Robinhood revenue jumps 24% YoY, crypto business rebounds

Shares of Robinhood Markets Inc. surged after the company reported fourth-quarter revenue that exceeded analysts’ estimates and highlighted robust deposit growth.

The company’s net revenue for the fourth quarter increased by 24% year-over-year to $471 million, surpassing analysts’ expectations of $457 million. CEO Vlad Tenev credited the strong performance to accelerating product velocity, increased trading market share, and global expansion efforts in 2023. He expected an even better start in 2024, noting that the company had already attracted more funded customers and net deposits in the first half of Q1 than in all of Q4 2023.

Shares of Robinhood, known for its commission-free trading platform, rose nearly 9% in after-hours trading following the earnings report.

During the quarter, net deposits totaled $4.6 billion, while crypto revenue reached $43 million, exceeding estimates.

The no-fee trading app quickly made Bitcoin exchange-traded funds available to customers after US regulators approved them in January. Despite the initial excitement around ETF approvals, interest in Bitcoin remains high, with the cryptocurrency recently hitting its highest value in two years.

Chief Financial Officer Jason Warnick highlighted the potential for growth amid declining interest rates, expecting them to become a tailwind for the company in 2024.

Robinhood estimates total operating expenses for the year to be between $1.85 billion and $1.95 billion, slightly lower than analysts’ expectations.

The company posted a surprise profit of 3 cents per share in the fourth quarter, driven by higher interest income from customer loan repayments and increased trading activity. Margin investing and transaction-based revenues, particularly from cryptocurrencies, contributed to the positive results.

CEO Vlad Tenev noted that Robinhood’s trading market share for equities and options increased by 14% and 19%, respectively, compared to the previous year.

Robinhood was notably involved in the retail trading frenzy of 2021, attracting mom-and-pop investors who used its platform for commission-free trading, particularly in meme stocks. Earlier in January, the company agreed to pay a $7.5 million fine and revamp its operational practices in a settlement with Massachusetts’ securities regulators.

This agreement resolves an administrative enforcement action initiated in 2020 by Massachusetts Secretary of State Bill Galvin. The action was based on claims that Robinhood’s platform design and marketing strategies amounted to a “gamification” of trading. This approach, according to the allegations, boosted user engagement but did so at the risk of promoting hazardous trading behaviors among inexperienced investors.