IG Group shares fall after Q3 trading update as Underdog posts strong revenue gain

IG Group reported a third-quarter trading update showing group revenue fell to approximately £240m in the three months to 30 September 2026, prompting a c.25% share decline on 2 October. Management said revenue retention in Q3 was around 70%, below the 80% average since market-making optimisation measures were introduced, while full-year 2026 revenue growth is now expected to be only in the mid-single-digit range.

IG Group Q3 trading update: headline figures and market reaction

IG Group disclosed that revenue for the quarter ending 30 September 2026 was down around 14% year on year to approximately £240m. The firm said Q3 over-the-counter (OTC) net trading revenue was approximately £155m, around 18% lower year on year, even as OTC customer income rose by approximately 8%.

Those headline setbacks coincided with a large share price move: IG Group’s stock dropped roughly 25% on Friday 2 October after the brief trading update failed to satisfy investors. Management put the shortfall partly down to "reduced OTC revenue retention in less supportive market conditions," and maintained confidence in meeting its medium-term guidance.

"Growth in first trades and active customers remained strong in Q3 2026," IG Group CEO Breon Corcoran said, while acknowledging the revenue impact of lower OTC retention.

Underdog performance in Q3 and strategic context

Underdog, the US prediction-markets and fantasy operator that IG agreed to acquire in July, reported a materially stronger quarter inside the IG update. IG Group said Underdog’s net revenue in Q3 grew by more than 100% year on year to around $105m. That improvement arrives ahead of Q4, which includes the main portion of the 2026 NFL season; IG noted the final three months of 2025 accounted for more than a third of Underdog’s revenue that year.

IG announced the planned acquisition of Underdog in July in a transaction worth up to $1.3bn, including an upfront consideration of $1.1bn. When the deal was announced IG Group described Underdog as "well placed" to succeed in prediction markets. Underdog had earlier expanded its technology stack by acquiring Aristotle Exchange to support its prediction-markets ambitions.

Jeremy Levine, Underdog CEO, praised Breon Corcoran and the acquisition during a Bank of America conference in September. Levine referenced Corcoran’s previous M&A track record, noting Corcoran led Paddy Power Betfair when it bought Levine’s prior venture DRAFT in 2017.

What the numbers mean for IG’s guidance and investor calendar

IG now expects full-year 2026 revenue growth to be in the mid-single-digit range. The company has scheduled an investor day dedicated to Underdog on 8 October, signalling a desire to give analysts and investors deeper operational detail about the US asset and its integration plans.

Management highlighted two contrasting dynamics in Q3: weaker OTC net trading revenue overall, and improving customer income in OTC products. The group said revenue retention in the quarter was c.70%, versus an 80% average since it implemented market-making optimisation measures. That drop in retention underpins the near-term revenue weakness.

Underdog’s trajectory and product strategy

Underdog began as a daily fantasy sports operator, moved briefly into online sports betting, and more recently pivoted to prediction markets and short-form US sports products. The operator was valued at $1.2bn after a Series C funding round in March 2025. Its strategy has involved building proprietary infrastructure: the purchase of Aristotle Exchange last year was positioned as a move to create an in-house stack to power its prediction-markets ambitions.

IG’s case for buying Underdog rests on that US growth opportunity. The company has emphasised the seasonal skew to Underdog’s revenue and the expectation that Q4 will be the strongest quarter because of the NFL season. Investors will use the 8 October investor day to probe monetisation, product roadmaps and how much of Underdog’s growth is seasonal versus structural.

Market implications and operational questions for the group

The trading update leaves several operational questions exposed. One is whether the lower OTC revenue retention is a transitory drop tied to market conditions or the start of a different customer behaviour pattern. Another is the near-term integration and capital allocation trade-off: IG paid up to $1.3bn for Underdog, with $1.1bn upfront, and will now need to show how the asset contributes to group returns while core OTC trading revenue faces headwinds.

For investors and industry observers the immediate issues to watch are:

1. The details IG provides on Underdog at the 8 October investor day, especially on quarterly seasonality and retention across cohorts.

2. Whether OTC revenue retention recovers back toward the 80% average IG cited since optimisation measures began.

3. How the group reconciles a mid-single-digit full-year revenue outlook with a material cash deployment into Underdog.

What vendors and competitors will be watching

Platform vendors and US-focused product teams will be paying attention to the investor day, as it may reveal where IG intends to lean on technology or data to scale Underdog through the NFL-heavy Q4. Competitors in the US prediction-markets and short-form-sports segments will watch marketing spend, player economics and any disclosed customer acquisition costs.

Underdog’s past acquisition of Aristotle Exchange signals a technical bet on owning the stack; other operators may accelerate similar vertical moves or partner with specialist providers. For readers focused on product and payments, Q4 metrics on churn, average revenue per user and submission rates for prediction markets will be the most illuminating.

IG Group’s Q3 trading update therefore presents a mixed picture: a softer core OTC revenue line alongside a high-growth US asset whose peak season remains ahead. The market priced the uncertainty harshly on 2 October, but the company will have an early opportunity on 8 October to explain how Underdog fits into its medium-term plan.

Oliver Grant, Industry Technology Correspondent.