Techquity
Technology Investor, Fundamental Research
Interactive Brokers is a fantastic business because it is basically a tech company. Its fully automated platform keeps costs low, supporting operating margins above 70% and the industry's lowest fees, and one account can trade almost anything in over 150 markets, a scale no rival matches. Its software is too complex for beginners, leaving the mass market to competitors like Robinhood, and complex international regulation is costly. It is a powerful cash machine with a great moat. x.comÂ
Interactive Brokers' lean, high-margin brokerage is generating rising net interest income. It is the 'big boy' broker, not Robinhood: its clients have real money on the line. In Q3 FY26, net revenue rose 16% to $1.914 billion and net interest income 19% to $1.154 billion year over year; basic EPS rose 17% to $0.69. Net income to common was $314 million of $1.348 billion total, with most going to noncontrolling partnership interests by design. Grade: A. x.comÂ
Interactive Brokers' 31% account growth is no one-quarter phenomenon, because retail trading is increasingly international and less US-centric. With under 5 million accounts versus Robinhood's roughly 27 million, it could add 3 million in a year or even beat Robinhood's 10 million in 2021, as traders now accept less user-friendly platforms, as Polymarket shows. Its valuation is no longer anomalous versus peers, but modest multiple expansion and a few more such quarters point to roughly 2x. x.comÂ
Interactive Brokers is expensive against its earnings. At $89.98 it trades at 36x earnings and 28x next year's, while brokerages usually get 12x. At 12x next year's estimated $3.20 a share, give or take 12%, fair value is $33.75-$42.96, so buyers are paying about 109% above fair. This is a valuation read only, not fundamental work. x.comÂ
Robinhood is a future $200B+ company valued at $66B, and that gap will close. Interest is low after a 50% correction from all-time highs, retail capitulation in crypto, a 10x run off the lows and hotter themes in AI and memory. Yet Schwab is worth $156B and Interactive Brokers $138B, while Robinhood is evolving into a full financial operating system for younger investors. x.comÂ
Robinhood is likable, but competition in prediction markets is a growing concern as Schwab and Interactive Brokers enter, and its sweep program could become a problem. The chart is also a mess, and Interactive Brokers looks best of the three brokers. x.comÂ
Robinhood, Interactive Brokers and Coinbase face prediction-market regulation in the near future, which would hurt their margins, revenue and profits. x.comÂ
Robinhood's new advisor tab in its app should bring referral payments that benefit shareholders. Partnering with advisors also helps it compete with advisor-managed accounts at brokers such as Interactive Brokers. x.comÂ
Robinhood exploits its customers for its own benefit through Gold membership, payment for order flow and encouragement of day trading. Its prediction and gambling markets reinforce that view. SoFi, by contrast, is the company that seems to work in customers' best interest. x.com x.comÂ
Interactive Brokers will face crypto competition at the core of its trading-oriented business sooner than Robinhood will. Crypto is better at trading, as Hyperliquid shows, than at products such as crypto cards, so it should hit IBKR's trading franchise before it seriously challenges Robinhood's product-oriented business. x.comÂ
Korean equities' year-to-date rally is getting more fuel, as Interactive Brokers adds access to Korean stocks and Korea approves leveraged ETFs for the first time. x.com x.comÂ
