The shares of Robinhood took a hit following the retail brokerage’s announcement of reduced trading volumes in the last quarter and its intention to pursue growth in Europe.
Robinhood also revealed a decline in its monthly active users, which dropped by 16% to 10.3 million during the third quarter, compared to the same period last year. Despite these challenges, the company reported a 29% increase in third-quarter revenue, totaling $467 million. However, this figure fell short of the $480 million. The silver lining was that the company’s net loss narrowed to $85 million, or 9 cents per share, surpassing Wall Street’s expectations.
This drop in revenue was primarily due to a 13% decrease in transaction revenue related to stock trading during the third quarter, compared to the previous year. Additionally, cryptocurrency trading witnessed a significant drop of 55% year over year, while options trading remained stable. Overall, this led to an 11% decline in Robinhood’s transaction-based revenue.
The company’s stock also experienced a significant drop, down more than 14%. However, it is worth noting that shares had gained nearly 20% year to date prior to this setback.
In a statement accompanying the earnings release, Robinhood CEO Vlad Tenev acknowledged the challenges but remained optimistic about the future. He stated, “Over the past year, we’ve placed greater emphasis on products like Robinhood Gold, offering a 4.9% annual yield on cash and a 3% match on IRA contributions. Looking ahead, we remain committed to providing leading products that cater to a wider range of customers’ financial needs, gaining market share, expanding internationally, and continuing to drive positive change in the industry.” Furthermore, the company is actively exploring growth opportunities in Europe. Robinhood’s earnings release disclosed plans to launch its brokerage services in the U.K. and extend crypto trading to its European Union customers.
The decline in trading coincides with the recent rise in treasury yields, particularly the 10-year Treasury yield surpassing 5% in the previous month. This uptick in yields has exerted pressure on equities. Although stocks have shown strength at the start of November, it followed three consecutive months of declines, which likely impacted retail trading activity.
Similarly, the cryptocurrency market has maintained its recent gains after a substantial rally at the end of October. However, trading activity across the crypto market has remained stagnant since around May. At the close of August, Bitcoin’s trading volume reached its lowest level in over four years, as investors awaited more regulatory clarity before re-entering a market marked by uncertainty.