Freedom Holding Reports Q3 Revenue Growth But Underlying Earnings and Regulatory Pressures Persist

What happened

Freedom Holding Corp. reported third-quarter fiscal year 2026 revenue of $628.6 million for the three months ended December 31, 2025, indicating continued top-line expansion from previous quarters. This growth occurs amidst severe earnings volatility documented in the DeepValue report, which shows net income plummeting from $376 million in 2024 to $85 million in 2025 due to trading losses and regulatory hits. Key headwinds include new Kazakh caps on insurance commissions, a 10% surtax on sovereign income, and heavy reliance on a single institutional market-maker for 56% of fee revenue. Despite the revenue figures, the stock trades at approximately 165x trailing P/E on depressed earnings, suggesting the market may be overestimating a rapid profitability rebound under structural challenges. Investors must look beyond the revenue propaganda, as underlying margins face persistent pressure from Kazakh regulatory changes, high-concentration risks, and ongoing sanctions scrutiny.

Implication

The Q3 revenue figures reinforce growth but fail to address core profitability issues, with net income still depressed and volatile due to Kazakh tax hikes and commission caps. Valuation remains stretched at ~165x P/E, implying unrealistic expectations for earnings normalization amid structural headwinds. Regulatory risks are escalating, including potential sanctions enforcement and dependence on a single market-maker, which could trigger downside scenarios. Free cash flow remains balance-sheet-driven rather than earnings-aligned, limiting sustainable value creation. Therefore, investors should avoid or trim positions above $130, awaiting clearer evidence of margin improvement or a price reset toward the base-case $105 valuation.

Thesis delta

The investment thesis remains unchanged, as the Q3 revenue data confirms ongoing top-line growth but does not mitigate the critical risks of earnings volatility, regulatory pressure, and high valuation. Any shift would require sustained profitability recovery above 2025 levels, which this update does not provide. Thus, the 'POTENTIAL SELL' recommendation stands, emphasizing caution until earnings power normalizes or the price reflects a more conservative Kazakhstan-centric profile.