Lemonade reported third‑quarter 2025 revenue of $194.5 million, a 42% year‑over‑year increase that reflects a 30% rise in in‑force premium to $1.16 billion. The growth was driven by a 25% jump in its U.S. renters segment and a 35% increase in its car‑insurance line, while its homeowners business grew 12% as the company expanded into Western Europe. The revenue beat analysts’ consensus of $188.99 million by $5.51 million, underscoring the strength of its AI‑powered underwriting and pricing model.
The company’s net loss ratio fell to 64% from 69% in the prior quarter, and its gross loss ratio improved to 62% from 67% year‑over‑year, the best‑ever result for the insurer. Net loss for the quarter was $37.5 million, a 44% improvement over the $67.7 million loss reported in Q3 2024, while adjusted EBITDA loss narrowed to $26 million from $49 million. Adjusted free cash flow declined to $18.1 million from $37.6 million a year earlier, reflecting higher marketing spend and investment in new product lines.
Earnings per share were –$0.51, beating the consensus estimate of –$0.72 by $0.21. The beat was largely driven by the sharper-than‑expected decline in loss ratios and the company’s ability to keep operating expenses in line with revenue growth, offsetting the impact of higher acquisition costs. The improvement in gross margin to 41% helped lift profitability despite the continued net loss.
Management raised its full‑year 2025 revenue guidance to $727–$732 million, up from the prior $713.3 million consensus, and reaffirmed a 30% in‑force premium growth target for fiscal 2026. CEO Daniel Schreiber said the quarter “crossed 30% IFP growth ahead of schedule and continued progress toward profitability,” highlighting the role of AI‑driven segmentation and pricing in maintaining a strong LTV/CAC ratio. The guidance signals confidence that the company’s scale and technology investments will translate into positive adjusted EBITDA by Q4 2026.
Investors responded positively to the results, with analysts noting the combination of a revenue beat, an EPS beat, and a significant upgrade to full‑year guidance as key drivers of the favorable market reaction. The market’s enthusiasm reflects confidence in Lemonade’s path to profitability, driven by its AI‑centric model, expanding product mix, and robust premium growth.
Overall, Lemonade’s Q3 2025 performance demonstrates a clear acceleration toward profitability. The company’s ability to grow revenue while tightening loss ratios and improving operating leverage positions it well for the next fiscal year, and the raised guidance indicates management’s belief that the AI platform will continue to deliver value as the insurer expands into new markets and product lines.
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