Prepared remarks
Gentlemen, welcome to Futu Holdings Second Quarter 2026 Earnings Conference Call. Operator instructions: Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Michelle Li, Investor Relations Manager at Futu. Ma'am, please go ahead.
Thanks, operator. Thank you for joining us today to discuss our second quarter 2026 earnings results. Joining me on the call today are Mr. Leaf Li, Chairman and Chief Executive Officer; Arthur Chen, Chief Financial Officer; and Robin Xu, Senior Vice President. As a reminder, today's call may include forward-looking statements, which represent the company's belief regarding future events, which, by their nature, are not certain and are outside of the company's control. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. For more information about the potential risks and uncertainties, please refer to the company's filings with the SEC, including its annual report. And with that, I will now turn the call over to Leaf. Leaf will make his comments in Chinese, and I will translate.
Thank you all for joining our earnings call today. In the second quarter, we acquired 252,000 net new funded accounts, up 23.7% year-over-year and 12.2% quarter-over-quarter. Total funded accounts reached approximately 3.84 million, representing an increase of 33.6% year-over-year and 7% quarter-over-quarter. Client acquisition in Hong Kong accelerated sequentially during the quarter, supported by a robust local IPO pipeline and strong performance in U.S. equities. In Singapore, registered users surpassed the 2 million milestone, further solidifying our leadership among local retail investors. The average revenue per new client in both markets improved sequentially, underpinned by our ongoing investor education initiatives across multiple asset classes, reinforced by our sustained investment in brand equity. In Malaysia, our targeted marketing campaign centered around local IPOs and the AI-driven rally catalyzed a record quarter of client acquisitions, leading all markets in net new funded accounts for the third consecutive quarter. In the U.S., moomoo's prediction markets garnered significant traction, driving incremental new client acquisition and helping improve overall client engagement on our platform. As of quarter end, total client assets stood at HKD 1.4 trillion, up 43.6% year-over-year and 14.5% quarter-over-quarter. The growth was mainly attributable to higher market valuation of client stock holdings and, to a lesser extent, net asset inflow. Period-end margin financing and securities lending balance rose 31% quarter-over-quarter to HKD 95.1 billion, supported by an active Hong Kong IPO market, along with broader positive market sentiment that encouraged clients to take on more leverage. Thanks to favorable market conditions, total trading volume rose 78.8% year-over-year and 54.6% quarter-over-quarter to HKD 6.42 trillion, setting a new record high. U.S. stock trading volume grew 67.2% sequentially to HKD 5.02 trillion, driven by client interest in AI-related names. Hong Kong stock trading volume increased by 15.9% quarter-over-quarter to HKD 1.17 trillion, largely attributable to heightened trading activity in semiconductors, China internet and newly listed companies. In June, Futu Securities became the first and to date only broker in Hong Kong to launch securities-backed margin financing for virtual assets under an upgraded Type 1 license approval from the SFC. We are also exploring extending our unified buying power framework to cover virtual asset holdings, further enhancing capital efficiency across traditional and digital asset markets. Wealth management client assets were HKD 180.2 billion, up 10% year-over-year and 1% quarter-over-quarter. During the quarter, we observed a shift in client preference from money market funds towards equity funds on the back of strong equity market performance. In Hong Kong, we held our first offline fund roadshow for retail investors centered on the commercial space theme. Amid heightened investor interest, the event drew a full on-site audience and several hundred livestream participants, translating into meaningful follow-on subscriptions. We concluded the quarter with 683 IPO distribution and IR clients, up 32% year-over-year. The Hong Kong IPO market sustained strong momentum in the second quarter with nearly 60% of newly listed companies choosing to partner with Futu. We served as joint book runners for multiple high-profile listings, including those of Star Sports Medicine, Lightelligence and Metis TechBio. Next, I'd like to invite our CFO, Arthur, to discuss our financial performance.
Thank you, Leaf and Michelle. Please allow me to walk you through our financial performance in the second quarter. All the numbers are in Hong Kong dollars, unless otherwise noted. Total revenue was HKD 7.2 billion, up 36% from HKD 5.3 billion in the second quarter of 2025. Brokerage commission and handling charge income was HKD 3.4 billion, up 30% year-over-year and 27% quarter-over-quarter. Total trading volume grew on both a year-over-year and a quarter-over-quarter basis, while blended commission rate declined due to stronger trading activities in higher-priced U.S. stocks and options during the quarter. Interest income was HKD 3.1 billion, up 37% year-over-year and 18% quarter-over-quarter. Both the year-over-year and quarter-over-quarter increase was mainly driven by higher interest income from margin financing, bank deposits and securities lending. Other income was HKD 718 million, up 61% year-over-year and 27% quarter-over-quarter. Both the year-over-year and the quarter-over-quarter increase was primarily driven by higher currency exchange income and IPO financing service income. Our total costs were HKD 985 million, up 47% compared to the second quarter of 2025. Brokerage commission and handling charge expenses were HKD 248 million, up 54% year-over-year and 50% quarter-over-quarter. Both the year-over-year and the quarter-over-quarter increase was mainly due to higher trading volume. Interest expenses were HKD 513 million, up 36% year-over-year and 24% quarter-over-quarter. Both the year-over-year and the quarter-over-quarter increase was mainly driven by higher interest expenses associated with our margin financing business. Processing and servicing costs were HKD 225 million, up 70% year-over-year and 32% quarter-over-quarter. Both the year-over-year and quarter-over-quarter increases were primarily driven by higher product service fees. As a result, total gross profit was HKD 6.2 billion, an increase of 34% from HKD 4.6 billion in the second quarter of 2025. Gross margin was 86.3% as compared to 87.4% in the same quarter of 2025. Operating expenses were HKD 1.8 billion, up 35% year-over-year and 11% quarter-over-quarter. To break it down, R&D expenses were HKD 501 million, up 13% year-over-year and 5% quarter-over-quarter. The year-over-year and quarter-over-quarter increase was primarily driven by the increased investments in strategic initiatives like AI and Web3. Selling and marketing expenses were HKD 657 million, up 53% year-over-year and 18% quarter-over-quarter. The year-over-year and quarter-over-quarter increase was mainly driven by the increase of new funded accounts. G&A expenses were HKD 593 million, up 40% year-over-year and 10% quarter-over-quarter. The year-over-year increase was primarily due to an increase in G&A personnel and professional fees. As a result, income from operations was HKD 4.5 billion, up 34% year-over-year and 26% quarter-over-quarter. Operating margin of 62% is largely flat compared to the second quarter of 2025. Our net income increased by 42% year-over-year to HKD 3.6 billion. Net income margin expanded to 50.6% in the second quarter compared to 48.4% in the same quarter last year. Our effective tax rate for this quarter was 16.1%. That concludes our prepared remarks. We'd now like to open the call to questions. Operator, please go ahead.
Questions and answers
Operator instructions: Our first question is going to come from the line of Emma Xu with BofA Securities.
Congratulations on the strong second quarter results. Since the release of the new regulations on May 22, have you seen material changes in Mainland client share account across funded accounts, AUM and revenue contribution? Have you observed meaningful outflow of accounts or client assets? The second question is, against the regulatory backdrop, the group delivered resilient revenue and profit in the second quarter, so could management please share an update of the overseas market development and their contribution to the group?
Futu places very strong emphasis on compliance, and we are committed to meeting all applicable regulatory requirements. Following the release of the new rules, we promptly implemented the relevant compliance measures, and we have maintained ongoing communication with the regulators. As for the cumulative asset outflows since the new regulations, the outflows were about a mid-single-digit percentage of our total client assets. We believe the bulk of the impact has already been absorbed in Q2. The outflows came from both our Mainland and Hong Kong client bases, and the two are roughly the same. The Mainland outflows were primarily compliance-driven adjustments under the new rules, while the Hong Kong outflows were more concentrated in the early period right after the announcement, reflecting some risk-off sentiment as the market digested the news. Most of the Mainland client outflows happened in June and July after we implemented the restrictions on our app, and the pace of client attrition started to moderate in August. For Q2, our Hong Kong client retention rate stayed above 98% and retention across our overseas markets remained stable quarter-over-quarter. We continue to see steady growth in overseas new client additions. On the quality of newly funded accounts, the average revenue per newly funded account improved sequentially across multiple overseas markets, in particular the U.S., Singapore and Hong Kong, all posting double-digit growth. We think this reflects both a structural upshift in funded account quality in growing markets like the U.S. and continued acquisitions of higher-value clients in mature markets like Hong Kong and Singapore, together supporting overall revenue growth. From the client asset perspective, funded accounts in overseas markets including Malaysia, Australia, New Zealand and Canada grew double digits sequentially in the second quarter. Actually, average client assets rose quarter-over-quarter across every overseas market where we operate, showing that we are growing not just in the number of clients, but also wallet share. Our recent securitization of the Thailand license also gives us an important anchor for our ASEAN footprint down the road. In terms of profitability, our overseas markets are at different stages of maturity. For instance, Singapore passed breakeven a couple of years ago, and both the absolute level of profitability and the net profit margin continue to expand, thanks to operating leverage kicking in. I am also pleased to share Malaysia has recently achieved breakeven at the operating level as well. While our other overseas markets are still building out their client and asset base, rising average client assets and client retention suggest the groundwork for long-term profitability in our overseas markets is in place. Thank you.
Our next question will come from the line of Chiyao Huang with Morgan Stanley.
Let me briefly translate. The first question is regarding Thailand. What's the strategic thinking about choosing this market? And when do we expect Futu to officially launch the business here? Do we see any synergy among the ASEAN markets we are already in? And second question is about the commission rate, which is dropping a little bit quarter-on-quarter. What kind of structural changes are we seeing behind this drop?
Thailand is the third-largest economy in Southeast Asia. Local investors there are quite digitally savvy with growing demand for global asset allocation as well as digital investing tools. According to the Stock Exchange of Thailand, as of the first half of 2026, over 4.5 million investors had opened accounts online. For moomoo, entering Thailand is a natural next step in Southeast Asia after Singapore and Malaysia, and it allows us to leverage the infrastructure and operations we have already built in the region. Moomoo has obtained the Type A securities license from the Thai SEC, and combined with our licensed operations in other overseas markets, this reflects ongoing recognition from regulators of our ability to operate compliantly across multiple jurisdictions. The overall pace of our overseas expansion remains steady. As for the timing of the official launch, we still need to go through the regulator's readiness inspection to receive final approval, so we don't have a specific timeline to share at this point. We'll continue to work closely with the local regulator and make sure all prelaunch preparations are thoroughly in place. There was no price menu change in the second quarter across our markets. So the take-rate change quarter-on-quarter is mainly driven by customer behavior. First, the contribution from derivatives in the second quarter compared with the first quarter was slightly down quarter-on-quarter, though on absolute levels the contribution remains healthy. Second, more clients traded U.S. stocks in the second quarter with a very high concentration in some high-value AI and tech leading names, which led our implied commission rate to fall a little bit.
Our next question is going to come from the line of Charles Zhou with UBS.
First of all, congratulations to the management on the excellent results and a strong beat to market consensus. I have two questions. First, can we get some color on the trajectory of your CAC in the second quarter? What were the key drivers and how should we think about CAC in the coming quarters? My second question is, could you provide some breakdown on the newly added funded accounts and the period-end funded accounts by market, in particular the contribution mix from your overseas markets?
In the second quarter, the blended CAC rose sequentially to around HKD 2,600, which is still within our full-year guidance range of HKD 2,500 to HKD 3,000. The quarter-on-quarter increase in CAC for Q2 was mainly driven by the relatively lower net new funded accounts as a result of the regulatory developments. At the same time, we maintained a certain level of brand investment to support long-term growth and higher client lifetime value across our markets. Additionally, CAC trended higher in July relative to Q2.
Malaysia led all markets in terms of new funded accounts growth for three consecutive quarters, followed by Hong Kong. Together, these two markets accounted for more than 50% of net new funded accounts acquired in this quarter, with Singapore being the next largest source among the remaining markets. By the end of the second quarter, moomoo's share of total funded accounts increased to nearly 60%, led by Singapore, Malaysia and the U.S.
Our last question is going to come from the line of You Fan with CICC.
Congratulations on the outstanding results. I have two questions. Firstly, would you share more color on Q3 trends such as the run rate of new funded accounts, trade flow and client AUM? Secondly, since moomoo has launched the prediction market in the U.S., can you share more on this business trend and how you view the future monetization and growth opportunities of prediction markets?
On a Q3 quarter-to-date run-rate basis, our key metrics are trending modestly softer against the backdrop of market volatility. Net additions of funded accounts moderated compared with Q2. In Hong Kong and our overseas markets, net asset inflows have returned to a normalized level. For trading volume, total trading volume was down modestly sequentially, primarily reflecting a moderation of retail sentiment in the Q3 quarter-to-date relative to the previous quarter.
We obtained the FCM license from the CFTC and moomoo U.S. officially launched the prediction market trading service for our retail clients in the U.S. in early June. Event contracts traded over $200 million within one month of the launch, reflecting very strong demand from U.S. retail investors for prediction market products. Event contracts have delivered strong results in acquiring new clients and driving engagement with clear cross-sell synergy with our core brokerage business. For instance, users who trade event contracts are more active in securities trading, showing that event contracts are not a substitute for securities trading but rather a driver of it. The purpose for our U.S. prediction market rollout serves two purposes. First, to capture the near-term opportunity as prediction markets take off locally. More importantly, it allows us to build product design, operational and risk management expertise that will support our ability to bring prediction markets to other regions where we operate down the road.
Thank you. I would now like to hand the conference back over to Michelle Li for closing remarks.
That concludes our call today. On behalf of the Futu management team, I would like to thank you all for joining us. If you have any further questions, please do not hesitate to contact me or any of our Investor Relations representatives. Thank you, and goodbye.
This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.