By Andrew Welsch

Interactive Brokers reported Tuesday adjusted first-quarter earnings of $1.88, falling short of Wall Street estimates of $1.92, according to FactSet. For the same period last year, Interactive Brokers reported adjusted earnings of $1.64.

The company said diluted earnings per share were $1.94 for the current quarter compared with $1.61 for the year-ago period.

Interactive Brokers' board of directors increased the quarterly cash dividend to 32 cents per share from 25 cents. The dividend is payable on June 13.

In addition, the company announced a four-for-one forward split of its common stock. Trading is expected to commence on a split-adjusted basis at market open on June 18, according to the company.

The company says it is looking for possible acquisition opportunities, but returning capital to shareholders makes sense. "It's difficult to find an acquisition we would like, at least so far," CEO Milan Galik said on the company's earnings call Tuesday.

Shares fell 4.5% in after hours trading. The stock is down 1.83% so far this year compared with an 8% decline for the S&P 500.

The Greenwich, Conn.-based company serves retail investors, financial advisors, and institutional customers such as hedge funds.

Its results show a surge in investor activity during the quarter. Customer trading volume in stocks, options and futures increased 47%, 25% and 16%, respectively, over the same period a year ago. Customer accounts increased 32% to 3.62 million. Total daily average revenue trades increased 50% to 3.52 million.

Responding to analyst questions about tariff-related trading activity this month, Galik said the company experienced record volumes and customers had reduced their use of leverage. "We saw a slight decrease of 10% to 12% in margin loans, which is something you would expect when there is such a large move downward," he said. "You would expect customers to change their risk posture."

Net interest income increased 3% to $770 million on higher average customer margin loans and customer credit balances, Interactive Brokers said.

Expanding platform. Interactive Brokers has been expanding its products and services for customers. It has been trying to grow its prediction market offering which let's investors essentially place bets on things such as whether the Federal Reserve will raise interest rates. Earlier this month, the company launched forecast contracts in Canada.

Interactive Brokers is also trying to capitalize on investor interest in digital assets. In March and April, the company broadened the array of crypto tokens it offers for customers, adding Solana $(SOL)$, Cardano $(ADA.AU)$, Ripple (XRP), Dogecoin (DOGE), Chainlink $(LINK)$, Avalanche (AVAX), and Sui $(SUI)$. It already offers others such as Bitcoin and Ethereum.

"Right now we are focused on rounding out our offering so our clients -- investors and advisors -- have access to this asset class," Galik said.

Morgan Stanley, which operates online brokerage E*Trade, also reported a big jump in trading activity. CFO Sharon Yeshaya said on the company's earnings call that investor activity on the company's self-directed platform was at record levels. Daily average revenue trades jumped 19% year over year to just over one million, according to Morgan Stanley.

The first-quarter results for Interactive Brokers didn't include the market selloff precipitated by President Donald Trump's April 2 tariff announcement.

Interactive Brokers' fourth-quarter earnings also got a boost from elevated trading volumes and investor activity following the presidential election. At the time, investors were pushing stock prices higher on hopes that Trump's agenda of tax cuts and deregulation would boost earnings. More recently, U.S. stocks have struggled as the other part of Trump's agenda -- tariffs -- have come into focus.

The S&P 500 sold off sharply following Trump's April 2 announcement of far-reaching reciprocal tariffs. The market rebounded somewhat, but the S&P 500 is still down 8% for the year. Stocks that soared last year, such as those of Interactive Brokers and Robinhood Markets, suffered big declines.

On the earnings call, Galik said he doesn't anticipate that tariffs will diminish the appetite of the company's international clients for investing in U.S. stocks, though he acknowledged that it is difficult to foresee where trade policy is moving and how it will affect economies. In any case, he thinks Interactive Brokers can manage just fine.

"We do not think it will impact our model because our aim is to offer access to not just U.S. markets, but global markets, on a single platform so clients can have all their assets in a single account. So we don't think it'll negatively affect us in any way," he said. "More importantly, we are exceptionally well positioned for volatility and the type of market we saw last week. As our customers noticed changes in yields, they were able to act on that."

Write to Andrew Welsch at andrew.welsch@barrons.com

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April 15, 2025 17:31 ET (21:31 GMT)

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