Robinhood Reports $61M in Q3 Crypto Revenue: Revenue Up But Shares Fall

TLDR:

• Robinhood reported 165% growth in crypto revenue to $61 million in Q3
• Overall revenue grew 36% year-over-year to $637 million
• Assets Under Custody increased 76% to $152.2 billion
• Company shares dropped 11% despite strong crypto performance
• Growth initiatives reduced Q3 net revenue by $27 million

Despite recording substantial growth in its cryptocurrency operations, Robinhood Markets faced mixed reactions from investors as its third-quarter results revealed both achievements and challenges.

The commission-free trading platform demonstrated remarkable expansion in its crypto segment while dealing with the costs of its ambitious growth strategy.

The company’s cryptocurrency division emerged as a standout performer, with revenue surging 165% to reach $61 million during the third quarter. This growth came at a time when the broader crypto market showed renewed vigor, particularly with Bitcoin approaching previous high points. The successful integration of Bitstamp, following its earlier acquisition, contributed to increased trading volumes.

Overall revenue for the quarter reached $637 million, marking a 36% increase compared to the same period last year. The company’s Assets Under Custody (AUC) grew to $152.2 billion, representing a 76% year-over-year increase, driven by consistent net deposits and higher valuations in both equity and crypto markets.

However, the company’s growth initiatives came at a cost. Chief Financial Officer Jason Warnick revealed that these efforts reduced third-quarter net revenue by $27 million. The news contributed to a nearly 11% drop in Robinhood’s share price in pre-market trading, despite the stock having more than doubled in value throughout the year.

Robinhood has been actively expanding its service offerings beyond its original role as a retail trading platform. Recent months saw the launch of a desktop trading platform, the addition of futures and index options trading, and the introduction of a credit card. These moves align with the company’s strategy to evolve into a comprehensive financial services provider.

The company’s Year-to-Date Net Deposits grew to $34 billion, highlighting continued user engagement and trust in the platform. This growth occurred despite regulatory challenges, including a Wells Notice from the Securities and Exchange Commission (SEC) in May regarding potential violations of Federal securities laws.

In response to regulatory concerns, Robinhood has taken a more measured approach to product expansion, particularly in its cryptocurrency offerings. While the company continues to list new tokens and enable transfers for assets like Solana (SOL), these services are currently limited to customers in the European Union.

The company’s operating expenses showed improvement, dropping 10% during the quarter, earning praise from analysts for cost discipline. J.P. Morgan analysts characterized the quarter as “somewhat of a seasonal deceleration in the business after a robust first half.”

The regulatory environment remains a key factor in Robinhood’s operations. While the SEC issued a Wells Notice earlier in the year, no formal legal action has been taken, allowing the company to maintain its current business operations.

The company’s relationship with cryptocurrency markets continues to evolve following its previous exposure to FTX. After buying back its shares from Alameda Research in a $605 million deal last year, Robinhood has strengthened rather than diminished its presence in the crypto space.

Robinhood’s performance reflects the broader trends in digital asset markets, with its crypto unit benefiting from increased market activity and higher valuations. The platform’s ability to attract and retain assets suggests ongoing user confidence despite regulatory uncertainties.

The company’s third quarter represents its second-best quarter for revenues on record, demonstrating resilience in a competitive market environment. The growth in Assets Under Custody reflects both market appreciation and continued customer engagement.

Recent product launches and service expansions indicate Robinhood’s commitment to diversifying its revenue streams and enhancing its market position. These initiatives, while impacting short-term profitability, align with the company’s long-term strategy.