Interactive Brokers Group IBKR is slated to report first-quarter 2025 results on Tuesday, after market close. 

See the Zacks Earnings Calendar to stay ahead of market-making news.

Among IBKR’s close peers, Charles Schwab SCHW will report quarterly numbers on April 17 and Tradeweb Markets Inc. TW will come out with first-quarter results on April 30.

Interactive Brokers’ fourth-quarter 2024 earnings outpaced the Zacks Consensus Estimate. Higher total GAAP net revenues, growth in customer accounts and an increase in daily average revenue trades (DARTs) acted as tailwinds. On the other hand, a rise in expenses was an undermining factor.

In the to-be-reported quarter, IBKR is likely to have witnessed impressive top and bottom-line growth. This can be attributed to substantial market volatility and heightened client activity as investors shifted to safe havens because of concerns related to the impact of tariffs on the U.S. economy and the Fed’s monetary policy. The Zacks Consensus Estimate for first-quarter revenues of $1.41 billion suggests 17.6% year-over-year growth.

Further, in the past week, the consensus estimate for earnings for the to-be-reported quarter has been revised 2.1% upward to $1.91. This indicates a 16.5% rise from the prior-year quarter.

Estimate Revision Trend
 

Image Source: Zacks Investment Research

Interactive Brokers has a decent earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with the average beat being 3.05%.

Earnings Surprise History
 

Image Source: Zacks Investment Research

Interactive Brokers’ Key Q1 Estimates

Client activity was solid during the first quarter, with the major indexes witnessing extreme volatility due to the Trump administration’s tariff plans and their impact on the U.S. economy and the Federal Reserve’s monetary policy. This, along with robust DART numbers in all three months of the quarter, is expected to have supported Interactive Brokers’ commission revenues. The Zacks Consensus Estimate for commission revenues is pegged at $502 million, indicating a 32.5% jump from the prior-year quarter. Our estimate for the metric is $498 million. 

Additionally, relatively high interest rates are expected to have supported IBKR’s net interest income (NII) in the to-be-reported quarter. The Federal Reserve kept the interest rates unchanged in the quarter, which is likely to have acted as a tailwind for the company’s NII. Thus, the consensus estimate for NII is $813 million, implying an 8.8% increase. We project NII to be $810.7 million.

The Zacks Consensus Estimate for other income is pegged at $16 million, implying an 11.1% decline from the prior-year quarter. Our estimate for other income is $16.9 million.

On the cost front, total operating expenses are likely to have remained elevated as IBKR invests in key areas to enhance platform capabilities, drive product innovation, improve customer support and build upon regulatory and compliance functions. We anticipate total non-interest expenses of $409.5 million, indicating a jump of 21.5% year over year.

What Our Model Unveils for IBKR

Our quantitative model predicts an earnings beat for Interactive Brokers this time. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Interactive Brokers has an Earnings ESP of +1.05%.

Zacks Rank: The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

IBKR’s Price Performance & Valuation Analysis

In the first quarter, Interactive Brokers' shares performance was weak. The stock underperformed the industry and its close peers – Schwab and Tradeweb.

1Q25 IBKR Price Performance
 

Image Source: Zacks Investment Research

IBKR shares appear inexpensive relative to the industry. The company is currently trading at the 12-month trailing price-to-tangible book (P/TB) of 1.13X, well below the industry’s 2.46X. 

Price-to-Tangible Book Ratio (TTM)
 

Image Source: Zacks Investment Research

Also, the stock is trading below its peers, Tradeweb and Schwab. At present, TW and SCHW’s 12-month trailing P/TB TTM are 14.00X and 7.25X, respectively.

From a valuation perspective, Interactive Brokers shares present a compelling buying opportunity. The stock is still undervalued as the market has not yet fully recognized or priced the company’s growth prospects.

Investment Thesis on Interactive Brokers

IBKR has been taking several steps to enhance its presence globally. In April, the company launched Forecast Contracts in Canada, allowing investors to trade on the outcomes of several events impacting markets. In February, IBKR announced the expansion of its offering of Stocks and Shares Investment Savings Accounts with the addition of mutual funds in the U.K. Last November, IBKR launched Plan d’Epargne en Actions accounts to boost its offerings for its French clients. Also, the launch of IBKR GlobalTrader has enabled investors worldwide to trade stocks through mobile applications.

The company was one of the first brokers to introduce Overnight Trading on U.S. stocks and ETFs nearly 24 hours a day, five days a week. IBKR Lite has enabled investors to trade commission-free. Further, it launched cryptocurrency trading via Paxos Trust Company, charging lower commissions compared to other crypto exchanges. The introduction of IBKR Desktop, the next-generation desktop trading application for Windows and Mac, marks a new chapter for innovation.

The company’s technological superiority, combined with easier regulations to improve product velocity, is likely to help its net revenues through higher client acquisitions. The company processes trades in stocks, futures, options and forex on more than 150 exchanges across several countries and currencies.

IBKR’s compensation expense relative to net revenues (11.1% in 2024) remains below that of its industry peers due to its superior technology. Further, the company has been emphasizing developing proprietary software to automate broker-dealer functions, leading to a steady rise in revenues. Total net revenues witnessed a compound annual growth rate (CAGR) of 21.8% over the last five years (2019-2024).

Net revenues are expected to improve going forward, given the solid DART numbers and robust trading backdrop driven by higher market participation.

To Buy or Not to Buy IBKR Shares Now

Interactive Brokers remains well-positioned for growth in the current volatile operating environment. Also, rapidly evolving trends will benefit the company’s revenues and expand its market share. The company’s strong technological capabilities and diversified product offerings enhance its global reach, supporting long-term growth. 

Further, positive analyst sentiment adds a layer of optimism. IBKR presents an attractive opportunity for value investors as the stock trades at a discount.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report

Interactive Brokers Group, Inc. (IBKR) : Free Stock Analysis Report

Tradeweb Markets Inc. (TW) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research