Lemonade (LMND 1.76%) is on a mission to disrupt the insurance industry by using artificial intelligence (AI) to write quotes, process claims, and calculate premiums more accurately. It only offers five insurance products (car, renters, homeowners, life, and pet insurance), but it has attracted almost 3 million customers so far.
Lemonade has a plan to grow its in-force premium (IFP), which is the value of the premiums from all active policies, almost tenfold over the next decade. If the company pulls this off, it could translate into significant returns for shareholders.
After soaring by 94% in 2025, Lemonade stock has started 2026 on the back foot with a decline of 24%, but that might be an opportunity for investors who can now pick up a single share for under $60. Here's why it could be a great long-term addition to almost any portfolio.
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AI is the future of insurance
The Lemonade customer experience starts with Maya, an AI chatbot that can write quotes in under 90 seconds through the company's website. For existing customers, AI Jim can process claims in as little as three seconds with no human intervention, a massive departure from the lengthy waiting periods and multiple phone calls common with traditional insurers.
This is resonating really well with customers. Lemonade had almost 3 million policyholders at the end of 2025, which was up 23% from the year-ago period. Plus, its IFP soared by 31% to a record $1.24 billion, marking the ninth consecutive quarter in which that growth rate accelerated.
Lemonade also uses AI extensively behind the scenes to calculate risk so customers receive the most accurate premiums, which ultimately saves them money in the long run. Since AI automates many of these operational workflows, Lemonade has unlocked a significant amount of operating leverage. Over the last three years or so, it added 1.2 million customers while reducing its workforce by 6%.
In fact, Lemonade ended 2025 with a loss adjustment expense ratio (the cost of handling claims divided by gross earned premium) of just 6%. The company says most traditional insurers aim for a ratio of around 9%, so its business is already significantly more efficient than many of its much older, entrenched competitors.
Lemonade's revenue is surging
Lemonade ended 2025 with a record-low trailing-12-month gross loss ratio of 64%, which represents the percentage of premiums paid out as claims. It believes 75% is the sweet spot for a thriving insurance business, so it's comfortably ahead of that mark. A declining gross loss ratio combined with a growing IFP results in more money in the insurer's pocket.
As a result, Lemonade brought in a record $738 million in revenue during 2025, which was a whopping 40% increase from the previous year. It was much higher than the company's most recent forecast of $729.5 million, which management had already raised three times throughout last year.
NYSE: LMND
Key Data Points
Lemonade also improved its bottom line in 2025. It still lost $165.5 million on a generally accepted accounting principles (GAAP) basis, but that was an 18% reduction from its loss in 2024. The company continues to spend aggressively on growth initiatives, which is the right strategy for as long as its IFP growth is accelerating. In theory, once its business achieves sufficient scale, it can pull back on its operating costs to allow more money to flow to the bottom line as profit.
Lemonade stock looks like a great long-term buy
Lemonade's price-to-sales (P/S) ratio peaked at almost 13 last year, which was a three-year high. However, the 24% decline in its stock in 2026, combined with the company's surging revenue growth, has pushed its P/S ratio down to 7.7, which is close to its trailing-12-month average.
But here's the kicker: Management's latest guidance suggests Lemonade's revenue will soar by 61% in 2026, to $1.19 billion, placing its stock at a forward P/S ratio of just 3.6.
LMND PS Ratio data by YCharts
If Lemonade delivers on that guidance, there is a very good chance its stock ends this year much higher than it is today. But the real rewards might come long term, because management believes it can grow IFP to $10 billion over the next decade by continuing to deliver an excellent customer experience and by leaning more aggressively into high-value segments like car insurance.
