IBKR's Retail Trading Surge: DARTs and Net Interest Income Signal a Bullish Future

Interactive Brokers (NASDAQ: IBKR) has become a poster child for the modern retail trading boom, and the numbers tell a compelling story. The company's Daily Average Revenue Trades (DARTs) have surged to 3.6 million in February 2025, up 48% year-over-year—a figure that outpaces even the most optimistic industry forecasts. This isn't just noise; it's a seismic shift in how individual investors are engaging with markets. With 3.54 million client accounts, a 32% increase since 2024, IBKR is no longer just a niche player for professional traders. It's a global platform that's democratizing access to complex markets, from U.S. equities to emerging futures and crypto.

What's driving this growth? The answer lies in a perfect storm of macroeconomic tailwinds and fintech innovation. The Federal Reserve's high-rate environment has turbocharged IBKR's net interest income, which hit $860 million in Q2 2025—a 9% year-over-year jump. Clients are leveraging margin loans and securities lending to the max, and IBKR is reaping the rewards. Even as rates stabilize, the company's ability to generate $1.63 billion in net interest income over the first half of 2025 shows it's not just riding the rate cycle. It's building a durable moat.

But let's not ignore the risks. A 1% rate cut could slash IBKR's annual net interest income by $339 million. That's a big number, but it's not a dealbreaker. The company's retail trading engine is firing on all cylinders, with DARTs per account rising to 225 annually. This means even if interest income softens, the commission and execution revenue from the sheer volume of trades will cushion the blow. And let's not forget: IBKR's cost structure is lean. Its professional execution costs for U.S. stocks sit at just 3.1 basis points, a competitive edge that's hard to replicate.

The long-term value creation here is twofold. First, IBKR is capitalizing on the “AI-driven investment” trend, with tools like its Investment Themes platform helping clients tap into high-growth sectors such as nuclear energy and artificial intelligence. Second, its global footprint—spanning 120 markets—positions it to benefit from the next wave of international retail trading. The recent addition of prediction markets and expanded crypto offerings isn't just diversification; it's a bet on the future of finance.

For investors, the key takeaway is this: IBKR is not just a beneficiary of the current rate environment. It's a company building a self-reinforcing cycle of growth. Every new account added (up 100,000 in a single month in February 2025) translates into more DARTs, more margin balances, and more interest income. And with assets under custody hitting $587.8 billion, the company is scaling efficiently.

Is the stock overvalued? At a price-to-earnings ratio of 18.5 and a forward P/E of 15.2, IBKR trades at a discount to its historical average and to peers like Charles Schwab. Given its 30.5% annual earnings growth and 20.37% return on equity, the valuation looks compelling.

Investment Advice: Buy and hold. The short-term risks of rate cuts are real, but IBKR's retail trading momentum and strategic innovation are more than enough to justify a bullish outlook. For those who want to hedge, consider pairing IBKR with a small position in a diversified fintech ETF to balance exposure. The market is changing, but IBKR isn't just adapting—it's leading the charge.