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 a 15% year-over-year increase in total revenue, which reached $1.07 billion.
The company reported adjusted earnings per share of $0.38, falling short of Wall Street's estimate of $0.39, according to FactSet data. As a result, shares declined by approximately 8% in post-market trading. The significant drop in cryptocurrency-related revenue, which decreased by 47% to $134 million from $252 million in the previous year, was a major contributor to the disappointing earnings report. This decline occurred as the company attempts to shift its focus away from cryptocurrency price cycles.
CEO Vlad Tenev expressed his desire to move beyond discussing bitcoin prices, instead emphasizing the use of cryptocurrency technology as 'infrastructure' for financial services. The decrease in cryptocurrency trading revenue was offset by stronger activity in other areas, including a rise in transaction-based revenue to $623 million from $583 million in the previous year. This growth was driven by the increasing popularity of newer products, such as 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 earnings report highlights a shift in how customers are utilizing the platform, with CEO Tenev noting that 'if you build great products... they'll be there throughout the cycle.' Robinhood has been expanding into areas such as prediction markets, derivatives, and advisory tools in an effort to reduce its dependence on cryptocurrency trading. The company is also working to smooth out revenue fluctuations.
Like Coinbase, which is scheduled to report its earnings on May 7, Robinhood is attempting to decrease its reliance on cryptocurrency trading. Tenev 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.' This refers to the process of bringing assets like stocks onto blockchain platforms.
The company also experienced growth in net interest revenue and subscriptions, including its Gold tier, as it continues to develop a comprehensive financial services platform.