IG Group's 18% H1 Revenue Jump Masks a Margin Problem-and the Underdog Bet Is the Real Test

IG's half was solid, but the market is now judging growth quality

IG delivered H1 2026 results yesterday after the holding-company proposal and trading update earlier this month, and it announced the proposed acquisition of Underdog on the same day as the results. That timing matters. The story is no longer just whether IG can grow; it is whether that growth can improve the quality and valuation of future profits.

The core business still has real support. Revenue rose 18% to £642.8 million, EBITDA remained strong at £282.0 million, and management had already pointed to mid-point 2026 revenue growth last month. That resets expectations higher.

But the debate is clear: revenue grew faster than profit. EBITDA rose just 4%, so the next move for the stock depends on whether the core business can keep converting growth into durable earnings power while Underdog opens a second leg in the US.

The numbers show demand is strong, but operating leverage is still in question

One of the clearest tensions in the report is the gap between revenue growth and the profit step.

Adjusted EPS gives the cleaner read

If you use EPS as a quick leverage test, the headline numbers can mislead. Basic EPS from continuing operations was GBP 0.538 and diluted EPS was GBP 0.53-only marginal gains year over year.

But the cleaner signal is elsewhere. Adjusted EPS was up 21% to 68.9 pence, while statutory EPS rose just 1% to 53.8 pence because of non-recurring costs associated with the strategic review and other non-cash, non-recurring net losses. In other words, statutory EPS looks noisy here, not diagnostic.

That also helps explain why net income fell to GBP 179.2 million from GBP 186.3 million even as the business grew. The report says the lower figure reflected those review costs and other non-recurring items, not an obvious collapse in operating performance.

Where the margin tension sits

Management attributed growth to faster product velocity, increased marketing at attractive returns, and a rapidly growing customer base. It also said EBITDA still expanded despite lower interest income, higher investment in propositions and marketing, and costs tied to the strategic review.

That is the constructive case: the business kept growing instead of stalling under heavier spend.

The tighter objection is about mix and timing. Revenue rose 18%, but EBITDA rose just 4%. Margins remained strong at 44%, yet this still looked more like a spend-to-scale half than a clean pass-through.

What matters next

The key question is whether that spending continues to hit attractive returns and whether customer growth keeps translating into better earnings leverage. If adjusted EPS continues to outperform EBITDA, slower margin expansion is easier for the market to live with. If not, IG may stay viewed as a solid growth story rather than a higher-quality compounding story.

Underdog is the real valuation test for IG

The margin debate matters, but it is not the final word. IG published the Acquisition of Underdog report on the same day as its interim results, pushing investors to look at the business through a broader lens.

Why the deal matters

The economic bar is straightforward. Management expects the deal to be broadly neutral to adjusted EPS in year one, then double-digit per cent accretive by year three, while delivering return on invested capital in excess of IG's weighted average cost of capital in year three. That makes the attraction less about near-term earnings power and more about whether the market will assign a better multiple to IG's future profit stream.

There is also a discipline angle. IG says pro forma gross leverage will be under 2.0x at end-2026. That suggests the company is framing the transaction as a controlled expansion rather than a balance-sheet stretch.

Where bulls and bears diverge

Bulls can argue this is mainly a mix story. IG already has growth momentum, and Underdog gives that momentum a new US-facing revenue stream.

Bears will focus on timing. Year-one EPS neutrality means there is no instant payoff, and if integration slips, the market may keep applying the old multiple for longer than hoped.

How to approach the stock from here

The Underdog angle is the upside option, but the core business still has to do the heavy lifting.

My read

I'm constructive, but tactical: treat IG as a buy-on-proof name, not a narrative-chase. Management had already pointed to robust growth in customer activity and numbers, and the half showed a rapidly growing customer base. That is a healthy setup. What matters now is whether activity, conversion, and execution keep improving.

Three checkpoints

• Customer activity: Do activity trends stay firm into H2? That is the clearest sign that growth is demand-led rather than purely marketing-led.
• Conversion depth: Beyond account growth, do more users move into meaningful trading behavior? That is what would strengthen the case for better earnings quality.
• Integration discipline: After announcing the proposed acquisition of Underdog, the test is whether execution stays sharp. If integration gets messy, the market is less likely to reward the story with a higher multiple.