"U.S. influencer brokerage Robinhood’s profit exceeds expectations, cryptocurrency revenue falls short, CFO resigns | Earnings Report News"

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"American fintech broker" Robinhood's third quarter profit exceeded Wall Street expectations, but cryptocurrency revenue fell short. The company announced the resignation plan of Chief Financial Officer (CFO) Jason Warnick and appointed Senior Vice President of Finance and Strategy Shiv Verma as the next CFO.

Robinhood Q3 Financial Highlights

Key Financial Data:

Revenue: Net revenue for the third quarter was $1.27 billion, analysts expected $1.21 billion.

EBITDA: Adjusted EBITDA for the third quarter was $742 million, analysts expected $726.9 million.

Earnings per share: $0.61, expected $0.53, EPS in the same period last year was $0.17.

Net profit: Net profit rose to $556 million, significantly higher than the $150 million profit in the same period last year.

ARPU: Q3 ARPU (average revenue per user) was $191, analysts expected $182.

Monthly active users: 13.8 million in Q3, analysts expected 13.31 million.

Segment Data:

Transaction-based revenue in Q3 was $730 million, analysts expected $725.8 million.

Cryptocurrency revenue in Q3 was $268 million, up 300% but below analysts' expectation of $287.2 million.

Options revenue in Q3 was $304 million, analysts expected $301.3 million.

After hours on Wednesday, Robinhood stock once fell more than 3%. So far this year, the stock has nearly quadrupled, and got another boost after being included in the S&P 500 index in the third quarter.

Event Contract Trading

Notably, event contract trading volume on the Robinhood platform surged to 2.3 billion contracts in Q3, more than doubled from the previous quarter. In October alone, the event contract trading volume has already surpassed that number, reaching 2.5 billion contracts. This includes about $25 million from the platform’s prediction market business. Robinhood has partnered with Kalshi to allow users to buy and sell contracts linked to "yes/no" outcomes of future events.

Recently, Robinhood has expanded the range of event contracts from the original sports and finance into politics, entertainment, and technology sectors.

Event contracts still account for only a small part of Robinhood’s overall revenue. But the prediction market business has grown rapidly in recent weeks: Piper Sandler analysts estimate that volumes on Kalshi and rival platform Polymarket nearly doubled in October. Analysts also said these two platforms experienced the two most active trading days since the 2024 election this past weekend.

However, this type of prediction market contract—especially those related to sports and entertainment—has also sparked controversy, as they blur the lines between investing and gambling.

Executive Remarks

Robinhood CEO Vlad Tenev said in a statement:

"Our team continues to quickly launch new products, driving record performance in the third quarter, and we’re not slowing down—our prediction market business is growing rapidly, Robinhood Banking is gradually going online, and Robinhood's venture capital business is about to launch."

CFO Jason Warnick said in the announcement:

"Q3 saw another strong and profitable growth. We continue to diversify our business and have added two new business lines with annualized revenue of about $100 million or more—Prediction Markets and Bitstamp."

Analyst Commentary

Robinhood has been working to diversify its revenue streams to reduce reliance on its trading business. Earlier this week, the company announced a partnership with Sage Home Loans to allow its clients to obtain mortgages. In addition, the company plans to launch a closed-end fund to give U.S. retail investors access to unlisted companies.

Analysis notes that Robinhood's third quarter results released Wednesday exceeded Wall Street expectations, extending its strong performance so far this year, making it one of the best-performing large tech stocks in America. Robinhood is betting that the new generation of investors will want to not only trade stocks but also bet on sports, culture, and political events on the same platform. So far, this bet seems to be paying off.

As Robinhood expands into comprehensive wealth management, it is gradually narrowing the gap with Coinbase. The company has been aggressively offering deposit-matching incentives to attract customers from Fidelity and Schwab, and is expanding its assets under management through the acquisition of TradePMR.

Robinhood mainly targets retail investors. Initially renowned for its easy-to-use platform enabling beginners to buy and sell stocks, Robinhood’s trading business has now greatly expanded: in Q3, nearly 90% of its trading-related revenue came from categories other than stocks, including options, futures, and cryptocurrencies.

Zacks Investment Research equity strategist David Bartosiak wrote in a morning note, "This is not the pandemic-era Robinhood anymore. It's now leaner, more diversified, and quietly growing into a true fintech competitor."

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