Prediction-market revenues on the popular trading app increased tenfold during the second quarter
Robinhood reported second-quarter results on Wednesday, beating expectations.
Traders using Robinhood Markets overcame anxiety around cryptocurrency and technology stocks in the latest quarter, betting big on events like the World Cup and driving the brokerage platform's revenue to record levels.
"A lot of our customers are net buyers," Robinhood CFO Shiv Verma told MarketWatch. "They believe in technology stocks. They believe in things like innovation. When they see periods of market volatility, they actually use it as an opportunity to lean in."
Heading into the company's earnings report, analysts were trying to parse the impact of many moving parts - including the crypto slump, a rapidly growing prediction-markets business and the recently launched "Trump accounts," for which Robinhood is a brokerage partner.
Meanwhile, the Iran war and concerns about artificial-intelligence spending have at times rattled trader sentiment.
Robinhood's equities revenue jumped 95% to $129 million during the second quarter. Options revenue increased 29% to $342 million.
Revenue from event contracts in Robinhood's prediction-market segment - which allows users to place wagers on things like sports and politics - increased more than tenfold to $156 million during the second quarter. However, revenue from Robinhood's cryptocurrency segment fell 38% to $100 million, as investors shied away from risky assets and focused more on artificial intelligence.
Robinhood's second-quarter results topped Wall Street's expectations overall, and the company tightened up its spending outlook for the year.
The company's shares (HOOD) were up 1.6% in Wednesday's extended trading session, at last check. Robinhood's stock has fallen 20.4% so far this year. After closing Wednesday near $90 a share, the stock is off highs of more than $150 reached last year.
That drop has been fueled in part by worries about the state of the company's large crypto business, following a nearly 30% drop in bitcoin's (BTCUSD) price so far this year. Meanwhile, the World Cup, by some estimates, drove more than $50 billion in bets on prediction-market platforms Polymarket and Kalshi.
Bill Birmingham, managing director at REX Financial, questioned whether singular, massive betting events make for stable, reliable earnings. He said that Robinhood had processed a 40% jump in wager contracts over the first quarter, but had questions on how much the company earned per contract. He also wondered how much promotional spending was associated with those gains.
"This matters because the market is starting to treat prediction as a potential replacement for slowing, perhaps structurally declining crypto revenue," Birmingham said in an email ahead of Robinhood's earnings.
Verma said that as more options and events become available on Robinhood's prediction-market platform, more traders would use it. The upcoming U.S. midterm elections are "something customers are really interested in," he noted. "Today, it was Fed day," he added.
Robinhood on Wednesday said it earned 62 cents a share for the second quarter, up 48% from a year before and topping FactSet analyst estimates for 43 cents. Revenue rose 32% to $1.31 billion over that time, above analyst estimates for $1.29 billion.
The company's "other revenues" segment saw a 54% gain to $143 million, driven mainly by Robinhood Gold subscriptions and services related to the Trump accounts, which include a $1,000 government contribution for U.S. children born between 2025 and 2028. In April, Robinhood said it expected to invest an extra $100 million toward creating a new app and other support efforts for those accounts.
Average revenue per user rose 24%. Funded customers - or customers with money in their accounts who completed a transaction through the platform over the last 45 day - rose 7% to 1.9 million.
Management said operating expenses jumped 33% during the quarter due to marketing expenses, costs related to staff reductions and expenses related to the Trump accounts. However, Robinhood narrowed its full-year outlook for adjusted operating expenses to $2.675 billion to $2.775 billion, whereas prior expectations were for $2.7 billion to $2.825 billion.
The change reflects savings related to Rothera, a new affiliate exchange, and the acquisition of trading platform WonderFi.
Net deposits were a record $22 billion, Robinhood said.
-Bill Peters
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