eToro Group Ltd. (NASDAQ:ETOR) is undergoing a significant valuation assessment as it expands its trading offerings beyond cryptocurrencies. The company has reported growth in funded accounts and is enhancing its brokerage capabilities in the U.S., but there are concerns around whether rising expenses and fluctuations in trading volume will allow for sustainable earnings growth.
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In August, eToro announced an agreement to acquire TradeZero for a potential total of $231 million. However, shortly after, several analysts downgraded their near-term expectations for the company.
In the second quarter of 2026, eToro's net contribution reached $229 million, a 9% increase compared to the previous year. Adjusted EBITDA also rose by 9% to $78 million, maintaining a 34% margin. Funded accounts grew by 18% to 4.28 million, while assets under administration climbed 10% to over $19 billion. The company's trading in equities, commodities, and currencies surged, contributing $141.6 million in net trading revenue, which was up approximately 24%. In contrast, its cryptocurrency trading contribution decreased to $11 million, indicating lower activity as customers shifted towards equities.
According to Reddit, eToro ranks tenth among the top 10 undervalued stocks to buy, based on hedge fund ownership rather than growth potential. This suggests that while eToro’s user base is expanding, the market remains cautious about whether a low earnings multiple can safeguard against significant revenue fluctuations driven by market dynamics.
The acquisition of TradeZero, which reported trailing revenues of about $80 million, aims to provide infrastructure for seasoned traders. eToro management anticipates that the acquisition will close in the first half of 2027 and will become accretive to adjusted earnings per share during its first full year. While this expansion could potentially increase client retention and enhance trading activity within eToro, ongoing costs associated with acquiring new users represent a challenge. In Q2, adjusted operating expenses were $151 million, with a sequential increase of $8 million in sales and marketing costs.
In July, eToro's assets under administration dipped 5% year-over-year to $18.5 billion, but recovered in August to $20.2 billion, marking a 3% increase. Meanwhile, capital-markets trading volumes accelerated by 31%, although the average amount invested per trade decreased by 29%. The disparity between acquiring new customers and the trading intensity of existing ones is pivotal, as sustained profitability hinges on both asset management and active trading practices. An earlier report highlighted that eToro's recent acquisitions suggest ambitions extending beyond being merely a trading app, while also outlining the challenges related to integration and opportunity realization.