Robinhood Markets Inc. Reported fourth-quarter earnings that exceeded analyst expectations, but a significant decline in cryptocurrency revenue cast a shadow over the results, sending the company’s stock down in after-hours trading. The results, released on , highlight the ongoing impact of the crypto winter on trading platforms, even as Robinhood diversifies its offerings.
Earnings per share reached $0.66, surpassing the $0.63 consensus estimate. However, total revenue for the quarter came in at $1.28 billion, falling short of the anticipated $1.33 billion. The miss was largely attributed to a 38% year-over-year decrease in crypto revenue, which totaled $221 million, down from $358 million in the same period last year.
The decline in crypto revenue underscores the challenges facing companies heavily reliant on digital asset trading activity. Despite efforts to expand its crypto offerings – including the addition of new tokens and the rollout of crypto transfers across more regions – Robinhood couldn’t offset the impact of lower digital asset prices and reduced trading volumes. This mirrors a broader weakness in the crypto market, a trend expected to also affect competitors like Coinbase (COIN).
Transaction-based revenue, however, showed resilience, increasing 15% to $776 million, driven by strength in options and equities trading. Net interest revenue also saw a substantial increase, rising 39% to $411 million, supported by growth in interest-earning assets and securities lending. Other revenue more than doubled to $96 million, fueled by growth in Robinhood Gold subscriptions.
Net income for the quarter was $605 million, a decrease from $916 million a year earlier. The prior-year figure benefited from a one-time tax and regulatory accrual reversal. Operating expenses increased 38% to $633 million, reflecting higher marketing and growth investments, as well as acquisition-related costs. Adjusted EBITDA rose 24% to $761 million.
User metrics continued to expand, with funded customers rising 7% year-over-year to 27 million and investment accounts increasing 8% to 28.4 million. Total platform assets climbed 68% to $324 billion, supported by net deposits, acquired assets, and higher equity valuations. Robinhood Gold subscribers increased 58% to 4.2 million, and average revenue per user rose 16% to $191.
Despite the earnings beat, the market reacted negatively to the revenue miss and the continued pressure from the crypto slump. Shares of Robinhood fell approximately 7% in post-market trading following the earnings release. This reflects investor concerns about the company’s reliance on volatile asset classes and the potential for further declines in crypto-related revenue.
The company’s annual revenue reached a record $4.47 billion, according to reports. However, the fourth-quarter decline in profitability, with a 34% decrease, underscores the challenges of maintaining momentum in a fluctuating market environment.
Analysts at Wolfe Research recently upgraded their rating on Robinhood, setting a price target of $125 per share, citing a potential 50% upside. This optimistic outlook suggests that some investors believe Robinhood’s diversification efforts and growing user base will eventually outweigh the headwinds from the crypto market. However, the immediate market reaction to the earnings report indicates that investor sentiment remains cautious.
Robinhood’s performance in the fourth quarter serves as a bellwether for the broader financial services industry, particularly for companies exposed to the cryptocurrency market. The results demonstrate the importance of diversifying revenue streams and managing expenses effectively in a volatile economic climate. The company’s ability to navigate these challenges will be crucial for its long-term success.
