Futu posts record 2Q26 results, with overseas expansion and easing regulatory impact supporting the BUY thesis

Overview

The report reviews Futu's record 2Q26 results and assesses regulatory changes, overseas expansion, new products, and quarter-to-date 3Q26 trends. Bank of America made minor adjustments to its earnings forecasts without specifying the direction, while maintaining its BUY rating and USD180.00 price target, primarily based on continued growth in clients and assets under management, improving quality and profitability of the international business, and the gradual absorption of regulatory impacts.

Core views

Excluding the impact of regulatory fines, Futu benefited in 2Q26 from active equity markets, increased retail investor participation, and strong international business execution, with revenue rising 23.0% QoQ and 35.6% YoY to a record HKD7.2bn. GAAP net profit increased 24.0% QoQ and 41.7% YoY to HKD3.65bn; non-GAAP net profit rose 23.7% QoQ and 40.1% YoY to HKD3.73bn. Both profit measures also reached record highs, and the results exceeded the most optimistic investor expectations encountered by Bank of America before the report's publication. Excluding the fine, gross margin declined 0.9 percentage points QoQ to 86.3%, but operating margin and net margin improved by 1.7 and 0.7 percentage points QoQ to 62.0% and 50.6%, respectively, showing that revenue growth continued to translate into operating leverage. Client growth and asset accumulation remained the foundation of operations. New funded accounts increased 12.2% QoQ to 252k in 2Q26, with Malaysia ranking first for the third consecutive quarter, followed by Hong Kong and Singapore; Malaysia and Hong Kong together contributed more than half of net new funded accounts. By quarter-end, Moomoo accounted for nearly 60% of all funded accounts, driven mainly by Singapore, Malaysia, and the United States. Client assets increased 14.5% QoQ and 43.6% YoY to HKD1.4tn, mainly due to mark-to-market appreciation of equity holdings, supplemented by positive net asset inflows; average daily client assets rose 9.6% QoQ to HKD1.39tn. The asset mix reflected stronger investor risk appetite. Margin financing and securities lending balances increased 30.5% QoQ and 85.1% YoY to HKD95.1bn, driven by the active Hong Kong IPO market and greater use of leverage. Their share of client assets rose to 6.8%, up 0.8 and 1.5 percentage points QoQ and YoY, respectively. Wealth management assets increased 1.0% QoQ and 10.4% YoY to HKD180bn, but their share of client assets declined 1.7 percentage points QoQ to 12.9%, as clients preferred equities in a strong market. Client idle cash increased 18.3% QoQ to HKD136bn, representing 9.7% of client assets, up 0.3 percentage points QoQ. Trading activity was the direct driver of the quarter's earnings surge. Annualized trading turnover rose from 15.8x in 1Q26 to 22.7x, the highest since 1Q21; total trading volume increased 54.7% QoQ and 78.8% YoY to a record HKD6.42tn. U.S. market trading volume rose 67.2% QoQ to HKD5.02tn, driven mainly by semiconductor and broader artificial intelligence-related stocks; Hong Kong market trading volume increased 15.9% QoQ to HKD1.17tn, with trading concentrated in semiconductors, Chinese internet companies, and newly listed artificial intelligence-related stocks. The effective commission rate declined 1.1bp QoQ to 5.2bp, but management explicitly stated that no market saw pricing changes in 2Q26. The decline resulted from changes in the trading mix, including a lower share of derivatives than in 1Q26 and clients trading more highly priced U.S. artificial intelligence and technology stocks and options, which diluted the effective commission rate. Trading volume growth offset the lower rate, driving brokerage revenue up 27.2% QoQ and 30.3% YoY. Interest income rose 17.9% QoQ and 36.5% YoY, while net interest income increased 16.8% QoQ and 36.7% YoY, supported by higher margin financing and idle cash balances; strength in IPO-related and foreign exchange businesses lifted other revenue by 26.8% QoQ and 61.2% YoY. Higher expense investment did not prevent margin expansion. Sales and marketing expenses increased 18.0% QoQ and 53.1% YoY due to the acquisition of more funded accounts and a 5.2% increase in customer acquisition cost to approximately HKD2.6k. This remained within the company's full-year guidance range of HKD2.5k to HKD3k, although management said July customer acquisition cost rose further above the 2Q26 average. Research and development expenses increased 4.6% QoQ and 13.4% YoY, mainly for strategic projects; general and administrative expenses rose 9.6% QoQ and 39.6% YoY, primarily due to additional personnel supporting business development. Regulatory changes caused visible but currently manageable asset outflows. Since the May 22 announcement, cumulative asset outflows represented a mid-single-digit percentage of total client assets, and management believes most of the impact has already been absorbed. Mainland China-related outflows mainly occurred through compliance adjustments after new restrictions took effect on June 12, while Hong Kong outflows were more attributable to short-term risk aversion following the announcement; the two were similar in scale. Most Mainland China-related outflows occurred in June and July, with the attrition trend easing in August. Despite regulatory pressure, Hong Kong client retention remained above 98% in 2Q26, while retention in other overseas markets was stable QoQ; the company emphasized full compliance with the new rules and continued close communication with regulators. Overseas growth came not only from account numbers but also from client quality and wallet share. Average revenue per new funded account in the United States, Singapore, and Hong Kong all achieved double-digit QoQ growth. Funded account numbers in Malaysia, Canada, Australia, and New Zealand all recorded double-digit QoQ growth; new funded accounts in Hong Kong, Japan, Canada, Australia, and New Zealand also delivered double-digit QoQ growth. Client assets per funded account increased QoQ across all overseas markets, indicating that growth came from both new client acquisition and greater wallet share among existing clients. After reaching breakeven several years ago, Singapore continued to benefit from operating leverage in both profitability and margins; Malaysia achieved operating breakeven for the first time in 2Q26. Newer overseas markets remained in the investment phase, but management regarded rising client assets and stable retention as positive indicators of future profitability. Thailand is the focus of the next phase of ASEAN expansion. The company obtained a Type A securities license from the Thai Securities and Exchange Commission in July; Thailand, Southeast Asia's third-largest economy, had 4.5mn investors with online accounts as of 1H26. Management believes local investors are highly digitalized and increasingly demand global asset allocation and digital investment solutions, enabling Futu to reuse its infrastructure, technology investments, and operating experience from Singapore and Malaysia. However, the company has not provided a definitive launch timeline and must still complete regulatory readiness inspections and obtain final approval. Therefore, the Thai business's contribution to medium-term client acquisition depends on the timing of formal approval and launch. New products expanded revenue opportunities and operational capabilities. After obtaining a futures commission merchant license from the U.S. Commodity Futures Trading Commission in May, Futu launched prediction markets in the United States in early June, with event contract trading volume exceeding 200mn in the first month. Management said the product can both attract new clients and increase engagement, and observed positive cross-selling into traditional securities trading rather than substitution of existing trading. The company regards it as a near-term growth opportunity in the U.S. market while using it to build product, operational, and risk management capabilities in preparation for launching similar products in other international markets. The company also received approval from the Hong Kong Securities and Futures Commission to launch virtual asset financing services through its proprietary PantherTrade platform; Bank of America believes these developments broaden its product range and geographic footprint. The near-term operating pace has moderated from the exceptionally strong 2Q26 level. Quarter-to-date in 3Q26, new funded accounts slowed, cooling retail investor sentiment reduced trading volume, and net asset inflows in Hong Kong and overseas markets returned to normalized levels. Bank of America therefore highlighted that market volatility, customer acquisition cost, and regulatory impacts will continue to influence near-term data, even as it remains positive on medium-term growth. Regarding capital allocation, as of the end of May 2026, Futu had repurchased approximately USD418mn of ADSs under its existing USD800mn share repurchase program, with no repurchases in June 2026. Following minor earnings forecast adjustments, adjusted net profit for 2026E, 2027E, and 2028E is HKD11.055bn, HKD12.757bn, and HKD15.548bn, respectively; corresponding earnings per share are HKD79.45, HKD91.24, and HKD110.38, representing YoY changes of -2.4%, 14.8%, and 21.0%, respectively, compared with Visible Alpha consensus estimates of HKD79.13, HKD92.94, and HKD91.70. Corresponding forecast P/E multiples are 10.8x, 9.4x, and 7.8x, while P/B multiples are 2.6x, 2.1x, and 1.7x, with 2026E ROE at 25.8%. Bank of America maintains its USD180.00 per ADR price target and BUY rating; the price target is based on 15.5x 2027E GAAP P/E, below the approximately 30x trading level of U.S. and Chinese online brokers. The report states that, despite Futu's stronger organic growth, the lower multiple still reflects its different market and investor structure. The share price stated in the report is USD112.73, and the price target was initially established on May 29, 2026.

Analysis framework

The report first excludes the non-operating impact of regulatory fines and uses QoQ and YoY data to assess core 2Q26 results. It then decomposes revenue growth into drivers including account acquisition, client assets, trading turnover, commission rates, financing balances, and idle cash, while using expense growth and margin changes to test operating leverage. The report subsequently incorporates information from management's earnings call to assess regulatory outflows, overseas client quality, profitability progress across markets, the Thailand license, and prediction markets, before deriving its price target from earnings forecasts and relative valuation based on 2027E GAAP P/E.

Methodology notes

• Valuation methodologyP/E and PEG valuation

  Relative valuation based on 2027E GAAP P/E

  The report bases its USD180.00 price target on 15.5x 2027E GAAP P/E and compares it with the approximately 30x trading multiple of U.S. and Chinese online brokers, explaining the discount through differences in market and investor structure.

• Industry analysis frameworkVolume-price decomposition

  Decomposition of accounts, assets, trading volume, and commission rates

  The report decomposes brokerage revenue into client numbers and asset scale, trading turnover, and effective commission rates, explaining that although the commission rate declined due to the trading mix, surging trading volume still drove brokerage revenue growth.

• Corporate fundamentals and financial frameworkOperating/financial leverage analysis

  Analysis of expense investment and margin changes

  The report compares growth in revenue, marketing, research and development, and administrative expenses and examines operating and net margins, confirming the operating leverage generated by scale expansion despite increased expense investment.

• Corporate fundamentals and financial frameworkEarnings quality analysis

  Excluding regulatory fines and comparing GAAP with non-GAAP profit

  The report excludes the impact of regulatory fines while presenting both GAAP and non-GAAP net profit to distinguish one-off regulatory factors from underlying operating performance.

Asset mapping & comparison

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

• Futu Holdings（FUTU）

  An online securities brokerage and integrated financial services platform whose 2Q26 revenue and profit reached records, driven by active markets, trading volume growth, client asset expansion, and international business execution.

  Strengths

  Diversified market coverage and strong growth in clients and assets under management; improving overseas client quality and wallet share; stronger profitability in Singapore and operating breakeven in Malaysia; prediction markets, virtual asset financing, and Thailand expansion increase product and geographic growth opportunities.

  Weaknesses

  Revenue is sensitive to capital market activity and retail sentiment; regulatory changes have caused asset outflows; quarter-to-date 3Q26 operating metrics have slowed, customer acquisition cost has risen, and newer overseas markets remain in the investment phase.

  Comparison

  The USD180.00 price target applies 15.5x 2027E GAAP P/E, below the approximately 30x trading level of U.S. and Chinese online brokers; the report states that the discount reflects different market and investor structures despite Futu's stronger organic growth.

  Risks

  Stricter regulation, substantial corrections in U.S. or Hong Kong equities, and intensified competition represent downside risks; better-than-expected capital markets, weaker-than-expected competition, faster client growth, and stronger progress in the crypto business represent upside risks to the price target.

Key data

• 2Q26 adjusted revenueHKD7.2bnExcluding the impact of regulatory fines, it increased 23.0% QoQ and 35.6% YoY to a record high.
• 2Q26 GAAP net profitHKD3.65bnIncreased 24.0% QoQ and 41.7% YoY to a record high.
• 2Q26 non-GAAP net profitHKD3.73bnIncreased 23.7% QoQ and 40.1% YoY to a record high.
• New funded accounts252kIncreased 12.2% QoQ in 2Q26, with Malaysia contributing the most for the third consecutive quarter.
• Client assetsHKD1.4tnIncreased 14.5% QoQ and 43.6% YoY.
• Average daily client assetsHKD1.39tnIncreased 9.6% QoQ.
• Margin financing and securities lending balancesHKD95.1bnIncreased 30.5% QoQ and 85.1% YoY, representing 6.8% of client assets.
• Wealth management assetsHKD180bnIncreased 1.0% QoQ and 10.4% YoY, with their share of client assets declining to 12.9%.
• Client idle cashHKD136bnIncreased 18.3% QoQ, representing 9.7% of client assets.
• Annualized trading turnover22.7xUp from 15.8x in 1Q26 to the highest level since 1Q21 in 2Q26.
• Total trading volumeHKD6.42tnIncreased 54.7% QoQ and 78.8% YoY to a record high.
• U.S. market trading volumeHKD5.02tnIncreased 67.2% QoQ.
• Hong Kong market trading volumeHKD1.17tnIncreased 15.9% QoQ.
• Effective commission rate5.2bpDeclined 1.1bp QoQ due to changes in the trading mix rather than price cuts.
• Customer acquisition costapproximately HKD2.6kIncreased 5.2% QoQ but remained within the full-year guidance range of HKD2.5k to 3k.
• Operating margin and net margin62.0% / 50.6%Increased 1.7 and 0.7 percentage points QoQ, respectively.
• Cumulative asset outflows after regulatory changesmid-single-digit percentage of client assetsManagement believes most of the impact has been absorbed, with the attrition trend easing in August.
• Hong Kong client retention rateabove 98%Remained high in 2Q26 despite regulatory pressure.
• Prediction market first-month trading volumeover 200mnThe U.S. event contract product was launched in early June 2026.
• Share repurchase progressapproximately USD418mnAs of the end of May 2026, the existing program totaled USD800mn; no repurchases were made in June.
• 2026E/2027E/2028E adjusted net profitHKD11.055bn / HKD12.757bn / HKD15.548bnAdjusted net profit for the corresponding forecast periods.
• 2026E/2027E/2028E EPSHKD79.45 / HKD91.24 / HKD110.38Representing YoY changes of -2.4%, 14.8%, and 21.0%, respectively.
• Price target valuation basis15.5x 2027E GAAP P/ECorresponding to a price target of USD180.0 per ADR; U.S. and Chinese online brokers trade at approximately 30x.

Impact & implications

The report believes that the 2Q26 results demonstrate Futu's ability to convert active markets, client asset growth, and trading participation into higher revenue and margins. Improving client quality, wallet share, and profitability in overseas markets, combined with new businesses such as Thailand and prediction markets, provide additional sources of medium-term growth; easing regulatory outflows and high retention rates support the view that the impact is manageable. At the same time, quarter-to-date 3Q26 trading volume, new accounts, and net inflows have retreated from their 2Q26 highs, while customer acquisition cost continues to rise. Near-term results therefore remain highly sensitive to market sentiment, regulatory developments, and investment efficiency. After balancing these near-term fluctuations against medium-term expansion opportunities, Bank of America maintained its BUY rating and unchanged price target.

Risks

• If regulatory requirements are stricter than expected, asset outflows and compliance adjustments may increase, representing downside risk to the price target.
• A substantial correction in the U.S. or Hong Kong markets could pressure trading activity, client assets, and related revenue.
• Intensified competition could affect customer acquisition cost, client growth, and profitability.
• Better-than-expected capital market conditions represent upside risk to the price target.
• Less competition than expected or faster-than-expected client growth represents upside risk to the price target.
• Better-than-expected development of the crypto business represents upside risk to the price target.

What to watch

• Track the easing trend in asset outflows following the regulatory announcement and client retention rates in Hong Kong and other overseas markets.
• Monitor whether quarter-to-date 3Q26 new funded accounts, trading volume, and net asset inflows can improve from their current slowdown.
• Observe whether customer acquisition cost continues to exceed the 2Q26 average of approximately HKD2.6k and the full-year guidance range.
• Monitor Thailand's regulatory readiness inspection, final approval, and official launch timeline.
• Track prediction market trading volume, new client acquisition, client engagement, and cross-selling into traditional securities trading.
• Observe Singapore's margins, Malaysia's profitability progress after breakeven, and returns on investment in newer overseas markets.
• Monitor changes in the capital market environment, competitive intensity, client growth, and crypto business development relative to the report's assumptions.