Robinhood shares fall as crypto trading weakens

Robinhood Markets shares dropped about 4% in extended trading after the brokerage reported stronger-than-expected quarterly earnings, as investors focused on falling cryptocurrency revenue and higher operating costs.

The trading platform generated $100 million from cryptocurrency transactions during the second quarter, down 38% from a year earlier. The decline was offset by sharp gains in options, equities and prediction markets, helping total net revenue rise 32% to a record $1.31 billion.

Transaction-based revenue increased 44% to $776 million. Options remained the largest contributor within that business, with revenue rising 29% to $342 million, while equities revenue surged 95% to $129 million.

Revenue from event contracts and other transaction products climbed more than tenfold to $156 million. The expansion highlighted the growing importance of prediction markets to Robinhood as customer interest shifts across asset classes.

The company reported diluted earnings of 62 cents a share, up 48% from the corresponding quarter. Adjusted earnings were 48 cents a share, exceeding market expectations of about 44 cents. Part of the gap between the figures reflected an accounting gain, which prompted investors to look beyond the headline profit increase.

Robinhood shares fell roughly 4% after the results were released, following a decline of about 3% during regular trading. The stock closed at $89.84 before the extended-session fall and has lost more than 20% since the beginning of the year.

The market reaction showed that expectations for the brokerage remain demanding despite its widening product range and record revenue. Robinhood’s valuation has benefited from hopes that the company can evolve beyond a retail trading application into a broader financial services platform.

Cryptocurrency revenue has weakened for several quarters as digital asset prices and retail trading volumes have come under pressure. The second-quarter decline followed a 47% year-on-year fall in crypto revenue during the first quarter, when the business generated $134 million.

The downturn contrasts with earlier periods when cryptocurrency trading was one of Robinhood’s main growth engines. Its contribution has become less predictable, leaving the company increasingly reliant on options, equities, interest income, subscriptions and event-linked contracts.

Prediction markets have emerged as the fastest-growing part of the transaction business. Robinhood allows customers to trade contracts linked to the outcome of political, economic and sporting events, including major football competitions and policy decisions.

The company generated $156 million from event contracts and related instruments during the quarter. That figure exceeded its equities revenue and accounted for about one-fifth of transaction-based income.

The rapid expansion has intensified competition among Robinhood, Kalshi, Crypto. com and other platforms seeking to attract customers interested in event-based trading. Robinhood has worked with outside exchanges while also investing in infrastructure that could give it greater control over contract distribution and execution.

Management has presented prediction markets as a long-term customer acquisition channel rather than a temporary replacement for weaker cryptocurrency activity. The product appeals to users who may not trade conventional securities but are willing to take positions on elections, sports and economic events.

Robinhood also continued to benefit from heavier activity in established products. Options trading revenue reached $342 million as retail investors used short-term contracts to respond to market volatility. Equities revenue nearly doubled as trading volumes and customer participation increased.

Net deposits reached a quarterly record of about $22 billion, reflecting continued inflows from customers. Robinhood Gold subscriptions rose to a record 4.8 million, up 39% from a year earlier, providing a more stable stream of recurring revenue.

Gold members pay for features that include higher interest on uninvested cash, research tools, larger instant deposits and access to margin benefits. Subscription growth has become an important part of Robinhood’s effort to reduce its dependence on transaction volumes.

Operating expenses increased 33% during the quarter. Spending was driven by marketing, product development, expansion programmes and restructuring costs linked to workforce reductions announced in June.

The company has narrowed its full-year expense outlook, citing savings from organisational changes and the development of its affiliated prediction-market exchange. Investors are nevertheless monitoring whether costs associated with new products and acquisitions will rise faster than revenue.