Wealthfront Earnings Call: High-Margin Growth, IPO Firepower

Wealthfront Corporation ((WLTH)) has held its Q3 earnings call. Read on for the main highlights of the call.

Wealthfront Earnings Call Signals Confident Growth Despite Near-Term GAAP Noise

Wealthfront Corporation’s latest earnings call struck a distinctly upbeat tone, underscored by record revenue, strong asset growth, and elite profitability metrics that would stand out across the fintech universe. Management emphasized broad-based momentum: platform assets rose 21% year over year, adjusted EBITDA climbed 24%, and margins remained exceptionally high, with an 89% gross margin and a 47% adjusted EBITDA margin, driving a Rule of 40 score of 63%. While macro headwinds from recent Federal Reserve rate cuts weighed on Cash Management growth and temporarily pressured fees, and a sizable one-time stock-based compensation charge will distort near-term GAAP earnings, the overall message was clear: the business engine is running strong, with diversified growth levers and disciplined execution.

IPO Delivers Capital Firepower and Balance Sheet Flexibility

Wealthfront closed its IPO in December 2025, emerging with a materially stronger balance sheet and more financial flexibility to fund growth. The company now has a post-IPO fully diluted share count of approximately 189 million and expanded its revolving credit facility fivefold, to $250 million from $50 million. At quarter-end, Wealthfront held $266 million in cash and cash equivalents, and with net IPO proceeds of more than $130 million, total cash now exceeds $400 million. Management framed this capital base and credit capacity as strategic ammunition to invest in product development, support growth initiatives like Home Lending, and navigate volatility without sacrificing long-term ambitions.

Record Revenue and Platform Assets Underscore Growth Momentum

Top-line performance was a key highlight, with revenue reaching a quarterly record of $93.2 million, up 16% year over year. Total platform assets climbed to $92.8 billion, a 21% increase from a year ago, reflecting both healthy client acquisition and solid net deposit trends. The combination of revenue growth and asset expansion suggests that Wealthfront is successfully deepening its role as a primary financial platform for its users, not just as a single-product provider. This scale also creates operating leverage, helping support the company’s strong margin profile even as it steps up investment in new offerings.

Investment Advisory Business Accelerates on Strong Asset Inflows

Wealthfront’s Investment Advisory segment delivered standout growth, further shifting the company’s mix toward fee-based investing. Advisory assets climbed 31% year over year to $45.8 billion, comfortably outpacing overall platform growth. Investment Advisory revenue rose 26% to $24.2 million, and the annualized advisory fee rate held steady at 22 basis points, indicating that pricing remains stable even as the product set expands. Management linked this strength to increasing adoption of Wealthfront’s automated investing solutions and to a structural tailwind from client assets migrating out of cash into portfolios, a trend they expect to continue if lower interest rates reduce the appeal of idle cash yields.

Cash Management Remains a Scale Engine Despite Rate Headwinds

The Cash Management franchise remains a core pillar of Wealthfront’s business model, even as rate cuts moderated growth in the quarter. Cash Management assets reached $47.0 billion, up 14% year over year, with average balances of $46.8 billion growing 18%. Revenue from Cash Management came in at $68.8 million, also up 14% year over year, reflecting the still-meaningful spread revenue opportunity. However, management noted that recent Fed cuts slowed asset growth and, via a built-in seven-day grace period on client APYs, temporarily compressed the cash fee rate. Consequently, the annualized Cash Management fee rate dipped to 58 basis points, down 2 basis points from a year ago. Even so, absolute revenue growth remains healthy, and Wealthfront continues to view Cash Management as an important source of scale, deposits, and cross-sell into higher-value products.

Profitability Metrics Stand Out in Fintech Peer Set

Wealthfront showcased profitability metrics that are rare for a high-growth fintech platform. Adjusted EBITDA reached $43.8 million, up 24% year over year, with an adjusted EBITDA margin of 47%, an improvement of 3 percentage points. Gross profit hit a record $83.0 million, up 15% year over year, and the gross margin stayed an impressive 89%. Free cash flow of $41.3 million represented 94% conversion of EBITDA, highlighting the cash-generative nature of the model. These figures signal that Wealthfront is not trading growth for profitability; instead, it is operating with a capital-efficient, high-margin structure that provides substantial financial resilience and optionality.

Rule of 40 and Operational Efficiency Highlight Discipline

Operational leverage remains a central narrative for Wealthfront, supported by a strong Rule of 40 performance. The company reported an incremental adjusted EBITDA margin of 66%, indicating that a large share of each additional revenue dollar is dropping to the bottom line. Its Rule of 40 score for the quarter was 63%, marking the 13th consecutive quarter above its internal threshold. This consistency underscores management’s ability to balance growth investments with expense control, a key consideration for investors evaluating fintech platforms that are often heavy spenders on customer acquisition and technology.

Client Base and Deposit Flows Support Durable Growth

Client and deposit metrics underscored the durability of Wealthfront’s growth engine. Funded clients reached roughly 1.38 million, up 20% year over year, while funded accounts rose to about 1.78 million, also up 20%, implying an average of around 1.3 accounts per client. Net deposits totaled $1.6 billion for the quarter and $9.7 billion over the trailing 12 months, reflecting strong organic inflows and client engagement. These metrics indicate both successful acquisition and solid retention, with Wealthfront increasingly serving as a primary destination for clients’ investable assets, a critical driver of long-term revenue and scale.

Product Innovation Broadens Revenue Streams and Client Value

Product innovation was a recurring theme, with Wealthfront expanding its toolkit to deepen wallet share and support long-term growth. The company launched Nasdaq-100 Direct, a new investing product with a 12-basis-point advisory fee, designed to appeal to clients seeking targeted, low-cost exposure. It also originated its first Home Mortgage in the third quarter, beginning with Colorado and gradually expanding to Texas and California. Several existing investment offerings—including automated bond ladders, automated bond portfolios, direct indexing, and stock investing—have each surpassed $1 billion in assets, showing meaningful traction beyond the company’s core passive portfolios. Wealthfront also highlighted the impact of its tax-loss harvesting technology, which has generated over $1 billion in cumulative client tax savings, equating to more than seven times clients’ lifetime advisory fees—a powerful value proposition that could further support client retention and cross-sell.

Cross-Product Adoption Gains Signal Platform Stickiness

Wealthfront reported encouraging progress in cross-product adoption, an important indicator of platform stickiness and lifetime value. Asset-weighted cross-product adoption reached 60% at quarter-end, up almost 1 percentage point sequentially and about 2 percentage points year over year. The company said the third quarter was its second-best ever for total cross-product flows and its best quarter on record for net transfers from cash accounts into investment products. This migration supports the strategic shift toward higher-value advisory relationships, and it also suggests that customers view Wealthfront as an integrated financial hub rather than a single-point solution.

Fed Rate Cuts Weigh on Cash Economics but Aid Investment Shift

Macro conditions played a visible role in the quarter, with three Fed rate cuts between September and December 2025 affecting the Cash Management business. Wealthfront’s seven-day APY grace period means interest income reprices immediately when rates fall, while client rates are held constant for a week, creating short-term fee compression. This mechanism contributed to the modest decline in the annualized Cash Management fee rate to 58 basis points. Management expects that lower rates will continue to moderate cash asset growth, but also believes they will accelerate the shift from cash into investment accounts as yields become less compelling, potentially enhancing long-term revenue diversification and strengthening the advisory franchise.

Asset Migration Creates Short-Term Revenue Mix Headwinds

The company highlighted a near-term revenue headwind from asset migration within its own ecosystem. As clients move funds from high-fee Cash Management (58 bps) into lower-fee Investment Advisory (22 bps), Wealthfront experiences a short-term drag on revenue growth per dollar of assets. However, management framed this as a healthy evolution for the platform and positive for the long run, arguing that invested assets are more durable, support deeper engagement, and better align with client financial outcomes. For investors, this dynamic implies a trade-off: near-term fee pressure in exchange for potentially more stable, higher-quality revenue streams over time.

GAAP Expenses and One-Time Stock Compensation Charge Cloud Optics

Wealthfront’s GAAP results lagged its adjusted metrics due to rising expenses and a looming one-time charge. Total GAAP expenses increased 22% year over year, reflecting higher compensation and growth-related costs. More importantly, the company flagged a noncash stock-based compensation charge of approximately $245 million to $250 million in the fourth quarter, tied to the satisfaction of IPO-related performance conditions. This charge will materially weigh on reported GAAP earnings, creating a disconnect between economic performance and accounting results. Management framed this as a one-time, non-recurring impact, but investors should expect noisy GAAP numbers in the near term.

GAAP Net Income Growth Lags Adjusted Performance

The divergence between GAAP and adjusted performance is already visible in the latest quarter. GAAP net income rose just 3% year over year to $30.9 million, with earnings per share of $0.21, far below the growth rates in revenue, EBITDA, and free cash flow. This reflects the heavier GAAP expense load, including stock-based compensation, and foreshadows the impact of the pending IPO-related charge. While the company is clearly generating strong cash and adjusted profits, investors focused strictly on GAAP earnings may see a less flattering near-term trajectory.

Increased Operating Spend Fueled by Product Investment

Adjusted operating expenses (excluding stock-based compensation) rose 11% year over year to $53.7 million, driven largely by higher product development spend. Management indicated that this increased investment is necessary to support the expansion of new products such as Home Lending and advanced investment tools, and was partially offset by lower marketing outlays. The strategy suggests a shift toward deepening product capabilities and cross-sell rather than relying solely on top-of-funnel spend, which could improve unit economics over time even as it temporarily raises expense intensity.

Home Lending Offers Long-Term Upside with Early-Stage Risks

Home Lending is emerging as a potentially meaningful growth vector, but management was candid about its early-stage and higher-risk profile. The company originated its first Home Mortgage in the third quarter and is gradually rolling out the offering, starting in Colorado and expanding to Texas and California. Wealthfront characterized the current environment as seasonally muted for housing and stressed that building a scaled mortgage business will be a multi-year effort. While the product could enhance the platform’s relevance in major financial life events and unlock new revenue streams, it introduces execution and timing risks that investors should monitor, particularly as the company balances lending risk management with its historical focus on investing and cash products.

Forward-Looking Outlook: Monthly Transparency and Mix Shift Strategy

Looking ahead, Wealthfront is departing from traditional quarterly guidance in favor of publishing monthly operating metrics—providing the first two months intra-quarter and the final month alongside earnings—to give investors a more real-time view of trends. Management expects recent Fed cuts to continue slowing Cash Management asset growth but to simultaneously spur accelerated growth in Investment Advisory as clients move assets from cash into investment portfolios. The strategic focus will remain on asset retention and enhancing cross-product adoption, which currently stands at about 60% on an asset-weighted basis. The company framed its outlook using current business metrics: platform assets of $92.8 billion, Cash Management assets of $47.0 billion with a 58-basis-point fee rate, and Investment Advisory assets of $45.8 billion with a stable 22-basis-point fee rate. Financially, Wealthfront highlighted its 16% revenue growth, 47% adjusted EBITDA margin, 63% Rule of 40 score, strong free cash flow conversion, and more than $400 million in total cash and IPO proceeds, offset by the expected one-time stock-based compensation charge and a post-IPO fully diluted share count of about 189 million. Overall, the guidance narrative emphasizes sustained growth, a deliberate mix shift toward advisory, and a commitment to transparency through monthly disclosures.

In closing, Wealthfront’s earnings call painted the picture of a fintech platform with robust growth, exceptional profitability, and a strong balance sheet, even as GAAP optics are muddied by stock-based compensation and macro-driven rate pressures. Record revenue, expanding platform assets, and rising cross-product adoption underline the strength of its business model, while new offerings like Nasdaq-100 Direct and Home Lending add long-term optionality. Investors will need to look past near-term accounting noise and modest cash fee compression to appreciate the underlying momentum, but the company’s numbers and strategy collectively point to a constructive, growth-oriented trajectory.