LMND +3.74% NVDA +4.24% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
For most of its time as a public company, the knock on Lemonade (NYSE:LMND) has been simple. It grows fast, but it loses a lot of money doing it. That's about to change, at least by one important measure.
In its third-quarter earnings report, Lemonade said that it expects to generate positive adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in the fourth quarter for the first time. This is a major milestone, and it's one that shareholders have been waiting for. With that in mind, here's a rundown of Lemonade's numbers, its profitability claims, and what investors should keep in mind as we head into 2027.
Missed AI's "Act 1"? Act 2 Could Be 16x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we're only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
The best measure of Lemonade's growth is in-force premium, the annualized value of all the insurance policies it has in place. In the third quarter, this figure grew 34% year over year to $1.55 billion, an acceleration from growth in the low 30s over the previous four quarters. Other growth metrics look excellent as well. For example, Lemonade now has 3.52 million customers, 23% more than a year ago.
Lemonade's revenue grew even faster, up 73% year-over-year to $336.1 million. However, a big part of that came from Lemonade passing less of its business to reinsurers, which means it keeps more premium (and more risk) on its own books. That's one big reason why it's smart to focus on in-force premium instead.
The car insurance business is a big part of the momentum. This is both Lemonade's largest growth opportunity (by far), as well as one of its big risk factors, as auto insurance is highly competitive. But the news was great. In-force premium from Lemonade Car rose to $265 million from $163 million a year ago, and the product is now available in 14 states.
Lemonade's adjusted EBITDA was a loss of $20.4 million in the third quarter, but management expects a positive $5 million to $9 million in the fourth quarter and its first full year of positive adjusted EBITDA in 2027. The plan is to grow marketing and other growth spending more slowly than in-force premium from here, so this figure should get significantly larger in the future.
It's also worth noting that Lemonade already generates cash. Adjusted free cash flow was $27 million in the third quarter and $63.2 million through the first nine months of the year. But adjusted EBITDA is a more widely recognized metric of profitability, and helps provide an easier comparison with other companies that also report this figure.
To be sure, adjusted EBITDA isn't the same as profit, and Lemonade still reported a net loss of $0.56 per share. A big reason why is the company's stock-based compensation, which is on the high end and has been for Lemonade's entire publicly traded history. Interest expense has also been elevated recently.
Plus, Lemonade's gross loss ratio, the share of premiums paid out in claims, rose to 65% from 62% a year ago, which is still significantly below Lemonade's 75% stated target. Over the past 12 months, it was a much better 60%, but insurance results can swing from quarter to quarter, especially when catastrophes hit. Keeping more risk on its own books also means a bad quarter would hurt more than it used to. And car insurance is a tough, competitive business.
Having said all that, Lemonade is growing faster while spending less to do it, and it's on the verge of the profitability milestone that many skeptics said it would never reach. I'm holding my shares, and the fourth-quarter results will be the first test of whether this turnaround is for real.
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Lemonade wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $344,878!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,097,846!*
Now, it's worth noting Stock Advisor's total average return is 852% — a market-crushing outperformance compared to 208% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of November 11, 2026.
Matt Frankel, CFP® has positions in Lemonade and has the following options: short September 2026 $140 calls on Lemonade. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.
This Fast-Growing Insurance Stock Is About to Do Something It's Never Done Before was originally published by The Motley Fool
