Webull’s slower path to profitability triggers sell-off as rising growth expenses outweigh revenue gains

Market Reaction to Webull's 2025 Performance

Webull's 2025 financial results sparked a classic "buy the rumor, sell the news" response from investors. Despite surpassing revenue expectations, the company's profitability fell short of what the market had quietly anticipated. As a result, shares dropped more than 6%, highlighting how concerns about heavy spending overshadowed the impressive revenue gains.

At first glance, the numbers looked strong. Over the year, Webull reported $571 million in revenue, a 46% increase from the previous year, with fourth-quarter revenue climbing 50% to $165.2 million. The company also achieved record net deposits totaling $8.6 billion. However, profitability told a different story. In the fourth quarter, Webull earned only $0.01 per share, falling short of analyst forecasts by $0.04. While this result was in line with company guidance, it was a stark reminder that scaling up hasn't yet translated into higher margins as many had hoped.

The disconnect was clear: investors had expected that rapid growth would naturally bring improved profitability. Instead, Webull ramped up spending to attract new customers, with adjusted operating expenses jumping 62% year-over-year to $143.6 million, largely due to aggressive marketing. This surge in costs led to a sharp drop in quarterly profits, turning a revenue win into an earnings disappointment. The stock's decline and subsequent price target reductions from analysts such as Rosenblatt and Northland made it clear that the market's focus had shifted to the lack of profitability, rather than revenue growth.

The Profitability Challenge: Balancing Growth and Costs

The gap between expectations and reality for Webull centers on a trade-off: robust revenue growth came at the expense of significantly higher spending. While investors had hoped for greater efficiency as the company scaled, the reality was a deliberate and costly effort to capture market share.

Webull's growth engine is undeniable. Annual revenue soared 46% to $571 million, with fourth-quarter revenue up 50% to $165.2 million. This momentum was fueled primarily by trading activity, as trading-related income surged 59% year-over-year. The platform averaged 1.2 million daily revenue trades, and equity notional volumes reached $239 billion, underscoring rapid business expansion.

However, this growth came with a steep price. Adjusted operating expenses for the fourth quarter soared to $143.6 million, exceeding analyst projections. The main culprit was a 128% increase in marketing and branding costs, which jumped from $23.4 million to $53.3 million. This was not a minor uptick, but a focused campaign to attract high-value active traders—a strategy management described as performance-driven. The result was a significant squeeze on profits, turning strong revenue into weaker earnings.

Despite maintaining its fifth straight quarter of adjusted operating profitability, with Q4 adjusted net income of $14.6 million, the pressure from marketing spend altered the near-term profit outlook. As Rosenblatt pointed out, adjusted operating profit fell short of expectations, indicating that Webull remains in a heavy investment phase. The market's reaction signals a shift in priorities: investors now want to see when this period of high spending will give way to sustainable profits, rather than just revenue outperformance.

Valuation Reset: How the Market Sees Webull

Webull's current share price reflects the market's reassessment of its risk and reward profile. Trading at around $5.54 per share and a market capitalization of about $3.05 billion, the company is valued as a high-growth business still in an expensive investment stage. This is not a premium for a profitable, mature company; instead, it reflects skepticism about near-term earnings.

The numbers paint a clear picture. The stock has fallen nearly 28% so far this year and is trading near its lowest point in the past 12 months, signaling that expectations have been significantly lowered. More notably, the stock's negative P/E ratio of -5.42 indicates that losses are being priced in. The market is not punishing growth itself, but rather the aggressive spending that currently outweighs it. The conversation has shifted from "when will profits arrive?" to "how long will spending remain elevated?"

Analyst opinions vary, but their perspectives are telling. Rosenblatt continues to rate the stock as a Buy, arguing that the substantial marketing investment is necessary to secure high-value traders and set the stage for a stronger 2026. However, they reduced their price target from $15 to $12, applying a 20x multiple to 2027 adjusted EBITDA—a lower valuation than before, acknowledging the short-term profit hit but betting on future gains. Northland, while also optimistic, cut its target to $14, citing lower valuations among peers and a more cautious outlook.

Ultimately, the focus has shifted from revenue growth to the timing of profitability. Investors have bought into the growth narrative but now require evidence that the current spending will soon translate into improved margins. The stock's depressed valuation and sharp decline this year show that the market is unwilling to pay for growth without a clear path to sustainable profits. The key question is whether management can deliver on promises to significantly reduce marketing expenses in the first quarter, signaling a transition from investment mode to profit generation.

Looking Ahead: What’s Factored In for 2026?

The market has already baked in considerable doubt about Webull's ability to achieve near-term profitability. With shares hovering around $5.54 and a negative earnings multiple, the company is still seen as a high-growth player in an expensive investment phase. The future now depends on whether Webull can turn its record customer growth into lasting, high-margin earnings without further diluting profits—a classic challenge of execution.

For 2026, management is pursuing several strategies to broaden revenue streams. These include monetizing its AI tool, Vega, which now supports 1.2 million global users each week; expanding into cryptocurrency and prediction markets; and growing its international presence, with 760,000 funded accounts outside the United States. These efforts aim to create a more stable and diversified revenue base beyond trading commissions. Early signs are promising: Webull Premium has surpassed 100,000 subscribers, and prediction markets saw over 152 million contracts traded in the fourth quarter alone.

However, the main risk remains execution. The market's negative reaction to the Q4 earnings report was a direct response to the surge in spending that overshadowed revenue gains. While Webull achieved its fifth consecutive quarter of adjusted operating profitability, the ongoing margin pressure from marketing spend forced a reset in expectations. For the stock to recover, management must prove that the current investment phase is winding down. Any indication that marketing costs will materially decrease in the first quarter could be a major catalyst, signaling a shift from relentless growth to a focus on profitability.

In summary, the market's attention has shifted from revenue growth to the timing of profit realization. While investors accept the company's growth story, they are waiting for clear evidence that spending will soon lead to improved margins. The depressed share price and steep decline this year reflect a reluctance to reward growth without a visible path to sustainable earnings. The coming quarters will be crucial, as management aims to deliver on its promise of reduced marketing spend and a transition toward stronger profitability.