Robinhood's Earnings Disappoint Wall Street Despite Profit Growth

After achieving record revenue over the past three quarters, online brokerage Robinhood Markets Inc. saw its shares tumble in after-hours trading on Wednesday, following its third-quarter earnings report.

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The company announced an adjusted earnings per share (EPS) of 17 cents, alongside revenue of $637 million after the closing bell. These figures, however, missed analysts’ predictions of 18 cents EPS and $661 million in revenue, according to FactSet. Robinhood's stock fell 12% in after-hours trading following the report’s release.

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Before the third-quarter report, Robinhood's shares had surged by 121.4% in 2024, a reflection of a strong year marked by growth in revenue and customer acquisition. Even with the lower-than-expected earnings, Robinhood's third-quarter revenue marked its second-highest in history, trailing only the record set in the prior, second quarter.

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Yet, other key metrics showed declines; net deposits from customers dropped from $13.2 billion to $10 billion, adjusted EBITDA decreased from $301 million to $268 million, and net income fell from $188 million to $150 million.

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This modest quarter-over-quarter performance comes amidst two significant growth initiatives that the company has launched this year.

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Earlier in 2024, Robinhood introduced a variety of promotions aimed at attracting more customers to its paid Robinhood Gold membership service. These initiatives included a physical Gold credit card, retirement-account matching, and a 1% deposit boost, which helped draw customers from other brokerages and contributed to Robinhood’s strong year-to-date growth.

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However, these promotions may now be losing their momentum. During the third-quarter earnings call, Robinhood’s Chief Financial Officer, Jason Warnick, stated that the company would be discontinuing the 1% deposit boost for Gold members. “The 1% Gold deposit boost has not driven as much incremental customer activity as our other promotions, so we’ve decided to wind it down in November to focus on offers that resonate more with customers,” Warnick explained during the call.

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In addition to winding down some existing promotions, Robinhood launched several new offerings in October. At its Hood Summit in Miami, which was organized for its most active users, Robinhood introduced a new futures-trading feature and an advanced trading platform named Robinhood Legend. Then, earlier in the week, announced it would release event-based contracts allowing users to bet on specific outcomes related to the upcoming November 5 presidential election.

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Robinhood has already begun introducing these new products. For example, the election contracts announced on Monday have now been made available to all eligible users. The rollout of Robinhood Legend has been more gradual, with the first 1,000 spots for the service being claimed within just 45 seconds of its release.

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Though these recent product launches were not reflected in Robinhood’s third-quarter results since they were introduced in October, they are expected to impact the company’s performance in upcoming earnings reports.

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