On August 11, eToro Group Ltd. (NASDAQ:ETOR) reported second-quarter results that read like a company trying to become more than a trading app. Net contribution rose 9% year over year to $229 million, and on the same day the company said it would buy US broker-dealer TradeZero for up to $230 million in cash and stock. Together, the earnings and the deal point to the same question hanging over ETOR: is the platform’s growing list of businesses reinforcing each other, or is the company buying growth it might have found on its own?
Bull Case: Every Market Shift Feeds The Platform
eToro’s core pitch is that users never have to leave the platform no matter where the market’s attention goes, and the second quarter backed that up. As investor activity rotated from crypto into commodities and then into equities, net trading contribution from capital markets jumped 25% year over year to $142 million, and the number of trades rose 64% year over year. Funded accounts grew 18% year over year to 4.28 million, climbing further to 4.32 million in July, while assets under administration reached more than $19 billion for the quarter. Adjusted diluted earnings per share came in at $0.68, up from $0.56 a year earlier, and the company closed the quarter with $1.2 billion in cash and short-term investments after generating $39 million from operations. eToro also used some of that cash to repurchase roughly 2.3 million shares for about $87 million during the quarter.
The TradeZero deal adds to that momentum. The broker generated approximately $80 million in revenue over the trailing twelve months with gross margins above 80% in the second quarter of 2026, and eToro expects the acquisition to be accretive to adjusted earnings per share in its first full year once it closes, a step targeted for the first half of 2027. Other parts of the business are scaling just as fast: etoro Money’s contribution grew 44% year over year to $26 million as total money transfers rose 92% year over year, card issuance across Europe climbed more than 30% quarter over quarter, and assets in the company’s savings product grew fifteen-fold year over year.
Bear Case: Crypto Cools While Costs Climb
Not every part of the business moved in the same direction. Net trading contribution from crypto fell to just $11 million, a decline that included a $2 million negative valuation hit on eToro’s own corporate crypto holdings, leaving that balance at $30 million by quarter’s end. The pullback carried into the next quarter: July assets under administration slipped to $18.5 billion, down 5% year over year as crypto prices fell, and the number of trades in July came in flat compared to a year earlier.
Spending is climbing at the same time. Adjusted operating expenses reached $151 million for the quarter, up 1% quarter over quarter, with sales and marketing spending of $68 million equal to 29% of net contribution, and management expects adjusted operating expenses to run slightly higher again in the third quarter. On top of that, the $230 million TradeZero deal will sit on the books for months before it closes, expected in the first half of 2027, before any of the promised earnings benefit shows up.
Cheap Multiple, Cautious Money
The number of hedge funds holding eToro fell from 28 to 26 quarter over quarter, a modest pullback among institutional investors. Short interest sits at 5.95% of the float, enough to show some organized skepticism without signaling a heavy bearish bet. The stock trades at a forward price-to-earnings ratio of 9.70 as of August 19, a multiple that assumes little of the growth management just reported.
A Story Still Being Written
eToro’s second quarter shows a business that can shift with the market and still grow, but one that is also spending heavily to keep that going. Funded accounts, capital markets trading, and eToro Money are all expanding faster than net contribution overall, while crypto’s slide and rising operating expenses show the cost of that expansion. The TradeZero and Zengo deals bet that eToro can bolt on new revenue without diluting margins, a bet that will not be testable until the acquisitions close in 2027.
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