Robinhood's Q3 Earnings: Crypto Revenue Plunges, Stock Price Drops, but User Base and Assets Continue to GrowAmerican online brokerage Robinhood (NASDAQ: HOOD) released its Q3 2021 earnings on October 27th. The report showed that Robinhood's total net revenue reached $365 million, a 35% year-over-year increase
Robinhood's Q3 Earnings: Crypto Revenue Plunges, Stock Price Drops, but User Base and Assets Continue to Grow
American online brokerage Robinhood (NASDAQ: HOOD) released its Q3 2021 earnings on October 27th. The report showed that Robinhood's total net revenue reached $365 million, a 35% year-over-year increase. However, its net loss amounted to $1.32 billion, significantly higher than the $11 million loss in the same period last year. Following the earnings release, Robinhood's share price dropped by approximately 8% in after-hours trading, settling around $39.
Robinhood's Q3 loss primarily stemmed from $1.24 billion in stock-based compensation expenses, with $1.01 billion being a one-time equity incentive related to its IPO. Despite the loss, Robinhood's user base and assets continued to grow. Its monthly active users (MAU) increased by 76% to 18.9 million, while assets under custody (AUC) grew by 115% year-over-year to $95 billion.
However, Robinhood's growth momentum slowed in the third quarter. Its Q3 net revenue of $365 million was $200 million lower than the $565 million in Q2, representing a 35% quarter-over-quarter decline. Meanwhile, the earnings report revealed that Robinhood's cryptocurrency revenue dropped to $51 million in the previous quarter, a 78% decrease from the $233 million in Q2.
Robinhood attributed its strong Q2 performance to the Dogecoin (DOGE) craze, but its cryptocurrency business declined rapidly in Q3. "In Q2, the story was about crypto, especially DOGE," Robinhood CFO Jason Warnick said during a conference call, adding that in Q3, customer attention shifted more toward equities.
Despite this, Robinhood remains committed to its cryptocurrency business. Warnick pointed out that over 1 million customers have signed up for Robinhood's upcoming crypto wallet. On September 22nd, Robinhood officially launched its cryptocurrency wallet and transfer functionalities. Robinhood CEO Vlad Tenev stated during the earnings call that the company is awaiting regulatory confirmation before offering trading pairs for the seven cryptocurrencies currently involved, including Bitcoin, Bitcoin Cash, Dogecoin, Ethereum, Ethereum Classic, and Litecoin. However, Tenev emphasized that the company will proceed cautiously.
At the beginning of 2021, a large number of US retail investors flocked to the Robinhood platform, known for its zero-commission trading, engaging in "bull vs. bear battles" with Wall Street financial institutions on multiple stocks like GameStop (GME) and AMC Entertainment (AMC). This attracted a significant influx of new users for Robinhood. Additionally, with the shift of retail investors towards Dogecoin, Robinhood became one of the major platforms for Dogecoin trading. On July 29th, Robinhood officially listed on the NASDAQ at an IPO price of $38.
Robinhood's Q3 earnings indicate that its business is still in a rapid growth phase, but the momentum has begun to slow down. The sharp decline in cryptocurrency revenue is one of the key challenges it faces. Nevertheless, Robinhood continues to actively explore new business areas, such as cryptocurrency wallets, and attempts to seize new opportunities. The future direction of Robinhood will depend on its ability to adapt to market changes and capitalize on new growth areas.
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