Interactive Brokers (IBKR)

Electronic brokerage firm Interactive Brokers (NASDAQ:IBKR) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 21.2% year on year to $1.66 billion. Its non-GAAP profit of $0.57 per share was 6.1% above analysts’ consensus estimates.

Company Overview

Founded in 1977 and known for its sophisticated trading technology and global reach across 150+ exchanges in 34 countries, Interactive Brokers (NASDAQ:IBKR) is a global electronic broker that provides low-cost trading and investment services across stocks, options, futures, forex, bonds, and other financial instruments.

Investment banks and brokerages facilitate capital raises, mergers and acquisitions, and securities trading. The sector benefits from corporate activity during economic expansion, increased retail trading participation, and advisory opportunities in emerging sectors. Headwinds include economic cycle vulnerability affecting deal flow, compressed trading commissions due to electronic platforms, and regulatory capital requirements constraining certain higher-risk activities.

Interactive Brokers competes with traditional brokerages like Charles Schwab (NYSE:SCHW) and Morgan Stanley's E*TRADE (NYSE:MS), as well as newer entrants like Robinhood (NASDAQ:HOOD). In the institutional space, its competitors include Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), and Bank of America's Merrill Lynch (NYSE:BAC).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, Interactive Brokers’s revenue grew at an exceptional 22.9% compounded annual growth rate over the last five years. Its growth surpassed the average financials company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Interactive Brokers’s annualized revenue growth of 19.3% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Interactive Brokers reported robust year-on-year revenue growth of 21.2%, and its $1.66 billion of revenue topped Wall Street estimates by 8.1%.

Transaction volume and loan originations represent the core activity metrics that drive revenue growth across the financial services landscape. This overall volume serves as the primary engine of a firm's top-line performance.

Interactive Brokers’s volumes have grown at an annual rate of 18.8% over the last five years, better than the broader financials industry but slower than its total revenue. When analyzing Interactive Brokers’s volumes over the last two years, we can see that growth accelerated to 33.8% annually. Its recent performance could be a sign of better days to come.

In Q3, Interactive Brokers’s volumes were $3.62 million, beating analysts’ expectations by 0.8%. This print was 33.8% higher than the same quarter last year.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Investment Banking & Brokerage companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

Financials companies manage interest-bearing assets and liabilities, making the interest income and expenses included in pre-tax profit essential to their profit calculation. Taxes, being external factors beyond management control, are appropriately excluded from this alternative margin measure.

Over the last four years, Interactive Brokers’s pre-tax profit margin has fallen by 9.2 percentage points, going from 66.6% to 75.8%. It has also expanded by 5.4 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

In Q3, Interactive Brokers’s pre-tax profit margin was 79.3%. This result was 12.7 percentage points better than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Interactive Brokers’s EPS grew at an astounding 28.3% compounded annual growth rate over the last five years, higher than its 22.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Interactive Brokers, its two-year annual EPS growth of 22.1% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Interactive Brokers reported adjusted EPS of $0.57, up from $0.44 in the same quarter last year. This print beat analysts’ estimates by 6.1%. Over the next 12 months, Wall Street expects Interactive Brokers’s full-year EPS of $2.06 to grow 5.9%.

Financial institutions with multiple business lines manage complex balance sheets that span various financial activities. Market valuations reflect this operational complexity, prioritizing balance sheet strength and sustainable book value growth across all business segments.

This is why we consider tangible book value per share (TBVPS) an important metric for the sector. TBVPS represents the real net worth per share across all business segments, providing a clear measure of shareholder equity regardless of the complexity of operations. Traditional metrics like EPS are helpful but face distortion from the complexity of diversified operations, M&A activity, and various accounting rules that can obscure true performance across multiple business lines.

Interactive Brokers’s TBVPS grew at an exceptional 17.7% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 20.5% annually over the last two years from $7.92 to $11.50 per share.

Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.

Over the last five years, Interactive Brokers has averaged an ROE of 19.8%, excellent for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Interactive Brokers has a strong competitive moat.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Interactive Brokers currently has $27.03 billion of debt and $19.48 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 3.4×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 3.5× for a financials business.

We were impressed by how significantly Interactive Brokers blew past analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock remained flat at $68.81 immediately after reporting.

Updated: December 4, 2025 at 11:36 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Interactive Brokers.

Interactive Brokers is a pretty good company if you ignore its balance sheet. First of all, the company’s revenue growth was exceptional over the last five years. On top of that, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders, and its expanding pre-tax profit margin shows the business has become more efficient.

Interactive Brokers’s P/E ratio based on the next 12 months is 28.5x. Despite its notable business characteristics, we’d hold off for now because its balance sheet concerns us. We think a potential buyer of the stock should wait until the company generates sufficient cash flows or raises money.

Wall Street analysts have a consensus one-year price target of $76.56 on the company (compared to the current share price of $65.98).