TLDR
- Lemonade (LMND) shares declined approximately 10-12% after releasing Q4 2025 financial results
- Fourth quarter revenue reached $228.1 million, accompanied by a $0.29 per share net loss
- Fiscal year 2025 revenue totaled $737.9 million as losses decreased compared to the previous year
- Piper Sandler reduced its price target to $65 from $85 while keeping a Neutral stance
- Fiscal 2026 outlook forecasts $1.187–$1.192 billion in revenue alongside an adjusted EBITDA deficit of $48–$52 million
Shares of Lemonade (LMND) experienced a decline of roughly 10-12% in trading sessions after the company unveiled its fourth quarter 2025 financial performance on February 19, 2026.
The stock retreat occurred despite the insurtech firm delivering what represented its strongest quarterly performance to date.
Fourth quarter revenue landed at $228.1 million, marking a 53% increase compared to the same period one year earlier. Net losses narrowed to $0.29 per share, while the adjusted EBITDA deficit compressed to approximately $5 million during the three-month period.
The company’s in-force premium climbed to roughly $1.24 billion, establishing a new company milestone.
For the complete 2025 fiscal year, revenue totaled $737.9 million. Annual net losses came in at $165.5 million, representing an improvement from the previous twelve-month period.
Executives also emphasized record-setting gross profit figures and enhanced cash flow metrics as indicators of business model maturation.
Wall Street Turns Cautious
Piper Sandler responded swiftly following the earnings announcement, slashing its price objective from $85 down to $65 while maintaining its Neutral classification.
The investment bank identified Lemonade’s consistent inability to achieve its adjusted EBITDA projections as the primary concern. Despite improvements in underwriting performance, the organization continues falling short of its self-imposed profitability milestones.
Piper recognized its perspective might be “overly simplistic,” highlighting that Lemonade demonstrates strong execution within direct-to-consumer personal lines insurance. However, shareholder tolerance appears to be diminishing.
The consensus Wall Street price objective currently stands at $65.11, suggesting roughly 14% potential appreciation from Friday’s closing price of $57.31. Among 11 covering analysts, three assign Buy ratings or higher, five recommend Hold, and three rate it Sell.
2026 Guidance Disappoints
Looking ahead to 2026, Lemonade provided revenue guidance spanning $1.187–$1.192 billion. This represents robust topline expansion.
However, management simultaneously forecasted a full-year adjusted EBITDA deficit ranging from $48–$52 million.
The first quarter of 2026 alone is anticipated to generate an adjusted EBITDA loss between $22–$25 million.
Management does anticipate achieving positive adjusted EBITDA during the fourth quarter of 2026, with complete fiscal year EBITDA profitability targeted for 2027.
This schedule remains unchanged — which represents a significant portion of the concern. Market participants and analysts had anticipated the profitability milestone might be accelerated.
The disconnect between revenue acceleration and immediate-term profit achievement is fueling the reassessment in market sentiment.
AI Progress Continues
Lemonade did deliver encouraging developments on the innovation front. The organization introduced an AI-powered autonomous automobile insurance offering during the quarter.
Its artificial intelligence operating platform, Blender, now enables claims adjusters to process three times the workload they could previously handle.
Company leadership stated AI implementations are currently reflected throughout “pretty much every line” of the organization’s income statement.
Marketing expenditures have more than tripled, propelled by AI-driven enhancements in pricing algorithms and customer segmentation capabilities.
Long-term analyst projections forecast revenue climbing to $1.8 billion with earnings of $201.4 million by 2028. More optimistic estimates had previously positioned revenue as elevated as $2.0 billion for that timeframe.
Piper Sandler’s updated $65 price objective represents 13.4% potential upside from the latest closing price of $57.31.
