TLDR
- Wealthfront shares plunged up to 13% Thursday morning, settling at a 6.2% decline by market close
- Fourth-quarter net loss reached $135 million, primarily due to $239 million in IPO-related stock compensation expenses
- Quarterly revenue exceeded forecasts at $96.1 million versus analyst projections of $92.5 million
- Cash management saw $360 million in net withdrawals, contrasting sharply with $2.7 billion in net deposits from the prior year
- Platform assets reached an all-time high of $94.1 billion; client base expanded to 1.4 million funded accounts
Shares of Wealthfront (WLTH) experienced significant volatility on Thursday, initially plummeting as much as 13% during morning trading before recovering somewhat to finish the session down 6.2%. The selloff followed the automated investment platform’s release of fourth-quarter financial results that presented a mixed picture for investors.
The fintech firm disclosed a GAAP net loss totaling $134.8 million, equivalent to $1.31 per diluted share. This marked a dramatic swing from the $32 million profit recorded during the identical quarter in the previous fiscal year.
However, the substantial reported loss requires context. The overwhelming majority stemmed from $239 million in dual-trigger equity award costs associated with the company’s recent public market debut, contributing to an overall stock-based compensation expense of $248.3 million during the three-month period.
Quarterly revenue reached $96.1 million, representing a 16% year-over-year gain. This performance surpassed Wall Street expectations of $92.5 million, based on consensus estimates compiled by FactSet.
Adjusted EBITDA increased 22% to $44.2 million, achieving a robust 46% margin. Gross profit totaled $86.6 million, translating to an impressive 90% gross margin.
Broader market weakness compounded investor concerns. The S&P 500 declined 1.5% while the Nasdaq retreated 1.8% on Thursday, weighed down by escalating tensions involving Iran, rising crude oil prices, persistent inflation readings, and emerging challenges within the private credit sector.
Cash Management Outflows Weigh on Sentiment
The primary source of investor anxiety centered on capital flows. Wealthfront disclosed net outflows of $360 million during the quarter ended January 31. This represents a dramatic reversal from the $2.7 billion in net inflows witnessed during the comparable period twelve months earlier.
The cash management segment demonstrates significant sensitivity to interest rate fluctuations. Over two-thirds of Wealthfront’s quarterly revenue originated from its high-yield cash management products.
When benchmark rates were elevated, this offering attracted substantial client deposits. However, rate reductions implemented last year diminished its competitive appeal. The platform experienced an acute $840 million withdrawal spike in January alone, attributed to customer responses to rate adjustments and seasonal tax-preparation withdrawals.
Company leadership acknowledged that cash deposits returned to positive territory during mid-February, with outflows decelerating to $145 million. Nevertheless, management cautioned that tax-season-related withdrawals will likely accelerate again through the April deadline.
J.P. Morgan analyst Kenneth Worthington maintained his Overweight recommendation but reduced his December 2026 price objective to $10 from $16. He highlighted the cash segment’s continued rate sensitivity as a headwind in the near term. Meanwhile, Keefe, Bruyette & Woods analyst Ryan Tomasello downgraded his rating to Market Perform from Outperform.
Record Platform Assets and Expanding Products
Notwithstanding the outflow concerns, overall platform metrics demonstrated strength. Total platform assets under management climbed to a record $94.1 billion, advancing from $80.2 billion in the year-ago period. By February, this figure had grown further to $95.2 billion.
The investment advisory division reported a 29% year-over-year asset increase to $48.7 billion. Advisory revenue jumped 31% in the fourth quarter to $25.8 million.
Funded client accounts expanded to approximately 1.42 million from 1.2 million, while total funded accounts grew 16% to roughly 1.84 million.
For the complete fiscal year, revenue achieved a record $365 million, climbing 18% from the previous year. Full-year adjusted EBITDA totaled $170.7 million, representing a 20% gain, with margins expanding to 47%.
The company also generated $152.2 million in operating cash flow for the year and concluded the period without any debt obligations while maintaining $440.8 million in cash reserves. The board authorized a $100 million share buyback program.
Wealthfront increased its base cash APY by 5 basis points to 3.3% in January and launched a direct-deposit promotion providing an additional 25 basis point APY enhancement for eligible customers.
The firm’s home lending initiative, currently available in early access format across Colorado, Texas, and California, is undergoing expansion. CEO David Fortunato stated that Wealthfront targets offering mortgage rates at least 50 basis points below national averages.
Management provided guidance for Q1 cash management fee rates of 57–58 basis points and projects EBITDA margins will remain above 40% in the first fiscal quarter of 2027.
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