Robinhood's first-quarter earnings report revealed a significant shortfall in expected earnings and revenue, primarily due to a sharp decline in cryptocurrency trading revenue. The company reported adjusted earnings per share of $0.38, falling short of Wall Street's estimate of $0.39.
Although overall revenue increased by 15% year-over-year to $1.07 billion, it failed to meet analysts' expectations of $1.14 billion. As a result, shares dropped approximately 8% in post-market trading. The decline in crypto-related revenue, which decreased by 47% to $134 million from $252 million in the previous year, was a major contributor to the earnings miss.
However, the company is attempting to shift its focus away from crypto price fluctuations and towards utilizing crypto technology as a foundation for financial services. In contrast, transaction-based revenue saw an increase to $623 million from $583 million in the previous year, driven by growth in newer products. A notable driver of this growth was event contracts, which led to a 320% year-over-year increase in 'other transaction revenue' to $147 million. The platform reported a record 8.8 billion contracts tied to prediction markets during the quarter, highlighting a shift in user behavior.
The company is expanding its offerings into areas such as prediction markets, derivatives, and advisory tools to reduce its dependence on crypto trading. This move is also being pursued by Coinbase, which is set to report its earnings on May 7. Robinhood's CEO, Vlad Tenev, emphasized the company's focus on building great products that will attract users throughout market cycles. The results also showed gains in net interest revenue and subscriptions, including the Gold tier, as the company develops a broader financial services platform.
Furthermore, Tenev expressed his belief in the long-term potential of crypto, stating that the company is at the beginning of a 'tokenization super cycle' that will involve bringing assets like stocks onto blockchain rails.