Robinhood (HOOD) fell short of its first-quarter earnings and revenue projections, largely due to a significant 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, missing the Wall Street estimate of $0.39. Following the report, shares dropped approximately 8% in post-market trading. The decline in cryptocurrency-related revenue, a key driver of transactions for Robinhood, was 47% to $134 million from $252 million in the previous year. This decrease 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 drop 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. A significant factor in this growth was the rise of event contracts, which led to a 320% year-over-year increase in 'other transaction revenue' to $147 million. During the quarter, users traded a record 8.8 billion contracts tied to prediction markets.
The results indicate 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.' 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 attempting to smooth out revenue fluctuations, similar to Coinbase, which will report its earnings on May 7. Tenev also views cryptocurrency as a long-term investment beyond trading, stating that 'we're at the very beginning of what's going to be a tokenization super cycle.' This refers to the efforts to bring assets like stocks onto blockchain rails.
The company also experienced gains in net interest revenue and subscriptions, including its Gold tier, as it builds out a broader financial services platform.