Futu's 2Q26 Results Significantly Beat Expectations, but Growth Sustainability Replaces Regulatory Issues as the Core Focus

Overview

This report reviews Futu's 2Q26 results and management conference call. Goldman Sachs believes that revenue, profit, and major operating metrics generally exceeded expectations this quarter, further validating the growth thesis driven by overseas client acquisition, asset accumulation, and monetization capabilities. However, as the regulatory impact becomes more manageable, market debate has shifted toward whether record trading activity can be sustained and whether non-Mainland China operations can continue contributing revenue and profit.

Core views

Futu reported 2Q26 revenue of HK$7.0bn and net profit of HK$3.6bn, up 36% and 42% YoY, respectively, and 16% and 28% above Goldman Sachs' forecasts. Major operating metrics also generally exceeded expectations: client assets under management were HK$1.4tn, 5% above Goldman Sachs' forecast; trading turnover was 19.6x, 5.9x above the forecast; the margin financing and securities lending balance was HK$91.9bn, 15% above the forecast; assets per paying client were HK$364k, 3% above the forecast; and ARPU was HK$5.9k, 15% above the forecast. Based on stronger trading activity, higher client assets, improved monetization, and better-than-expected client acquisition performance, Goldman Sachs raised its 2026E, 2027E, and 2028E revenue forecasts by 7%, 5%, and 3%, respectively, and adjusted its net profit forecasts by 8%, 3%, and -0.3%, respectively. The increases were partly offset by two factors: management indicated that trading activity had slowed after entering 3Q26, while client acquisition spending increased in July. The regulatory impact appears to be becoming manageable. Management stated that cumulative client asset outflows following the May 22 regulatory changes represented approximately a mid-single-digit percentage of total client assets, with most of the related impact already reflected in 2Q26. Asset outflows slowed significantly after entering August. Client retention in Hong Kong, China remained above 98%, while other overseas markets were also generally stable. Goldman Sachs therefore believes that regulatory risk is becoming less important to the investment thesis, with attention shifting toward whether Futu can sustain growth through overseas client acquisition, asset accumulation, and monetization. The quality of overseas business growth has improved. Average revenue contributed by new clients in the United States, Hong Kong, China, and Singapore all achieved double-digit QoQ growth during the quarter, while average client assets increased across all overseas markets. Growth in funded accounts was particularly strong in Malaysia, Australia, New Zealand, and Canada. In terms of profitability, Singapore continued to represent an important source of profit, while Malaysia achieved operating breakeven for the first time in 2Q26. Management expects more overseas markets to gradually approach profitability over the coming quarters. Goldman Sachs believes that as investors look beyond client numbers alone, monetization efficiency and actual profit contribution from overseas operations will become more important. Trading activity remained the most important earnings driver for the quarter. Trading volume reached a record HK$6.42tn, 46% above Goldman Sachs' forecast, while brokerage commission revenue reached HK$3.4bn, 16% above the forecast. Management primarily attributed the strong performance to active participation in AI-related US stocks, semiconductor trading, and the Hong Kong, China IPO market. The QoQ decline in the blended commission rate was not driven by price reductions but by changes in product mix and trading behavior: the increased share of higher-priced US stocks and options trading lowered the implied commission yield. Management also stated that as retail investor sentiment normalized, 3Q26 trading activity had moderated from the exceptionally strong level in 2Q26, making the sustainability of trading turnover and client participation a key issue. Client assets and margin financing and securities lending also significantly exceeded expectations. Client assets reached HK$1.40tn, up 44% YoY and 5% above Goldman Sachs' forecast. The growth was primarily driven by mark-to-market gains, with net fund inflows providing additional support. The margin financing and securities lending balance rose to HK$91.9bn, 15% above the forecast, benefiting from improved market sentiment and robust financing demand for Hong Kong, China IPOs. Although market appreciation contributed significantly to asset growth this quarter, Goldman Sachs believes the more important issue going forward is whether Futu can achieve more stable AUM expansion through continued overseas client acquisition and asset consolidation rather than relying primarily on changes in market valuations. New markets and products provide additional growth options. Thailand is Futu's next destination following its existing Southeast Asian expansion, and the company recently obtained a license, although the timing of the commercial launch remains subject to final regulatory approval. Approximately one month after the launch of its US prediction markets, traded contracts exceeded 200mn. Management indicated that user engagement was healthy and that the business generated positive cross-selling effects for securities trading. Both businesses remain relatively small, but Goldman Sachs believes they broaden the product range beyond traditional brokerage and wealth management and provide additional options for future growth. Overall, Goldman Sachs believes that the core debate has shifted from regulatory uncertainty to the sustainability and composition of future growth, particularly whether non-Mainland China clients, AUM, and monetization can offset a slowdown in Mainland China-related growth over the long term. Goldman Sachs raised its 12-month target price from US$121.82 to US$127.10, continuing to apply an unchanged 11x 2027E P/E multiple, and maintained its Neutral rating. Relative to the current price of $109.42, this implies 16.2% upside.

Analysis framework

Goldman Sachs first compared 2Q26 financial results and client, trading, asset, and financing metrics with its own forecasts, then incorporated information from management's conference call to assess the regulatory impact, overseas client acquisition and profitability, trading activity, and progress in new businesses. Goldman Sachs subsequently translated operating variances into its 2026E—2028E revenue and net profit forecasts and updated its 12-month target price using an unchanged 2027E P/E multiple.

Methodology notes

• Event-Driven Strategy and Behavioral FinanceEvent-driven analysis

  Earnings and Conference Call Event Analysis

  The report uses the 2Q26 earnings release and management conference call as triggering events, compares actual financial and operating metrics with Goldman Sachs' forecasts, and adjusts earnings forecasts and the target price accordingly.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Decomposition of Trading Volume, Product Mix, and Commission Rate

  The report decomposes brokerage revenue performance into trading volume, product mix, and the blended commission rate, noting that the decline in the commission rate resulted from a higher proportion of higher-priced US stocks and options rather than pricing adjustments.

• Valuation MethodP/E and PEG Valuation

  12-Month Forward P/E Target Price Method

  Goldman Sachs determines its 12-month target price using an unchanged 11x 2027E P/E multiple. Following the increase in earnings forecasts, the target price was raised from US$121.82 to US$127.10.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Futu Holdings (FUTU.US)

  2Q26 results, overseas monetization, and client assets all exceeded expectations, but the valuation assessment still depends on the sustainability of trading activity and overseas growth.

  Strengths

  Record trading volume, with client assets and margin financing and securities lending exceeding expectations; improved monetization of new overseas clients, profit contribution from Singapore, and operating breakeven in Malaysia for the first time.

  Weaknesses

  3Q26 trading activity moderated from 2Q26, client acquisition spending increased in July, and AUM growth during the quarter was primarily driven by mark-to-market gains.

  Risks

  The regulatory impact, capital market performance, cost structures in new markets, and execution of overseas expansion may differ from expectations.

Key data

• 2Q26 RevenueHK$7.0bnUp 36% YoY and 16% above Goldman Sachs' forecast
• 2Q26 Net ProfitHK$3.6bnUp 42% YoY and 28% above Goldman Sachs' forecast
• Trading VolumeHK$6.42tnA record high and 46% above Goldman Sachs' forecast
• Brokerage Commission RevenueHK$3.4bn16% above Goldman Sachs' forecast
• Trading Turnover19.6x5.9x above Goldman Sachs' forecast
• Client Assets Under ManagementHK$1.40tnUp 44% YoY and 5% above Goldman Sachs' forecast
• Margin Financing and Securities Lending BalanceHK$91.9bn15% above Goldman Sachs' forecast
• Assets per Paying ClientHK$364k3% above Goldman Sachs' forecast
• ARPUHK$5.9k15% above Goldman Sachs' forecast
• Revenue Forecast Adjustments2026E/2027E/2028E +7%/+5%/+3%, respectivelyPrimarily reflects improvements in trading, client assets, monetization, and client acquisition performance
• Net Profit Forecast Adjustments2026E/2027E/2028E +8%/+3%/-0.3%, respectivelyThe moderation in 3Q26 trading and increased client acquisition spending in July partly offset the operating upside
• Full-Year New Paying Client Target800kManagement's full-year target and a key metric to monitor going forward
• US Prediction Markets Trading VolumeMore than 200mn contractsAchieved within approximately one month of launch
• 12-Month Target PriceUS$127.10Raised from US$121.82, based on an unchanged 11x 2027E P/E multiple

Impact & implications

The report believes that Futu's investment thesis is changing: the regulatory impact has largely been reflected, and future performance will be determined by whether trading momentum can be sustained, whether overseas client acquisition can translate into stable AUM, and whether new markets can contribute revenue and profit while controlling client acquisition costs. The strong 2Q26 results support higher forecasts and a higher target price, but the moderation in 3Q26 trading, the relatively high contribution of market appreciation to AUM growth, and investment in overseas expansion led Goldman Sachs to maintain its Neutral view.

Risks

• The regulatory impact may be higher or lower than expected, altering assessments of client asset flows and growth.
• Capital market performance may be stronger or weaker than expected, directly affecting trading, commissions, and financing demand.
• The degree of cost structure optimization in new markets may differ from expectations.
• Expansion into new markets may face execution and commercialization challenges.

What to watch

• Whether trading activity, turnover, and client participation can be sustained after the record 2Q26.
• The company's progress toward its full-year target of 800k new paying clients.
• Client acquisition costs during overseas expansion, particularly changes following the increase in spending in July.
• The pace of revenue, AUM, and profit contributions from non-Mainland China markets.
• Final regulatory approval and commercial launch in Thailand, as well as commercial progress in US prediction markets and virtual asset-related initiatives.