How Lemonade Stock Surged 40% Last Month

Key Points

• Lemonade's second-quarter revenue jumped 35% year over year while its net loss per share improved significantly from $0.81 to $0.60.

• The company's loss ratio dropped from 79% to 69%, meaning it's paying out less in claims per $1 of premiums collected.

• After years of disappointing loss ratios and slow expansion, Lemonade's AI system is finally providing the efficient service its enthusiastic investors originally expected.

• 10 stocks we like better than Lemonade ›

Shares of Lemonade (NYSE: LMND) rose 40.4% in August 2025, according to data from S&P Global Market Intelligence. The insurance technology company, which relies on automated data analysis and artificial intelligence (AI) instead of human insurance adjusters, impressed investors with a great earnings report last month.

Image source: Getty Images.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Lemonade squeezed out some impressive results

Lemonade's second-quarter revenues rose 35% year over year to $164.1 million. The in-force premium -- an important metric of business volume in the insurance industry -- showed a 29% increase. The net loss ratio fell from 79% to 69%, reflecting lower insurance claim payouts per $1 of premium payments. On the bottom line, the net loss stopped at $0.60 per share, significantly better than the $0.81 loss per share in the year-ago period.

The average Wall Street analyst had expected a net loss near $0.79 per share on top-line revenues in the neighborhood of $160.4 million.

Investors were quick to embrace Lemonade's improving business metrics. The stock closed 29.5% higher the next day and has hovered around the new level ever since. August's peak of $60.41 per share was the highest share price Lemonade has seen since November 2021.

Lemonade's AI brain is finally learning its insurance lessons

This company was a market darling in 2020 as investors applauded the idea of automated, infallible insurance management processes. But Lemonade fell out of favor due to lofty loss ratios and generally inefficient operations. At the same time, the company's expansion into new insurance types and larger geographic coverage areas has been slow.

But the expansion is picking up speed in 2025. Its insurance services are now available in all 50 U.S. states and four European countries, with new coverage "coming soon" to 27 more European nations. Its lucrative car insurance coverage is currently available in only 10 states, but that should also change in the near future.

So Lemonade is finally earning some Wall Street success the hard and honest way -- by growing and improving its insurance business. Its overall operating performance figures still aren't great, but the stronger efficiency should change that over the next couple of years. It simply takes time and lots of data to optimize a sophisticated AI system, and Lemonade's computerized business brain is showing the expected type of delayed success in the real world.

In other words, Lemonade's stock looks ready to climb out of the deep hole it fell into five years ago. The AI-driven insurance business is starting to shine, and the stock returns should follow suit in the long run.

Anders Bylund has positions in Lemonade. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.