Date: August 3, 2025 Subject: Futu Holdings Limited (NASDAQ: FUTU)
This report analyzes the impact of a hypothetical, intensified tax investigation by Chinese authorities targeting Futu's remaining mainland Chinese users, beginning in May 2025. Our key judgment is that the impact on Futu's total quarterly revenue is minimal, estimated to be a reduction of between 1.1% and 3.5%.
This conclusion is based on three core findings:
The risk associated with the mainland China user base, while a major concern in previous years, has been effectively neutralized as a threat to Futu's overall growth story.
Historically, Futu's growth was heavily tied to mainland China. As of early 2022, this segment accounted for an estimated 44% of total revenue. However, a series of regulatory actions by the China Securities Regulatory Commission (CSRC) fundamentally altered this landscape:
Our analysis now incorporates a new stress test: a tax crackdown beginning in May 2025 that causes 50% of the remaining mainland users to cease activity immediately.
To quantify the impact, we will use the two most credible scenarios developed during our research, which account for both official rules and real-world user behavior.
Baseline Projections (Pre-Shock):
| Metric | Scenario A (Realistic) | Scenario C (Grey Market) |
|---|---|---|
| Annual Mainland Revenue | $45.8 Million | $146.1 Million |
| Quarterly Mainland Revenue | $11.45 Million | $36.53 Million |
The tax crackdown shock event occurs in May, affecting the entire second quarter (May, June, July). We calculate the direct revenue loss for this quarter.
Step 1: Calculate the Quarterly Revenue Loss The event causes a 50% reduction in the projected quarterly revenue from the mainland segment.
Step 2: Calculate the Impact on Total Quarterly Revenue We compare this loss to the company's total projected quarterly revenue of $525 million.
The following chart visualizes the negligible impact of this revenue loss on the company's total quarterly earnings.
Our conclusion that this shock is manageable is strongly supported by Futu's fundamental financial data, which validates the core assumption of a successful international pivot.
The data clearly shows a healthy, expanding global business that is no longer dependent on its legacy mainland segment.
The era of viewing Futu through the lens of Chinese regulatory risk is over. While the mainland segment was once the company's engine, it is now a small, firewalled, and rapidly depreciating asset.
Our analysis demonstrates that even a severe shock like an accelerated tax crackdown would have a negligible impact on Futu's overall financial performance, reducing total quarterly revenue by a mere 1-3.5%. The company's growth trajectory is now firmly tied to its success in markets like Hong Kong, Singapore, Japan, and North America.
Investors should focus on the execution of this international strategy—client acquisition costs, ARPU trends in new markets, and competitive positioning—as these factors will determine Futu's future, not the final chapter of its mainland China story.