Business

Robinhood Revenues Drop After a Decline in Crypto Trading


TL;DR (2-Minute Read)

  • Robinhood reported an enormous loss on Tuesday in revenue for the third quarter: it fell from $565 million last quarter to $365 million this quarter.
  • Experts believe this drop is due to a decrease in cryptocurrency trading, a very volatile market that varies often between quarters.
  • Cryptocurrency is a collection of binary data which is designed to be used as payment that can be exchanged online for goods and services.

Robinhood, an online discount brokerage offering commission-free stock trading, reported a huge loss in revenue for the third quarter because of a sharp drop in cryptocurrency trading last Tuesday, October 26th. Robinhood aids in investing in and trading stocks and allows users to invest in certain cryptocurrencies based on their geographic location. The company receives its earnings through premium membership fees, stock loans, interest on uninvested cash, interchange fees related to its debit card, and other streams of revenue. Robinhood’s shares dropped 10.4% to end the day at $35.44 per share which is below the stock trading app’s IPO price of $38 per share. IPO is defined as the Initial Public Offering which is where shares of a company are sold to investors. Robinhood’s reported earnings after Tuesday came in well below Wall Street expectations. Revenue fell from $565 million last quarter to $365 million this quarter.

Robinhood tanks after earnings. CNBC

One of the main reasons for this miss in earnings was a sharp decline in revenue from crypto trading on Robinhood’s platform. In the second quarter, revenue from crypto trading totaled $233 million, helped by interest in meme-inspired Dogecoin, but dropped to $51 million last quarter. Cryptocurrency is a collection of binary data which is designed to be used as payment that can be exchanged online for goods and services. It’s a form of digital asset based on a network that is distributed across a large number of computers and can exist outside the control of governments and central authorities. Although the company took a huge hit last Tuesday, predicting the future of cryptocurrency is practically impossible. “Q2 was kind of one of those idiosyncratic market events where there’s this massive interest specifically in doge,” Robinhood CFO(Chief Financial Officer) Jason Warnick told CNBC. “We love it when those moments happen. It’s a great way to bring a lot of new customers onto the platform. But we’re really thinking about investing in crypto over the long term. And so it’s you know, frankly, it’s gonna be impossible for us to accurately predict … revenue on a quarter-to-quarter basis.”

Robinhood reported a net loss of $1.32 billion. It was estimated that Robinhood clients boosted the overall value of the U.S. stock market by 1.0% during the second quarter but this value decreased into the third quarter. The company also saw a slowdown in user growth. Monthly active users totaled about 18.9 million when it was originally 21.3 million in the second quarter. “This quarter was about developing more products and services for our customers, including crypto wallets,” said Vlad Tenev, CEO and co-founder of Robinhood Markets. “More than one million people have joined our crypto wallets waitlist to date.” Looking to the future, Robinhood said that it expects fourth-quarter revenue no greater than $325 million.

Vlad Tenev, co-founder and CEO of Robinhood rings the opening bell at the Nasdaq on July 29th, 2021. The Nasdaq

Sources

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