eToro's Q2 beat ($0.68 EPS) masked a 73% crypto volume crash. The $231M TradeZero acquisition adds execution risk as equity/commodity trading drives profit. Focus shifts to US expansion close in H1 2027.
Alpha Score of 40 reflects weak overall profile with moderate momentum, poor value, moderate quality, moderate sentiment.
eToro (ETOR) stock fell 8% to $31.15 in early Tuesday trading after the company reported a Q2 earnings beat that was overshadowed by a collapse in crypto trading activity and a $231 million acquisition of US brokerage TradeZero.
The trading platform posted adjusted diluted earnings of $0.68 per share for the quarter ended June 30, beating the $0.61 consensus estimate and extending its streak of quarterly beats to four. Net income reached $53 million. But the headline numbers masked a sharper turn in crypto.
Crypto trades dropped to 1.4 million in July, down 73% from the same month last year, eToro said. The average investment per trade fell 50% to $182. Crypto revenue declined roughly 30% year over year to $1.34 billion in the second quarter. The slump pushed crypto's contribution to net trading profit to just $19.7 million, while equities and commodities together generated $141 million.
Chief Financial Officer Meron Shani said customers are rotating across asset classes rather than concentrating in any single one. Sixty percent of eToro users expanded into equities in the second quarter after trading commodities in the prior two quarters, he said. Nearly 90% of those users also traded crypto during the same period.
The TradeZero acquisition is designed to address eToro's weakest geography. TradeZero, founded in 2015, operates online brokerages in the US, Canada and international markets. eToro will pay cash plus up to 2.5 million newly issued Class A shares, with the total capped at $231 million. The deal is expected to close in the first half of 2027, subject to regulatory sign-off.
TradeZero generated about $80 million in revenue in the 12 months through June, with an 81% gross margin, Calcalist reported, valuing the firm at roughly 2.9 times sales at the top of the range. Jefferies advised eToro on the deal, which the company called its third acquisition signed in 2026.
What eToro is buying is broker-dealer infrastructure that is hard to build from scratch in the US market, where launching regulated products requires more than porting technology from abroad. The company entered New York in April after a years-long wait for authorization under the state's BitLicense regime. CEO Yoni Assia called the acquisition "an important step in building our US business."
The crypto slowdown poses a direct risk to revenue if the trend persists. The acquisition adds execution risk: integrating TradeZero's operations and securing regulatory approvals, with dilution from the share component. If equity and commodity trading also soften, earnings could face pressure in coming quarters.
A rebound in crypto activity would relieve some pressure. A smooth integration of TradeZero with no regulatory delays would reduce execution risk. Continued growth in equities and commodities would provide a buffer.
The deal's first-half 2027 close target gives eToro time to manage the transition. eToro reported 1.4 million crypto trades in July, down 73% from a year earlier.
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