Robinhood’s Q3 Crypto Gains Couldn’t Prevent a 12.5% Share Drop: What Happened?

Thursday, 31/10/2024 | 05:07 GMT by Arnab Shome

Crypto trading volume on the platform doubled, while crypto revenue surged by 165 percent.

However, net revenue was impacted by a $27 million reduction due to matches paid to customers on transfers and deposits.

Robinhood (Nasdaq: HOOD) saw substantial gains from its crypto offerings. Crypto trading volume on the platform doubled to $14.4 billion, resulting in a 65 percent increase in revenue from this segment, totaling $61 million.

A Profitable Quarter

According to figures released yesterday (Wednesday), the American trading platform generated $637 million in revenue for the third quarter of 2024, marking a 36 percent increase. Of this, transactions-based revenue grew to $319 million, up 72 percent.

Although crypto revenue posted the largest gains, options trading remained Robinhood’s primary revenue generator, contributing $202 million, a year-over-year increase of 63 percent. Revenue from equities trading also rose by 37 percent to $37 million.

The platform’s net income increased to $150 million, which translates to $0.17 in diluted earnings per share (EPS). In the same quarter last year, Robinhood reported a net loss of $85 million.

Falls Short of Market Expectations

Despite the strong overall figures, the retail broker’s shares dropped by nearly 12.5 percent after-hours, falling short of Wall Street expectations. According to the Zacks Consensus Estimate, the market anticipated Robinhood to generate $661.21 million in revenue for the quarter and an EPS of $0.18.

HOOD share price after the Q3 results; Source: Google Finance

On a media call, Robinhood’s Chief Financial Officer, Jason Warnick, explained that the gap between market expectations and actual results was due to analysts overlooking “contra revenue” from the brokerage’s match promotions.

Jason Warnick, Chief Financial Officer of Robinhood

The brokerage also clarified that its net revenue was impacted by a $27 million reduction due to matches paid to customers on transfers and deposits.

“We entered 2024 aiming for another year of profitable growth,” Warnick added.

The California-based platform also reported a year-over-year increase of 1 million in the number of funded accounts, bringing the total to 24.3 million. The number of investment accounts reached 25.1 million.

The platform’s average revenue per user also improved by 31 percent to $105.

A Profitable Quarter

The platform’s net income increased to $150 million, which translates to $0.17 in diluted earnings per share (EPS). In the same quarter last year, Robinhood reported a net loss of $85 million.