Robinhood Markets (HOOD) shares fell nearly 4% in after-hours trading on Tuesday after reporting third-quarter earnings of 51 cents per share, missing Wall Street estimates of 56 cents despite crypto revenue exceeding forecasts. The decline reversed a 1.85% gain during regular trading hours, where the stock closed at $94.56. By 4:11 p.m. ET, shares were trading down $3.66 per share at $90.90 ahead of Wednesday's market open.
Expenses and Paper Losses Weight on Q3 Net Income
Revenue for the quarter increased 12% year-over-year to a record $1.42 billion, though it fell short of the $1.44 billion consensus estimate from analysts. Net income dropped 14% to $476 million. A $67 million paper loss stemming from the quarter-end revaluation of Robinhood Ventures Fund I—a fund holding private company stakes—reduced earnings by approximately 7 cents per share. Additionally, operating expenses rose 16% to $739 million.
Analyst firm Bernstein had previously projected quarterly revenue of roughly $1.5 billion while maintaining a $160 price target on HOOD shares.
Crypto Beat Offset by Broader Volume Decline
Robinhood's crypto revenue reached $120 million, beating analyst projections of $114 million and rising from $100 million in the second quarter. However, crypto revenue remained 55% lower compared to the same period last year as platform crypto volume fell 38% to $50 billion, mirroring trends where altcoin trading volume cooled.
Key platform metrics and developments from the quarter include:
- Earnings & Revenue: Reported EPS of 51 cents on $1.42 billion revenue versus 56 cents and $1.44 billion expected.
- Event Contracts & Options: Event contract revenue surged over sixfold year-over-year to $173 million, while options revenue gained 31% to $399 million.
- Rothera Milestone: The exchange operated with Susquehanna International Group and regulated by the CFTC surpassed $100 million in annualized revenue during its first full quarter.
- Subscriber Growth: Robinhood Gold paying subscribers increased 34% to a record 5.2 million.
Chief Executive Officer Vlad Tenev noted that crypto contracts could eventually surpass sports as the primary driver for event contracts. However, the derivative segment faces ongoing regulatory scrutiny, including a lawsuit filed by the city of Baltimore against prediction market operators over sports contracts.
Strong Deposit Momentum Heading Into Q4
Customers deposited $15.7 billion in net new funds during the third quarter. Chief Financial Officer Shiv Verma highlighted that momentum continued into the final quarter, with October net deposits topping $13 billion month-to-date. That October total includes a $6 billion contribution from the Dell family into Trump Accounts serviced by Robinhood.
Why It Matters
Robinhood's performance underscores a structural shift in retail trading behavior toward event contracts and options products as spot crypto trading volumes remain subdued relative to year-earlier highs. While strong subscription growth and net deposit inflows signal robust user retention, reliance on non-traditional derivative products introduces new regulatory hazards. Investors will closely track whether fourth-quarter deposit velocity can outpace climbing operating overhead and portfolio revaluation losses.
