eToro shares (NASDAQ: ETOR) crashed 12% yesterday (Tuesday) after the newly public trading platform delivered mixed first-quarter results that disappointed investors focused on profitability metrics. In after-hours trading, shares fell another 1.43%, to $66.

eToro Shares Drop 12% From All-Time High After Q1 2025 Earnings

The Israeli-based company reported earnings per share of 69 cents, beating analyst estimates of 59 to 61 cents but falling 9% from the 76 cents posted in the same quarter last year. Total revenue climbed 11% to $3.75 billion, yet the market punished the stock for shrinking profit margins and rising expenses.

eToro's adjusted EBITDA margin compressed to 37% from 43% in the prior year, while total expenses jumped to $3.68 billion from $3.31 billion. Marketing spend alone surged more than 60% to $61.2 million as the company ramped up promotional activities around its May IPO.

At the opening bell on Tuesday, eToro shares initially surged to a new all-time high, testing the $79.96 level. However, the rally quickly reversed into a sharp correction, with the stock hitting an intraday low of $64.15. By the end of regular trading on the Nasdaq, eToro had lost nearly 12%, closing at $66.96. In after-hours trading, the decline continued with an additional drop of 1.4%, bringing the price down to a round $66.

Analyst Optimism Meets Reality Check

The earnings disappointment stung particularly hard because it came just one day after 15 analysts initiated coverage on the stock. Ten of those analysts issued buy or outperform ratings, with price targets ranging from $70 to $85. The stock had soared nearly 11% on Monday to hit new highs at $75.97.

"I am incredibly proud of the eToro team for producing strong first quarter results and the successful completion of our initial public listing," CEO Yoni Assia said in the earnings release. "We believe that AI is turbocharging the reshaping of the investing landscape and we're excited to be at the forefront of this transformation."

Canaccord analyst Joseph Vafi views eToro as a next-generation digital disruptor with a value proposition that resonates with younger and active traders. Goldman Sachs analyst James Yaro sees the company as well-positioned to grab market share in Europe's fragmented retail brokerage landscape.

Growth Metrics Show Promise

Despite the profit concerns, eToro posted solid user growth numbers. Funded accounts increased 14% to 3.58 million compared to 3.13 million in Q1 2024, driven by user acquisition efforts and the 2024 acquisition of Australian investing app Spaceship. Assets under administration grew 21% to $14.8 billion.

The company ended May with 3.61 million funded accounts and $16.9 billion in assets under administration. Management said the "performance of the business" by the end of May "reflects continued progress and interest in trading and investing from retail investors in response to market events."

Volatile Trading Since IPO

eToro went public on May 14 at $52 per share and had gained 46% through Monday's close. The stock has shown extreme volatility, reversing sharply lower last Thursday before rebounding 9.8% on Friday. Tuesday's decline brought shares down to $66.96.

Some analysts remain cautious despite the growth story. Bank of America initiated with a neutral rating, saying shares reached full valuation after recent gains. Deutsche Bank also went neutral, citing risks from rising competition and potential changes in adoption rates for the social investing platform.

The company trades with a Composite Rating of 94 and an 85 Relative Strength Rating, though it hasn't been public long enough to establish key volatility metrics.