Robinhood Markets Inc. saw a significant rise in cryptocurrency trading and assets under custody in the third quarter of 2023. However, its stock price fell 12.4% in after-hours trading following an earnings miss that fell short of Wall Street expectations.
Q3 Performance: Strong Crypto Growth but Missed Targets
During Q3, Robinhood reported a notable 112% increase in cryptocurrency trading volume year-on-year, reaching $14.4 billion. Crypto revenue also saw a surge, growing by 165% to $61 million. The strong crypto performance contributed to the company’s positive net income of $150 million on revenue of $637 million. However, this revenue was below analyst expectations of $661.2 million, according to Zacks Consensus Estimate, while earnings per share of $0.17 missed the forecasted $0.18.
These factors contributed to the 12.4% drop in Robinhood’s stock price in after-hours trading, as per Google Finance data.
Crypto Assets Under Custody Surge
Robinhood’s assets under custody reached $152.2 billion, up 76% from the previous year. This increase was partly due to rising crypto valuations, with crypto assets under custody climbing 32.3% from $14.7 billion in Q4 2023 to $19.45 billion in Q3. Despite the year-over-year growth, trading volumes dropped from $36 billion in Q1 2024 and $21 billion in Q2 2024, reflecting a quarter-on-quarter decline in crypto activity.
Jason Warnick, Robinhood’s CFO, expressed satisfaction with the company’s performance despite missing targets. “When we reflect on our revenue so far this year, it feels good that our last three quarters are the three highest in company history,” he noted.
Expanding Crypto Offerings and Upcoming Acquisition
Robinhood continues to strengthen its position in the crypto market. The company launched its crypto trading unit in 2018 with initial offerings of Bitcoin and Ethereum and has since expanded to include Litecoin and other cryptocurrencies. In June 2023, Robinhood entered into a $200 million agreement to acquire Bitstamp’s U.S. operations, allowing it to serve institutional investors. The deal is still pending regulatory approval and is expected to close by mid-2025.
Despite the recent after-hours dip, Robinhood’s stock has seen significant gains in 2024, up 128% year-to-date and trading at $28.21. The company’s ability to capitalize on rising crypto valuations and expand its crypto offerings could position it for future growth as it navigates the challenges of a volatile market.
