Robinhood Revenue Falls on a Drop in Crypto Trading

Robinhood recorded a net loss of $1.3 billion for the quarter, or $2.06 per diluted share, which the company attributed to expenses tied to share-based compensation. For the second quarter, Robinhood recorded a loss of $502 million and for the year-earlier period, it posted a loss of $11 million.

Some 660,000 new accounts were funded in the third quarter, but the growth wasn’t enough to offset the small decline the company saw in net cumulative funded accounts. That metric fell by 100,000 to 22.4 million in the period.

Robinhood had previously warned that seasonal trading patterns could weigh on revenue and account growth in the quarter. But the company largely missed analyst revenue expectations. The revenue the company earns from routing customers’ trades to high-speed trading firms—a practice known as payment for order flow—was $267 million during the quarter, down about 41% from the preceding quarter but up 32% year-over-year.

Much of that fall was attributable to a sharp drop in revenue tied to cryptocurrency trading, which tumbled 78% to $51 million, from $233 million the quarter before. Quarterly revenue tied to stock and options trading ticked down 3.8% and 0.6%, respectively.

“Historically our growth has come in waves—the surges have come during periods of increased volatility or market events,” said Jason Warnick, Robinhood’s chief financial officer, on a media call after the earnings were released. “Going forward, we expect to continue to see the ebb and flow of our growth with market conditions, as well as product launches.”

For the last year-and-a-half, Robinhood benefited from the retail-trading bonanza that sent stocks and cryptocurrencies soaring. But it was affected in the third quarter by shifting trading preferences among individual investors. In the second quarter, for example, the company said that nearly two-thirds of cryptocurrency revenue was attributable to dogecoin transactions, a parody token that returned more than 15,500% on a year-to-date basis when its price peaked in May. Dogecoin has since struggled to gain momentum after falling sharply off its high.

Shares of Robinhood, which made its trading debut in July, fell about 8.4% to $36.25 in after-hours trading, sliding below its initial public offering price of $38 a share.

Robinhood said it expects seasonal slowdowns to persist in the fourth quarter, with quarterly revenue to be no greater than $325 million and full-year revenue to be less than $1.8 billion. Looking ahead, the company said it is focusing on user products. It said that more than 1 million customers have signed up for crypto wallets, which allow users to move digital asset holdings in and out of the app.

Write to Caitlin McCabe at [email protected]