Robinhood (HOOD) missed Wall Street profit estimates for the third quarter as a slowdown in crypto trading, higher expenses, and a decline in income from interest eclipsed record numbers in stocks, options, and prediction markets.
Cryptocurrency markets have been under substantial pressure this year as geopolitical tensions and rising oil prices fuel market uncertainty.
Robinhood Misses Wall Street Estimates
The online brokerage’s net income declined 14% year over year to $476 million, and diluted earnings per share fell 16% to $0.51. Meanwhile, revenue rose 12% to $1.42 billion, while transaction-based revenue from crypto trading fell 55% to $120 million.
Cryptocurrency markets have been under immense pressure this year, with volatility spiking and outflows increasing. Investors have pivoted to traditional investment assets as inflation and higher interest rates make them more appealing than speculative assets like cryptocurrencies.
Robinhood stock has fallen over 15% year-to-date, putting it on track for its worst annual performance since 2022. Market analysts expected the company to record earnings of $0.57 per share, and revenue of $1.43 billion, according to Bloomberg.
Stocks, Options, Prediction Markets Register Record Numbers
While the company lagged in crypto trading, it registered record trading activity across stock, options, and prediction markets. Transaction revenue jumped to $867 million, a 19% increase from last year. However, net interest revenue fell 9% to $415 million, which Robinhood attributed partly to lower securities lending activity. Robinhood CFO Shiv Verma attributed the weak demand to borrow stocks, fewer IPOs, and fewer disagreements among investors over the performance of individual companies.
“Right now, there was lower market volatility, and there were fewer IPOs, and so there were lower requests for demand. The core business is on fire.”
Robinhood’s Q3 net deposits fell to $15.7 billion, a substantial decline from $21.7 billion in the preceding quarter. However, Verma added that the company’s disclosed deposits had already crossed $13 billion, partly due to the Dell family’s contribution to Trump Accounts. Prediction markets continued to grow, with revenue from event contracts rising 11% from the previous quarter to $173 million. Revenue from options trading rose 31% year over year to $399 million, while equities trading revenue jumped 41% to $121 million.
The platform’s operating expenses rose 16% to $739 million, and the company’s focus on expanding its credit card business saw provisions for credit losses triple to $71 million. Robinhood’s adjusted net income fell 3% to $550 million.
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