Robinhood’s fourth quarter profit fell 34%, with sluggish cryptocurrency dragging down revenue; shares dropped over 6% after hours | Earnings Report Insights

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Robinhood's net profit dropped sharply in the fourth quarter. Although it slightly exceeded analysts' expectations, total revenue missed forecasts, raising concerns among investors.

After the U.S. market closed on Tuesday, February 10, Robinhood reported that fourth quarter net profit fell 34% year-on-year to $605 million, or 66 cents per share—slightly above Bloomberg analysts' consensus estimate of 64 cents. However, total revenue was $1.28 billion, missing Wall Street's expectation of $1.34 billion.

Cryptocurrency trading revenue plunged 38% year-on-year to $221 million, well below analysts' forecast of $248 million. Bitcoin has fallen more than 50% since peaking on October 6 last year. Dragged down by this, Robinhood's stock price has dropped 24% so far this year and continued to fall another 6.6% in after-hours trading.

The financial report came as U.S. brokerages are generally under pressure. Individual investors remain an important force supporting the stock market, but ongoing volatility in digital assets is testing these platforms' diversification capabilities. For Robinhood, whose stock price tripled last year, whether it can sustain its growth momentum into 2026 has become a focus for the market.

Cryptocurrency Business Shrinks Sharply

Weakness in digital asset trading was the biggest drag on quarterly results.

Cryptocurrency trading revenue plummeted 38% from $357 million a year ago to $221 million. This performance was not only below market expectations, but also reflected the difficulties facing the broader cryptocurrency market.

Bitcoin dropped nearly 30% from its peak on October 6 at the start of the fourth quarter last year, then fell another ~20% after year end. In a report to clients, Deutsche Bank analysts noted that U.S. spot Bitcoin ETFs saw about $2 billion in net outflows in December, with as much as $7 billion flowing out in November.

Chief Financial Officer Shiv Verma, who just took over the role last week, explained to the media that active traders benefit from the lowest pricing tier due to high trading volume, resulting in rebate rates below expectations for the company.

Prediction Market Becomes a Growth Driver

Despite the shrinking crypto business, the prediction market business performed strongly in Q4.

After launching its prediction market business at the end of 2024, Robinhood saw more than 12 billion event contracts traded on its platform last year, with a record 8.5 billion contracts traded in the fourth quarter.

This emerging business provides the company with an extra growth engine. Prediction markets allow consumers to bet on event-based outcomes, including a variety of categories such as sports events.

However, Piper Sandler analysts estimate that sports events account for 80% to 90% of Robinhood's prediction market trading volume, meaning the end of the football season may temporarily cool down this business.

In Q4, Robinhood announced a partnership with Susquehanna International Group to acquire a majority stake in derivatives exchange LedgerX. This deal was announced before the U.S. Commodity Futures Trading Commission revealed plans to establish new rules for the multi-billion-dollar prediction market industry.

Traditional Trading Businesses Perform Solidly

Traditional trading businesses demonstrated resilience in Q4.

Transaction-based revenue grew 15% to $776 million, with equities trading revenue surging 54% and options trading growing 41%. Net interest income rose 39% year-on-year to $411 million, benefiting from the interest rate environment.

Individual investors continue to be a key support for the stock market, buying aggressively amid concerns about an AI bubble and market selloffs triggered by geopolitical turmoil. This provided support for Robinhood's core brokerage business.

The number of Gold subscription users grew 58% year-on-year to 4.2 million. These users can access an AI-powered investment assistant for trading advice and order placement. This growth shows the company's efforts to expand into wealth management and banking services are progressing.

Diversification Strategy to Meet Challenges

Facing uncertainties into 2026, CEO Vlad Tenev previously stated that the company's goal is to build a "financial super app" that meets all customer needs on a single platform.

In a media interview, Verma stressed that the company's business structure is robust enough to withstand market swings. He stated:

The most important thing is to remain diversified. As long as we focus on inputs, outputs will naturally follow.

However, the company still faces multiple challenges. A Fed rate cut cycle could erode interest income, the timing of a recovery in the crypto market remains unclear, and the regulatory outlook for the prediction market business is still uncertain.

After tripling last year, Robinhood shares have declined about 24% this year as the market reassesses its growth prospects.

Risk Warning and DisclaimerThe market involves risks; investment must be cautious. This article does not constitute individual investment advice and does not take into account an individual user's special investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their circumstances. Investment based on this information is at your own risk. ```