Shares of Lemonade (LMND) soared more than 35% on Wednesday, marking one of the stock’s biggest single-day gains in recent years. The rally was fueled by a strong Q3 earnings report and improved operational metrics. Even more, the insurance company raised its full-year guidance, which beat analysts’ expectations. This helped reassure investors about its path to profitability.
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Importantly, the results indicate that Lemonade’s use of artificial intelligence (AI) to streamline claims and underwriting continues to be a supporting factor. The company’s improved loss ratio and faster decision-making are helping it compete with big insurers while keeping costs in check.
Impressive Q3 Results
Lemonade reported Q3 revenue of $194.5 million, up 42.4% year-over-year, beating Wall Street’s estimate of $185.06 million. The company also posted a net loss of $0.51 per share, which came in better than expected, signaling improved cost control and efficiency.
Among key performance highlights, LMND’s net premiums earned rose 46.3% year-over-year, showing strong core insurance growth. Also, the customer count grew 24% to 2.87 million. Moreover, Q3 loss ratio dropped to 64%, thanks to better AI-driven underwriting.
Raised Guidance Adds Fuel
Lemonade raised its 2025 revenue outlook to the range of $727 million to $732 million, up from the previous expectations of between $710 million and $716 million. This also beat the consensus estimate of $714.36 million. It also narrowed its adjusted EBITDA loss guidance to between $127 million and $130 million.
The company said, “We continue to expect 30% IFP growth in FY 2026. Simultaneously, we’ll continue to leverage AI to scale the operation such that we can deliver relative stability in operating expenses excluding growth spend.”
For the current quarter, Lemonade sees Q4 revenue in the range of $217 million to $222 million, compared to the consensus estimate of $213.49 million.
Is LMND a Good Stock to Buy?
Turning to Wall Street, Lemonade stock has a Moderate Sell consensus rating based on one Buy, two Holds, and four Sells assigned in the last three months. At $43.86, the average LMND stock price target implies a 44.62% downside risk.
