Robinhood (HOOD) fell short of its first-quarter earnings and revenue projections, primarily due to a significant decline in cryptocurrency trading revenue, even as growth in other areas propelled overall revenue upward. The trading platform reported adjusted earnings per share of $0.38 for the first quarter, missing the Wall Street estimate of $0.39, according to FactSet data. Although the company achieved a 15% year-over-year increase in total revenue to $1.07 billion, it failed to meet analysts' expectations of $1.14 billion. As a result, shares declined by approximately 8% in post-market trading.
Cryptocurrency-related revenue, a major driver of transactions for Robinhood, dropped by 47% to $134 million from $252 million in the previous year. This decline occurs as the company attempts to shift its focus away from cryptocurrency price fluctuations.
CEO Vlad Tenev expressed his desire to move beyond discussing bitcoin prices, emphasizing Robinhood's focus on utilizing cryptocurrency technology as 'infrastructure' for financial services. The decrease in cryptocurrency trading revenue was offset by stronger activity in other areas, with transaction-based revenue rising to $623 million from $583 million in the previous year, driven by growth in newer products. A key contributor to this growth was 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 stating, 'If you build great products... they'll be there throughout the cycle,' pointing to more consistent engagement across asset classes.
As Robinhood expands into areas like prediction markets, derivatives, and advisory tools, it aims 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, 'We're at the very beginning of what's going to be a tokenization super cycle,' referring to efforts to bring assets like stocks onto blockchain rails.
Furthermore, the company saw gains in net interest revenue and subscriptions, including its Gold tier, as it builds out a broader financial services platform.