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, amounting to $1.07 billion.
The company reported adjusted earnings per share of $0.38, falling short of Wall Street's estimate of $0.39. As a result, shares dropped approximately 8% in post-market trading.
Cryptocurrency-related revenue, a significant driver of transactions for Robinhood, decreased by 47% to $134 million from $252 million in the previous year. This decline occurred as the company attempts to shift its focus away from cryptocurrency price fluctuations. In contrast, transaction-based revenue rose to $623 million from $583 million in the previous year, driven by growth in newer products.
A key factor contributing to this growth was the increase in event contracts, which led to a 320% year-over-year rise 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 indicate a change in how customers utilize the platform, with CEO Vlad Tenev stating that 'if you build great products... they'll be there throughout the cycle.' Tenev emphasized the company's focus on using cryptocurrency technology as 'infrastructure' for financial services, rather than being solely dependent on cryptocurrency price cycles.
The company is expanding into areas such as prediction markets, derivatives, and advisory tools to reduce its reliance on cryptocurrency trading. Similar to Coinbase, which will report its earnings on May 7, Robinhood is working to diversify its revenue streams.
Tenev views cryptocurrency as a long-term investment opportunity beyond trading, citing the potential for a 'tokenization super cycle' that could bring assets like stocks onto blockchain platforms. The company also experienced growth in net interest revenue and subscriptions, including its Gold tier, as it develops a broader financial services platform.