Lemonade (NYSE:LMND) Delivers Strong Q3 Numbers, Stock Jumps 11.3%

Digital insurance provider Lemonade (NYSE:LMND) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 42.4% year on year to $194.5 million. Its GAAP loss of $0.51 per share was 27.6% above analysts’ consensus estimates.

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Company Overview

Built on the principle of giving back unused premiums to charitable causes selected by policyholders, Lemonade (NYSE:LMND) is a technology-driven insurance company that offers homeowners, renters, pet, car, and life insurance through an AI-powered digital platform.

Revenue Growth

Insurance companies generate revenue three ways. The first is the core insurance business itself, represented in the income statement as premiums earned. The second source is investment income from investing the “float” (premiums collected but not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from policy administration, annuities, and other value-added services. Luckily, Lemonade’s revenue grew at an incredible 46.6% compounded annual growth rate over the last five years. Its growth beat the average insurance company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Lemonade’s annualized revenue growth of 27.9% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Lemonade reported magnificent year-on-year revenue growth of 42.4%, and its $194.5 million of revenue beat Wall Street’s estimates by 4.8%.

Net premiums earned made up 69.7% of the company’s total revenue during the last five years, meaning insurance operations are Lemonade’s largest source of revenue.

Markets consistently prioritize net premiums earned growth over investment and fee income, recognizing its superior quality as a core indicator of the company’s underwriting success and market penetration.

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Net Premiums Earned

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are:

• Gross premiums - what’s ceded to reinsurers as a risk mitigation and transfer strategy

Lemonade’s net premiums earned has grown at a 40.6% annualized rate over the last five years, much better than the broader insurance industry but slower than its total revenue.

When analyzing Lemonade’s net premiums earned over the last two years, we can see that growth decelerated to 24.7% annually. Since two-year net premiums earned grew slower than total revenue over this period, it’s implied that other line items such as investment income grew at a faster rate. These extra revenue streams are important to the bottom line, yet their performance can be inconsistent. Some firms have been more successful and consistent in managing their float, but sharp fluctuations in the fixed income and equity markets can dramatically affect short-term results.

Lemonade’s net premiums earned came in at $140 million this quarter, up a hearty 46.3% year on year and topping Wall Street Consensus estimates by 1.6%.

Key Takeaways from Lemonade’s Q3 Results

It was good to see Lemonade beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock traded up 11.3% to $65.25 immediately following the results.

Lemonade may have had a good quarter, but does that mean you should invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.