Interactive Brokers (IBKR, Financial) saw a sharp decline of 10% following its Q1 earnings miss, despite reporting in-line revenue. The company announced a 4-for-1 stock split and increased its dividend by 28%, though the yield remains below 1%.

• The stock market experienced significant volatility in Q1. A strong January was followed by a mid-February peak, but concerns over DeepSeek's AI and tariff discussions led to a downturn in March.
• The S&P 500 ended Q1 down 5%, with a 9% decline from February highs. Six of the Mag 7 stocks fell more than the market. Despite this, Interactive Brokers highlighted that it does not rely on up markets for revenue. Among its 25 most active stocks, 22 experienced net buying.
• Options trading was robust, with volumes up 25% to a quarterly record. Futures volumes increased by 16%, also setting a record. Both growth rates surpassed industry averages.
• Interactive Brokers saw strong global interest, adding 279,000 new accounts in Q1, surpassing the meme stock surge of Q1 2021. Total account growth was 32%, with international growth outpacing domestic.

Reasons for the Stock Decline

Despite the EPS miss, Interactive Brokers is known for volatile earnings, as it does not provide guidance and relies heavily on unpredictable trading volumes. The company has missed EPS estimates in three of the past six quarters, making this miss not entirely unexpected.

Investors likely anticipated a strong Q1 due to market volatility. The stock had risen about 30% from its $135 low on April 7 to $173.43 before the earnings report. However, the expected Q1 upside did not materialize. While the stock split and dividend hike were positive developments, they were not enough to satisfy investor expectations for Q1.

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