Contents
Key Takeaways
- Shares of LMND declined 10–12% following the company’s Q4 2025 earnings announcement
- Fourth quarter revenue reached $228.1 million, marking a 53% year-over-year increase, though profitability remains elusive
- Management’s 2026 outlook calls for an adjusted EBITDA loss ranging from $48 million to $52 million
- Piper Sandler reduced its price objective from $85 down to $65 while maintaining a Neutral stance
- The company now aims to achieve full-year EBITDA profitability in 2027
Shares of Lemonade experienced a decline of 10% to 12% in the trading sessions that followed the company’s fourth quarter 2025 earnings announcement on February 19, 2026.
The selloff occurred even as the insurance technology firm delivered what it described as its best quarterly performance to date.
Fourth quarter revenue came in at $228.1 million, representing a 53% surge compared to the same period last year. The company reported a net loss of $0.29 per diluted share, while its adjusted EBITDA loss tightened to roughly $5 million during the three-month period.
In-force premium reached approximately $1.24 billion, marking yet another milestone for the company.
For the full year 2025, revenue totaled $737.9 million. The annual net loss stood at $165.5 million, representing an improvement compared to the previous fiscal year.
Forward Guidance Disappoints Market Participants
Looking ahead to 2026, Lemonade provided revenue guidance ranging between $1.187 billion and $1.192 billion. At first glance, this represents substantial expansion.
However, the issue lies in the accompanying profitability metrics. Management forecast a full-year adjusted EBITDA loss of $48 million to $52 million, with the first quarter of 2026 alone expected to post a loss between $22 million and $25 million.
While the company anticipates achieving positive adjusted EBITDA in the fourth quarter of 2026, with full-year profitability pushed to 2027, this timeline represents no acceleration from previous expectations.
The disconnect between top-line expansion and the extended path to profitability drove the negative market reaction.
Wall Street Reacts with Downgrades
Following the earnings release, Piper Sandler revised its price target downward from $85 to $65 while keeping its Neutral rating intact. The updated target suggests potential upside of approximately 13.4% from the recent closing price of $57.31.
The firm highlighted Lemonade’s track record of falling short on its own EBITDA projections as the primary area of concern, despite notable improvements in underwriting performance.
While Piper recognized these worries might be “overly simplistic” given the company’s solid execution in direct-to-consumer personal lines insurance, investors responded negatively nonetheless.
Among Wall Street analysts, the consensus price target stands at $65.11, suggesting roughly 14% upside potential. Among the 11 analysts providing coverage, three assign Buy ratings or higher, five recommend Hold positions, and three rate the stock a Sell.
Artificial Intelligence Initiatives and Product Expansion
The earnings report wasn’t without bright spots. During the quarter, Lemonade introduced an AI-powered autonomous automobile insurance offering.
The company’s proprietary AI platform, known as Blender, now enables claims adjusters to process triple their previous workload. Leadership emphasized that artificial intelligence has been integrated across “pretty much every line” of the income statement.
Marketing expenditures have more than tripled, fueled by AI-driven enhancements in customer segmentation and risk pricing.
Longer-term financial projections call for revenue of $1.8 billion and earnings of $201.4 million by 2028. Some more optimistic forecasts had previously targeted revenue approaching $2.0 billion for that year.
Piper Sandler’s $65 price target represents the latest analyst benchmark for the stock.
