On Friday last week, HUB24 (ASX: HUB) reported H1 FY 2026 revenue of $246 million, record statutory profit of $59.7 million, record statutory earnings per share of 73.3 cents, and record underlying Diluted Earnings per share of 82.9 cents, up a whopping 63%, extending a prolific growth track record. The investment thesis remains on track because Hub24 is taking market share in a growing market because of its superior product.
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You can see below how that has produced standout diluted underlying earnings-per-share growth over the last few years. It is no surprise the market responded to these results by pushing the share price higher.
However, underlying earnings-per-share excludes non-cash amortisation of past acquisitions, and it would be more conservative to consider statutory earnings per share. In this case, I’m content to use underlying earnings per share to track progress, since it is adjusted for some lumpy expenses. However, I’d prefer the statutory number for valuation purposes. You can check out the reconcilation for yourself, below.
Underlying free cash flow was just over $40m, which is a respectable 68% of net profit after tax. However, strict free cash flow was strongly negative because Hub24 lent an additional $73m (total $78m) to the HUB24 Super Fund Trustee. This cash is tied up, so even though it is an asset, it isn’t really a liquid asset. The CEO noted, “You’ll see normal growth in that going forward. There was a step change this half because of the changes on the 1st of July for regulatory changes.” As a result, the balance sheet was reduced to net cash of $27m.
Platform Administration Segment
As usual the much larger platform business, which allows funds to access investors via financial advisers, was the star of the show. The graph below excludes large customer acquisitions and shows how the general trend is for the platform to accumulate funds under management at ever-increasing rates.
This is driven both by increasing the number of advisers that use the Hub24 platform, but also by existing advisers directing more of their new business towards Hub24. While many advisers use multiple platforms, they are more likely to direct new clients (for example) to their preferred platform. Hub24 seems to be winning the battle for the hearts of advisers. However, unlike Xero (ASX: XRO) before it, which previously won the hearts of accountants, Hub24 is actually making ever-increasing profits, while eschewing grandiose empire-building acquisitions and international expansion. It truly is a rare beast.
My favourite graphic is provided by competitor Netwealth (ASX: NWL), which demonstrates that Hub24 is growing more quickly than it is, but also that both companies have plenty of space to take further share from the larger competitors like AMP.
I recommend all Hub24 shareholders read this article by Professional Planner editor Chris Dastoor. It quotes Hub24 CEO Andrew Alcock as saying that the collapsed Shield Master Fund and First Guardian Master Fund “couldn’t answer our questions to get on the platform, so we wouldn’t spend more time looking at it, and had no advice to recommend it.”
In my opinion, this kind of favourable reporting by an independent trade publication definitely encourages financial advisers to use Hub24 over Netwealth, which cannot say the same. I mean, why wouldn’t you favour the platform that blocked the fraudulent funds from its investment menu?
Meanwhile, having been burnt, Macquarie decided to remove hundreds of options from its own platform. The AFR confirms that this has made life difficult for completely innocent financial planners and their customers, so I would not be surprised to see Macquarie continue to lose market share.
Technology Solutions Segment
This segment remained weak from a profit perspective, as revenue growth of 10% was subsumed by cost growth of 15%. Notably, a lot of the growth came from the Class SMSF product, which benefitted from a strong increase in the number of SMSFs. Its market share remained the same at roughly 30%.
While it is certainly positive to see that the technology solutions business is profitable and growing revenue, it’s hard to get excited about this collection of businesses, given that as a group they are not scaling well due to expense growth. Amongst them, NowInfinity, which provides legal documents and an interface for communications with ASIC, is the standout, growing at 1.8x the market.
It is certainly possible that, in the future, AI will reduce the need to continue expanding headcount in these divisions. On the other hand, these products may face competitive pressure from AI. In any event, they are less protected from the impacts of new competitors than the platform business. I thought the result from this segment was characteristically uninspiring in H1 FY 2026.
The Impact Of AI on Hub24
CEO Andrew Alcock said:
“…we have a focus on human-in-loop solutions as well. We sit on market-leading infrastructure that’s very hard to disrupt. That is actually required for AI business models to thrive and SaaS models to thrive, sitting on data, scale, custody, and so forth. And so our own approach actually fosters the development of SaaS solutions that can sit within our ecosystem infrastructure to solve problems for our clients and increase our own opportunities. So I just wanted to comment about that. There’s been lots of talk about. The market has been very bearish. Our belief is we stand to gain from this. We’re certainly working in that direction, and we think we have a unique position to capitalize on the benefits this technology can give to our customers and our shareholders.”
This makes sense to me, but it i is clear that many market participants are severly alarmed by the potential impacts of AI on software companies, so shareholders should be prepared for continued negative sentiment in the near term.
Valuation
Based on the most recent half-year profit of 73.3 cents per share, Hub24’s earnings run rate is about $1.46 per share, which is close to the analyst consensus estimates on S&P Capital IQ, being around $1.48. I think both numbers are achievable and would put Hub24 stock on a P/E ratio of about 62 at the current share price of around $91.50.
That is not unreasonable given the pace and apparent reliability of earnings-per-share growth. On the other hand, the market is apparently liable to get very concerned about future growth in software companies at the moment, and a P/E ratio of 62 still certainly requires significant future growth. Volatile market conditions can also impact flows from period to period, so the valuation still carries some risk, without being dangerously overvalued.
Conclusion on Hub24 H1 FY2026
When I covered the FY 2025 results, I noted that at around a share price of $85, I was considering downgrading the stock to Hold based on valuation. Subsequently, I did downgrade the stock to Hold, then I recommended supporters sell a tenth at $94.67 and another three tenths at $99.80. Therefore, anyone who followed the original recommendation at $37.82 should have at least taken out their original investment, even after tax.
My investing philosophy is to continue to hold high-quality businesses even if they seem expensively priced, because it is basically almost any stock that goes up 10x or more will have periods of overvaluation. If one sells each time overvaluation occurs, one risks missing the right moment to buy back in; to speak nothing of the tax consequences.
Therefore, given my previous profit-taking just a few months ago, and mindful of the strong fundamental performance of the business, Hub24 remains a Hold recommendation.
Disclosure: The author owns shares in HUB and will not trade HUB shares for 2 days following this article. This article is not intended to form the sole basis of an investment decision. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).
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