder, slower problem of bringing that same product to the one market where the real money is.
3 The Mid-2026 Snapshot
Start with where the business actually stands today, because the headline numbers alone tell you this isn't a turnaround story. It's a growth story that happens to be trading like a value stock.
Assets under administration of $19.2 billion, up 10% year over year. Funded accounts up 18% to 4.28 million — real user growth, not just existing users trading more. Q2 net contribution of $229 million, up 9%. And the number that actually matters most to us as owners: GAAP net income of $53 million for the quarter, up 77% year over year, sitting on top of a $1.2 billion cash position with essentially no meaningful debt overhang. A company growing revenue at high single digits while growing profit at 77% is a company where the operating model is working exactly as designed.
4 Operating Leverage, Shown Not Told
We don't love the phrase "operating leverage" as a piece of jargon, but we love what it actually looks like on a page, and this is about as clean an example as we've seen this year.
Look at the shape of those three bars. Net contribution grew 9%. Adjusted EBITDA grew 9%, almost in lockstep. And then GAAP net income grew 77% — more than eight times faster than the revenue line underneath it. That gap is exactly what you want to see in a platform business with largely fixed technology and compliance costs: once the infrastructure is built and paid for, each incremental dollar of revenue drops disproportionately to the bottom line. Earnings per share nearly doubled year over year, from $0.31 to $0.58. This is not a company burning cash to buy growth. It's a company where growth is quietly compounding into real per-share profit, which is precisely the setup that eventually forces a stock price to catch up to the business underneath it.
5 Why a Bad Month in Crypto Doesn't Sink This
The single biggest question hanging over this stock right now is crypto, so let's address it head-on rather than skating past it. Crypto trading volumes on eToro fell 73% year over year in July. That's a real number and we're not going to pretend otherwise. What we'd push back on is the idea that a soft month in crypto tells you much about the health of the whole platform, and this next slide is exactly why.
eToro was built as a multi-asset platform on purpose, and this is the payoff. Users don't leave the platform when crypto cools off — they rotate. Roughly 60% of users active in commodities trading convert into equities trading, and there's a 90% overlap between the equities and crypto trading populations. In plain terms: it's largely the same engaged users moving their attention and capital between asset classes as market conditions shift, not different pools of users who show up only when their preferred asset is hot and vanish otherwise. A platform reliant on a single asset class lives and dies by that asset's cycle. A platform where users just rotate to whatever's interesting this quarter has a much sturdier floor underneath it, and that floor is exactly what shows up in the revenue numbers even during a crypto lull.
6 The Monthly Pulse Data
eToro publishes monthly activity metrics, which gives us an unusually clear, real-time window into exactly this dynamic rather than having to wait for the next quarterly report.
May 2026 was a strong month across the board — 64 million capital markets trades, 2.2 million crypto trades, $1.6 billion in total money transfers, double the prior year. July was softer on crypto specifically, down to 1.4 million trades, that 73% year-over-year decline we mentioned. But total money transfers onto the platform still grew 10% year over year in July, and capital markets trading activity stayed robust throughout. The company's own synthesis of this data is the same conclusion we'd draw independently: strong capital markets activity and sustained money transfer growth provide a genuinely robust revenue floor, even while crypto specifically goes through a quiet patch. This is a platform-level business, not a crypto exchange wearing a trading-app costume, and the data backs that up directly.
7 The Superapp, and Where AI Actually Fits
This is the part of the thesis we find genuinely exciting rather than just defensively reassuring, because it's where we think the AI platformisation megatrend and eToro's social-first design actually compound each other in a way most mainstream brokers can't easily copy.
Most brokers are built around a single core motion: you research, you click buy. eToro's architecture is built around four connected pillars — trading, investing, wealth management, and neo-banking — all tied together by an AI agent the company calls Tori, which delivers proactive, personalized insight across every part of the platform rather than sitting off to the side as a chatbot nobody uses. Layer that on top of a platform where every trade is already public and copyable by design, and you get something a plain brokerage account genuinely struggles to replicate: an AI system that isn't just analyzing a single user's own portfolio in isolation, but has a live, structured feed of what thousands of real, ranked, performance-tracked investors are actually doing with real money, right now. Mainstream brokers are racing to bolt AI research tools onto a fundamentally private, individual account structure. eToro's AI has a social graph of real trading behavior to learn from that a typical brokerage simply doesn't have access to. That's the specific edge we think gets underpriced by a market currently focused on last month's crypto volumes instead.
8 The US Question
Here's why the United States matters so disproportionately to this story. eToro already has real US presence — crypto trading is live in 48 states, held back only in Hawaii and Nevada, after years spent earning New York's notoriously strict BitLicense and money transmitter license. But crypto-only access in the US is a fraction of the full platform experience users get everywhere else. The full multi-asset, social-investing experience — equities, options, the copy-trading feed that's the entire point of the product — has to clear a much heavier US regulatory bar: broker-dealer registration, FINRA membership, state-by-state securities licensing. Cracking that fully is, in our view, the single largest unrealized lever on this entire earnings model, because the US is both the largest pool of retail trading activity in the world and the market where eToro's brand and product are, relatively speaking, still least established. Low penetration in the market that matters most isn't a weakness here. It's the opportunity.
9 TradeZero: Buying the Keys, Not Renting Them
Which brings us to the acquisition that, in our read, is the whole ballgame. On August 11, alongside the Q2 earnings beat, eToro announced it would acquire TradeZero, a US-focused active trading brokerage.
The price is up to $231 million, split between cash and up to 2.5 million newly issued shares, for a business generating roughly $80 million of revenue over the trailing twelve months at an 81% gross margin — genuinely excellent unit economics for the asset being acquired, not a distressed bolt-on. Management has said it expects the deal to be accretive to adjusted EPS in the very first year after closing, which is expected in the first half of 2027. Paired against the Zengo and Bit2C acquisitions completed earlier in Q2 2026 — which shored up eToro's self-custody crypto and core Web3 technology — this is a company running a disciplined, two-track capital allocation playbook: strengthen the technology moat on one side, buy the fastest path into the market that matters most on the other. That is not the capital allocation pattern of a company throwing money at growth for its own sake.
10 Why TradeZero Specifically
It's worth being specific about what TradeZero actually hands eToro, because the fit is unusually clean rather than a grab-bag justification bolted on after the fact.
Infrastructure: TradeZero brings a fully built-out global broker-dealer operation and its own proprietary short-locator technology directly into the eToro ecosystem — the unglamorous plumbing that takes years and real regulatory capital to build from scratch, now bought rather than built. Geography: it accelerates eToro's US footprint immediately while also opening the door to Canada, a market eToro doesn't currently serve at scale. Audience: TradeZero's user base skews toward highly engaged, active traders — a demographic that complements rather than cannibalizes eToro's broader retail and social investing crowd. Put together, this isn't a company buying revenue for the sake of a bigger number next quarter. It's a company buying the specific, hard-to-build infrastructure and audience it was missing to finish the US expansion story it's been building toward for years.
11 The Sell-Off We Think the Market Got Wrong
Now for the part that we think actually creates the opportunity here. eToro reported this Q2 beat and announced the TradeZero acquisition on the same day, August 11. Earnings per share of $0.68 beat analyst estimates of $0.61. Net contribution and adjusted EBITDA both grew 9%. Net income grew 77%. And the stock fell roughly 8% that same day, later extending toward an 11% decline, before stabilizing and edging back up over the following two sessions to today's $28.94.
Why would a stock fall on a genuine profit beat plus a smart, cheap, EPS-accretive acquisition? Based on the coverage we've reviewed, the sell-off tracked almost entirely to that 73% year-over-year drop in July crypto trading volumes and some analyst questions about capital allocation discipline going into an acquisition — not to anything wrong with the core business, the deal terms, or the earnings themselves. Cantor Fitzgerald, for what it's worth, trimmed its price target from $61 to $53 specifically citing crypto softness, while keeping a constructive stance overall. That's a market re-rating a single volatile line item on the income statement, in a quarter where the rest of the business demonstrably strengthened. We understand why a headline "crypto volumes down 73%" number spooks a trading algorithm. We don't think it should spook a long-term owner of this business, and we said as much before we opened a single filing on this name.
12 From Twelve Funding Rounds to Nasdaq
A little history helps explain why this company has the balance sheet and institutional backing to execute a plan like this rather than stretching to make it happen.
eToro raised $423 million across twelve rounds on its way to a $3.5 billion peak private valuation at its March 2023 Series F. When it finally went public in May 2025, demand was strong enough that the deal priced at $52 a share — above the original $46 to $50 marketed range, and upsized 19% — raising $713 million with Jefferies as lead bookrunner. That's a company that came to market from a position of strength, not desperation. The stock trading at $28.94 today, well below that $52 IPO price, isn't a reflection of the business getting worse since then. Net income is up. Users are up. Assets under administration are up. It's a reflection of a broader risk-off rotation away from richly priced 2025-vintage IPOs, landing on a company that, in the meantime, has simply kept executing.
13 Who's Actually Behind This
We don't put a lot of weight on logos alone, but a company's investor base tells you something about how seriously sophisticated, patient capital has diligenced the underlying business.
BlackRock anchored the IPO itself. SoftBank Vision Fund, ION Group, and Velvet Sea Ventures backed the late-stage private rounds. Spark Capital, Social Leverage, BRM, and Ping An were there even earlier. This is not a story about a scrappy retail favorite that institutions have ignored. It's a company that has been diligenced, funded, and taken public by some of the more demanding capital allocators in the world, at every stage of its life. That doesn't make the stock a buy on its own — plenty of well-backed companies still trade poorly — but it does mean the current cheap valuation isn't a reflection of the smart money staying away. It's a reflection of a market currently more focused on last month's crypto print than on the underlying franchise these investors bought into.
14 What You're Actually Paying
Here's the number that, more than anything else in this note, is what actually got our attention. eToro trades today at roughly 10.4 times trailing earnings, with a forward P/E of just under 12. For a company that just grew net income 77% year over year and is executing a clearly accretive US expansion acquisition, that is a remarkably undemanding multiple — the kind of number you'd expect from a business in slow decline, not one compounding profit this fast.
Compare today's $28.94 to the $52 IPO price from May 2025, and you're looking at a stock down about 44% from where it debuted, and similarly down from its 52-week high of $51.88. Wall Street's own numbers suggest the market largely agrees the current price undersells the business: the analyst consensus across 14 covering analysts is "Buy," with an average 12-month price target of $49.86 — implying more than 70% upside from here. We'd treat that average with the usual caveat that individual targets are scattered widely, from Keefe Bruyette's more cautious $38 up to Citizens' considerably more bullish $90, and that several of those targets predate this week's earnings and acquisition news and will likely get refreshed in the coming days. But even the more conservative end of that range implies real upside from a starting multiple this low.
15 What Could Go Wrong
- Crypto weakness could run longer than a quarter: a 73% year-over-year decline in crypto trading volumes is a real trend, not noise, and if it persists or deepens it will show up in net contribution even with capital markets activity holding up.
- The TradeZero close is a long way off: the deal isn't expected to close until the first half of 2027, leaving well over a year of regulatory approval risk, integration risk, and simple execution risk between today and the payoff this note is largely built around.
- The US market is genuinely competitive: Robinhood, traditional discount brokers, and a growing field of AI-driven trading tools are all fighting for the same active-trader audience TradeZero is meant to unlock. eToro's social-graph advantage is real, but it isn't uncontested.
- Regulatory complexity in the US is real and ongoing: broker-dealer registration, FINRA oversight, and state-by-state securities rules are precisely the kind of friction that has kept eToro's full platform out of the US at scale this long, and TradeZero doesn't eliminate that friction, it just gives eToro better tools to manage it.
- Dilution from the deal itself: up to 2.5 million newly issued shares as part of the TradeZero consideration is a modest but real dilution to existing shareholders, on top of whatever share count changes come from ordinary equity compensation.
- Sentiment can stay negative longer than the fundamentals justify: a stock that's already down 44% from its IPO price can keep drifting on macro or sector sentiment even while the underlying numbers improve, and we have no particular insight into when that gap closes.
16 Muffett's Take
We came into this note already believing eToro was a buy, and we want to be straightforward about that rather than pretend we arrived at this conclusion cold. What building this note did was give us the numbers to back that instinct with something more than conviction. A social investing platform with a genuine structural edge in how AI can actually be applied to trading — because it has a live feed of real, ranked trading behavior most brokers simply don't have — sitting on $1.2 billion of cash, growing net income 77% a year, trading at roughly 10 times trailing earnings, having just bought the specific US infrastructure it was missing at a price that's accretive from year one. That combination doesn't come along often, and when it does, it's usually because the market is temporarily distracted by something narrower and noisier — in this case, a soft month of crypto trading — than the actual business underneath it.
We think the sell-off following the TradeZero announcement is exactly the kind of overreaction we look for: real news, misread by a market fixated on the wrong number. The core call here is simple. If eToro closes the TradeZero deal on schedule and continues converting its existing 48-state crypto footprint into full multi-asset US market share, the earnings base this stock is trading against today looks conservative in hindsight. We'd rather own that setup at $28.94 than wait for the headline to read better and pay more for the same business.
