FUTU (FUTU) Q3 2025: Funded Accounts Jump 43% as Margin Expansion Outpaces Client Acquisition Costs
FUTU’s Q3 delivered a decisive acceleration in client asset growth and trading activity, driven by robust Hong Kong and U.S. demand, while operating leverage powered a 127% surge in operating income. Strategic expansion in crypto, digital banking, and international markets is reshaping the business model, but rising R&D and acquisition costs signal a pivotal investment phase. Management’s optimism on client inflows and margin trends sets up a high-expectation backdrop into Q4, even as volatility and regulatory headwinds loom.
Summary
- Client Asset Inflows Sustain Momentum: Inflows and market gains combined to drive record client assets across all regions.
- Margin Expansion Outpaces Cost Increases: Operating leverage and higher-value trading offset rising R&D and marketing spend.
- Strategic Investments Redefine Platform: Crypto, digital banking, and international growth are repositioning FUTU for broader financial services leadership.
Performance Analysis
FUTU’s Q3 results underscore a business model built on scale, technology, and multi-market expansion. Funded accounts surged to 3.13 million, up 43% YoY and 9% sequentially, with 254,000 net new accounts, reflecting broad-based acceleration across Hong Kong, Singapore, Malaysia, and the U.S. The Hong Kong market remained the primary engine, accounting for the highest net new client additions since Q1 2021, while the U.S. and Southeast Asia delivered high double-digit sequential growth in both funded accounts and trading activity.
Trading volumes soared 105% YoY to HK$3.9 trillion, with Hong Kong equities up 43% sequentially and U.S. stocks maintaining elevated activity. Crypto trading volume leapt 161% sequentially, led by Ethereum and new coin launches like Solana, though crypto remains a small revenue contributor. Wealth management assets rose 8% QoQ, as clients shifted toward fixed income and money market products. Gross profit doubled to HK$5.6 billion, with gross margin expanding to 87.8% (from 81.8% last year), while operating margin reached 61.3% on the back of strong top-line growth and disciplined cost scaling.
- Interest Income Diversification: Interest income, up 79% YoY, was evenly split between client idle cash, margin financing, and securities lending, with market-driven demand for hard-to-borrow stocks providing upside.
- Cost Structure in Transition: Operating expenses climbed 57% YoY, with R&D and marketing up sharply due to crypto, AI, and new market investments, but still lagging revenue growth.
- Client Quality Improving: Hong Kong’s new clients showed higher average assets and trading velocity, while high-net-worth client share continued to rise.
Operating leverage remains a key driver, as international markets like Singapore now consistently deliver operating margins above 60%, reinforcing the scalability of FUTU’s digital brokerage platform.
Executive Commentary
"We achieved high double-digit sequential increase in new funded accounts. We also observed another quarter of more active derivatives trading activity."
Leif, CEO
"Operating margin increased to 61.3% from 50.4% in the third quarter of 2024, mostly due to strong top-line growth and operating leverage."
Arthur, CFO
Strategic Positioning
1. Multi-Market Client Acquisition
FUTU’s client base is increasingly diversified, with Hong Kong and Malaysia contributing about half of Q3’s net new funded accounts, and overseas clients now representing 54% of total accounts. Singapore and Malaysia are emerging as substantial growth engines, supported by product localization (Bursa Derivatives, SGX Futures) and brand-building events like MooFest.
2. Digital Banking Integration
The acquisition of a controlling stake in Airstar Bank positions FUTU as the only online broker in Hong Kong with integrated digital banking. Management sees this as a lever to increase client stickiness, wallet share, and cross-sell opportunities, with banking expected to become a core pillar of the ecosystem over the next several years—even as it remains in investment mode near term.
3. Crypto and Product Innovation
Crypto trading is being aggressively expanded, with new coin launches, product features, and strong client uptake across Hong Kong, Singapore, and the U.S. Management is open to M&A in crypto and is investing in tokenization capabilities, though regulatory dependencies will shape the product roadmap. Structured product automation and AI-driven tools are also enhancing the client experience and operational efficiency.
4. Operating Leverage and Margin Discipline
International markets are delivering rapid operating leverage, with Singapore’s operating margin now above 60% and expanding. Gross margins remain robust across all geographies, reflecting the high-margin nature of trading and margin products. Cost increases are being absorbed by revenue growth, though management signals continued investment in R&D, AI, and international expansion.
5. Wealth Management and High-Net-Worth Penetration
Wealth management assets and high-net-worth client share are both increasing, particularly in Hong Kong. New self-service tools and product breadth are designed to capture more sophisticated investor flows and drive deeper wallet penetration.
Key Considerations
Q3 marks a clear inflection in FUTU’s asset and client growth trajectory, but the quarter also signals a shift toward a more capital-intensive, multi-product model.
Key Considerations:
- Asset Growth Composition: About one-third of Q3 client asset growth came from net inflows, with the rest from market gains—implying sensitivity to market volatility in future quarters.
- Cost of Client Acquisition: Customer acquisition cost rose slightly to HK$2,300 but remains below annual targets, with management expecting full-year CAC well within guidance.
- Interest Rate Sensitivity: Each 25bp Fed rate cut is expected to reduce monthly pre-tax profit by HK$7 million, though higher trading activity may offset this drag.
- Crypto Revenue Still Nascent: Despite explosive trading growth, crypto remains a minor revenue contributor, but management expects meaningful upside as product and regulatory environments mature.
- Integration and Execution Risk: The consolidation of Airstar Bank and aggressive international expansion introduce new operational and regulatory complexities.
Risks
FUTU’s multi-market expansion and product diversification increase regulatory, execution, and market risks. Sustained asset inflows depend on favorable market conditions, while interest income is exposed to rate cuts. Crypto and digital banking initiatives face uncertain regulatory timelines and potential integration hurdles. Rising R&D and G&A costs, if not matched by revenue, could pressure margins in slower quarters.
Forward Outlook
For Q4, FUTU guided to:
- Continued robust net asset inflows, with no slowdown observed to date
- Customer acquisition cost expected to remain below original full-year target
For full-year 2025, management maintained an optimistic stance:
- Cost discipline and operating leverage expected to support margin expansion
Management highlighted several factors that will influence results:
- Market volatility may drive both asset inflows and trading velocity
- Investments in crypto, AI, and new markets will continue, with cost growth balanced by top-line gains
Takeaways
FUTU’s Q3 results reinforce its evolution from a pure-play digital broker to a diversified financial platform, with strong operating leverage and client asset growth but rising cost and regulatory complexity.
- Margin Expansion Outpaces Cost Growth: Operating leverage and high-margin trading products are driving profitability, even as R&D and marketing costs rise.
- Strategic Investments Raise the Stakes: Crypto, digital banking, and international growth are reshaping FUTU’s business model, but require disciplined execution and regulatory navigation.
- Watch for Q4 Asset Flows and Cost Discipline: Sustained client inflows and stable CAC will be critical to maintaining the current growth trajectory into 2026.
Conclusion
FUTU’s Q3 showcased the power of its scalable, tech-driven platform, with record asset inflows, margin expansion, and product innovation. As management doubles down on crypto, banking, and international markets, the challenge will be to sustain growth while managing cost and regulatory complexity.
Industry Read-Through
FUTU’s results highlight the growing importance of digital brokerage platforms that combine trading, wealth management, and banking services, especially in Asia’s rapidly evolving markets. Operating leverage and product innovation are key competitive differentiators, while crypto remains an emerging but volatile revenue stream. For the broader sector, the integration of digital banking and brokerage is likely to become a core battleground, with regulatory agility and client experience as decisive factors. Peers lacking scale or digital depth may struggle to match FUTU’s growth trajectory and margin profile.