Futu Holdings Stock Dips Ahead of Earnings, Rally Takes a Breather

Futu Holdings Limited (NASDAQ: FUTU), the Hong Kong-based online brokerage firm, is preparing their upcoming earnings report, scheduled for release tomorrow. The stock's performance in the last five days, down 11.72%, marks a pause in what has been a stellar year-to-date rally of approximately 106%.

Analysts expect FUTU to report an earnings per share (EPS) of 20.48 in its upcoming earnings report, a significant increase from the 9.97 EPS recorded a year ago. Revenue estimates are projected at approximately $5.55 billion, reflecting an impressive 61.40% year-over-year sales growth.

Several key developments have recently impacted Futu's stock. One notable event is Yong Rong (HK) Asset Management Ltd's complete liquidation of its holdings in Futu during the third quarter of 2025. This exit, attributed to profit-taking and portfolio rebalancing after considerable gains, suggests a shifting sentiment among some institutional backers.

Conversely, Yunqi Capital Ltd acquired 130,000 shares of Futu, valued at approximately $16.07 million, during the second quarter, signaling continued confidence in the company's growth trajectory from other institutional players.

The company reported a year-over-year revenue increase of nearly 70% in the second quarter of 2025. This growth has been partially attributed to the integration of AI-driven product offerings like Futubull AI and moomoo AI, which have enhanced user experience and attracted new customers.

While the consensus points towards continued growth driven by AI and international expansion, a contrarian perspective suggests that Futu's reliance on navigating complex regulatory landscapes, particularly in China, presents a significant, potentially underestimated risk. The market may be too readily dismissing the potential for more stringent regulations that could severely curtail Futu's operations within China, its core market.

Furthermore, the narrative of AI-driven growth might be overshadowing the fundamental risks associated with operating a brokerage in a highly regulated sector. What if the regulatory hammer comes down harder than anticipated? The current valuation may not fully account for the potential downside if Futu faces substantial limitations on its Chinese operations or incurs significant legal liabilities.

This contrarian view suggests one should carefully weigh the potential for regulatory setbacks before embracing the prevailing bullish sentiment. The market is pricing in AI potential, but perhaps underestimating regulatory risks.

As Futu prepares to release its earnings report, the markets will be closely monitoring the company's financial performance, updates on the regulatory front, and any strategic initiatives aimed at mitigating risks and capitalizing on growth opportunities. The stock's reaction to the earnings release will likely set the tone for its performance in the coming weeks. Whether the YTD rally can continue or if this breather turns into a larger correction remains to be seen.