Robinhood (HOOD) failed to meet its first-quarter earnings and revenue projections, primarily due to a substantial decline in cryptocurrency trading revenue. However, growth in other areas of the business led to an increase in overall revenue. The company reported first-quarter adjusted earnings per share of $0.38, falling short of the Wall Street estimate of $0.39, according to FactSet data. While Robinhood achieved a 15% year-over-year increase in total revenue, reaching $1.07 billion, this figure was below analysts' expectations of $1.14 billion.
As a result, shares declined approximately 8% in post-market trading. Cryptocurrency-related revenue, a significant contributor to the company's transactions, decreased 47% to $134 million from $252 million in the previous year. This decline occurs as Robinhood attempts to shift its focus away from cryptocurrency price fluctuations. CEO Vlad Tenev stated on the earnings call that the company aims to utilize cryptocurrency technology as 'infrastructure' for financial services, rather than focusing on the price of bitcoin.
The decrease in cryptocurrency trading revenue was offset by stronger activity in other areas, with transaction-based revenue increasing to $623 million from $583 million in the previous year, driven by growth in newer products. A key factor was the significant rise in event contracts, which led to a 320% year-over-year increase in 'other transaction revenue' to $147 million.
Robinhood reported that users traded a record 8.8 billion contracts tied to prediction markets during the quarter. The results highlight a shift in how customers are utilizing the platform, with Tenev noting that 'if you build great products... they'll be there throughout the cycle,' pointing to more consistent engagement across various asset classes.
Robinhood has been expanding into areas such as prediction markets, derivatives, and advisory tools to reduce its dependence on cryptocurrency trading. The company is attempting to smooth out revenue fluctuations, similar to Coinbase, which is scheduled to report earnings on May 7.
Tenev also views cryptocurrency as a long-term investment opportunity beyond trading, stating that 'we're at the very beginning of what's going to be a tokenization super cycle,' referring to efforts to integrate assets like stocks onto blockchain technology. Additionally, the company experienced gains in net interest revenue and subscriptions, including its Gold tier, as it develops a more comprehensive financial services platform.