On August 20, Futu Holdings Limited (NASDAQ:FUTU) reported the strongest quarter in its history, with trading volume pushing past HK$6 trillion for the first time. Buried inside those numbers, though, is a reminder that the company’s oldest and largest client base isn’t as untouchable as it once looked, with asset outflows tied to new compliance rules. The result is a business firing on nearly every cylinder except the one investors have relied on the longest.
Money Keeps Pouring In
Futu’s headline numbers back up the enthusiasm. Total revenue climbed 35.6% year over year to HK$7.2 billion, while net income jumped 41.6% to HK$3.6 billion, pushing net margin to 50.6%. Total trading volume rose 78.8% year over year to a record HK$6.42 trillion, with U.S. stock trading volume up 67.2% sequentially to HK$5.02 trillion as clients piled into semiconductor and artificial intelligence names. Client assets grew even faster than trading activity, up 43.6% year over year to HK$1.4 trillion, and margin financing and securities lending balances jumped 85.1% to HK$95.1 billion as an active Hong Kong IPO market encouraged clients to lean on leverage.
The growth isn’t confined to trading. Net new funded accounts rose 23.7% year over year to 252,000, led by Malaysia, where the business reached operating breakeven for the first time. Futu also picked up a Type A securities license from Thailand’s regulator, its third market launch in the ASEAN region, and became the first Hong Kong broker approved for securities-backed margin financing tied to virtual assets under an upgraded Type 1 license. In the U.S., moomoo’s newly launched prediction markets generated more than $200 million in trade volume in their first month, while Futu’s IPO business served nearly 60% of new Hong Kong listings during the quarter.
A Quiet Regulatory Squeeze
Not every part of the story is expanding. Chairman Leaf Li acknowledged that cumulative asset outflows tied to new regulations came to a mid-single-digit percentage of total client assets, the result of compliance-driven adjustments and risk-off sentiment among the company’s Mainland Chinese clients. Growth is also getting more expensive to buy. Customer acquisition cost rose sequentially to HK$2,600 as new regulatory developments weighed on net new funded accounts.
Profitability showed some strain too, with gross margin slipping to 86.3% from 87.4% a year earlier as processing and cloud service fees increased, while operating expenses rose 35.1% year over year as research and development, selling and marketing, and general administrative costs all climbed on investments in AI, Web 3 initiatives, and international expansion. Even the brokerage business had a trade-off, as blended commission rates fell because a larger share of trading shifted into lower-margin U.S. stocks and options.
Funds Are Cutting Back
Hedge fund ownership of Futu fell from 36 funds to 24 last quarter, a pullback suggesting some institutional holders trimmed positions even as the business posted record numbers. Short interest sits at 9.16% of the float, a level that points to a real, organized bear camp rather than token skepticism. Yet the stock trades at a forward price-to-earnings ratio of just 13.19, as of August 27, a modest multiple for a company still growing revenue and net income by more than a third.
The Next Chapter
Futu’s second quarter shows a business accelerating in most directions while absorbing new friction in one. Record trading volumes, expanding client assets, and fresh footholds in Thailand and virtual assets argue the growth engine still has room to run. Yet the mid-single-digit asset outflows tied to Mainland China compliance rules, paired with rising acquisition costs and thinning commission rates, show not every market is cooperating.
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