Wealthfront (NASDAQ:WLTH) said fiscal second-quarter platform assets rose 12% from a year earlier to $99 billion as growth in its investment advisory business offset a decline in cash management assets. The company also said total platform assets surpassed $100 billion for the first time in August.
Chief Executive Officer and President David Fortunato said the company remains focused on building a digital wealth-management platform for clients born after 1980, adding products intended to serve clients across saving, investing, family financial planning and home buying.
Assets and Client Growth
At the end of the quarter ended July 31, total platform assets were $99 billion, up 2% sequentially. Investment Advisory assets increased 5% from the prior quarter and 30% year over year to $54.1 billion. Cash management assets were $44.9 billion, down 4% from a year earlier.
Net deposits totaled $1.1 billion during the quarter, all of which came from Investment Advisory. Fortunato said the result included the company’s second-best quarter of net transfers from cash accounts to investment accounts.
Wealthfront ended the quarter with 1.1 million funded clients, an increase of 14% year over year, and 1.97 million funded accounts, up 15%. The company reported 1.3 funded accounts per funded client.
In August, platform assets reached $100.9 billion, including $55.8 billion in Investment Advisory assets and $45.1 billion in cash management assets. August net deposits totaled $605 million, although Chief Financial Officer and Treasurer Alan Imberman noted the month included five full weekends, when the company recognizes withdrawals for spending and instant withdrawals. The company said August was its best month for cash net deposits since March and its best month for total net deposits since August 2025.
Asset-weighted cross-product adoption rose by one-half percentage point month over month to just under 64% in August. Fortunato said the company has targeted incentives and product marketing toward clients who joined in 2023 and 2024, when peak interest rates made the company’s cash account particularly attractive. Those cohorts had adopted Wealthfront investing products at lower rates than other groups and had also invested through external brokerages, he said.
Revenue, Profitability and Capital Returns
Quarterly revenue was $91.9 million, up 1% year over year. Cash management revenue declined 10% to $61.8 million, reflecting a lower annualized cash management fee rate of 55 basis points and a 1% decline in average cash management balances to $44.9 billion.
Imberman said the cash-management fee rate was affected by the conversion of annual percentage yields to annual percentage rates as federal funds rates declined, as well as a higher impact from APY boosts tied to client incentives. The run-rate annualized cash management fee rate at the end of August was also 55 basis points.
Investment Advisory revenue rose 31% to $28.8 million, driven by average advisory balances of $52.9 billion, up 35% year over year. The annualized Investment Advisory fee rate was 22 basis points, down about one basis point from the year-earlier period due to one-time incentives associated with the launch of Custodial Accounts.
- Gross profit was $81.1 million, down 1% year over year, with an 88% gross margin.
- GAAP expenses rose 45% to $75.1 million.
- Adjusted operating expenses, excluding share-based compensation, increased 17% to $58.7 million, largely due to product-development staffing and the rollout of Wealthfront Home Lending.
- Adjusted EBITDA declined 15% to $38.1 million, while adjusted EBITDA margin was 41%.
- GAAP diluted net income was $17.6 million, or $0.10 per share.
- Adjusted free cash flow was $28.3 million, representing 74% of adjusted EBITDA.
The company’s Rule of 40 metric was 42, marking its 16th consecutive quarter above that threshold, according to Imberman. Wealthfront also repurchased 3.3 million shares for approximately $30 million during the quarter. It ended the period with $453 million in cash and cash equivalents and no debt, Imberman said.
Product Rollouts Include Brokerage, Custodial and Home Lending
Wealthfront launched its Custodial Account in June, adding to its family-oriented offerings that include 529, joint and trust accounts. The account includes Tax-Gain Harvesting, which Fortunato said is designed to use favorable federal tax treatment for children to realize up to $1,350 of tax-free growth annually without requiring a federal tax return filing.
Fortunato said early adoption showed that a number of customers opened multiple Custodial Accounts for multiple children. He characterized the product primarily as a way to broaden client relationships rather than a major asset-growth driver.
The company also plans in October to transition its Stock Investing Account to its broker-dealer and rename it the Wealthfront Brokerage Account. Fortunato said the brokerage offering will initially provide additional order types and a larger list of investable securities. He said the company intends to emphasize long-term, buy-and-hold investing rather than replicate the priorities of other digital brokerage platforms.
Wealthfront Home Lending became generally available in Texas in May and California in August, following an earlier Colorado rollout. The company expects to expand into Washington, Florida, Illinois and Oregon in coming months.
Fortunato said the mortgage product is designed to offer rates at least 50 basis points below the national average and that the company has achieved that objective on an average basis. Recent enhancements include an online self-service loan scenarios tool, automated application-field prefill using Wealthfront and linked-account data, and a process designed to speed restricted stock unit income verification and borrower prequalification.
Management said it is continuing to invest in automation and the home-lending experience despite near-term margin pressure. Imberman said the company still expects it can maintain an adjusted EBITDA margin above 40% over the long term, though Home Lending will be a near-term headwind as Wealthfront works to build scale.
Separately, the company has begun testing an artificial-intelligence tool intended to help select clients determine and set emergency-fund targets. Fortunato said Wealthfront ultimately envisions AI tools that can help answer clients’ financial questions, but said the company must first establish client trust in the tools.
About Wealthfront (NASDAQ:WLTH)
Wealthfront (NASDAQ:WLTH) is a technology-driven wealth management firm that provides automated investment services to individual investors. Operating as a robo-advisor, the company uses algorithms and software to construct and manage diversified portfolios largely composed of low-cost exchange-traded funds (ETFs). Its platform is geared toward long-term, goal-based investing with an emphasis on passive strategies, automated rebalancing and straightforward user experience delivered through web and mobile applications.
The company’s product suite includes automated portfolio management, tax-loss harvesting and goal-planning tools that help clients set and track financial objectives.
