Robinhood Markets reported mixed third-quarter financial results on Tuesday as it aimed to deliver on expectations of greater and sustainable revenue diversification.
The brokerage firm reported higher-than-expected adjusted earnings of 60 cents a share. Net revenue of $1.42 billion was up 12% from a year ago but below expectations for $1.44 billion.
Analysts anticipated earnings of 56 cents a share, compared with earnings of 61 cents for the same period a year ago, according to estimates compiled by FactSet.
Robinhood's shares were down 3% in Wednesday trading, after falling nearly 8% in premarket trading Wednesday after closing up 1.9% in regular Tuesday trading. The stock has fallen 16.4% this year and has declined more than 35% over the past 12 months.
Robinhood said its Gold subscribers, who receive various perks, grew by 1.3 million in the quarter, to a record 5.18 million, representing about 18% of funded customers. For the second quarter, Robinhood said subscribers increased by 1.4 million, or 39% from the prior year, to 4.8 million.
"Customers are trusting us with more of their assets as we deliver on our product roadmap, leading to our highest quarter ever for revenues," said Chief Financial Officer Shiv Verma, in a statement. "We also added a new business cylinder with over $100 million in annualized revenues this quarter as Rothera scaled rapidly."
Verma said Robinhood is entering its fourth quarter with "strong momentum," noting that October net deposits have already topped $13 billion, including $6 billion from the Dell family's contribution to Trump accounts.
Adjusted earnings before interest, taxes, and depreciation grew 9% from a year ago, to a record $808 million in the quarter.
Operating expenses of $664 million, up 8% from a year ago, came in below analysts' expectations for $776 million. For the same period a year ago, Robinhood posted revenue of $1.27 billion and operating expenses of $639 million.
To win more wallet share with existing and new customers, Robinhood has been steadily expanding products and services. For example, it has begun offering credit cards, wealth management, and artificial-intelligence trading capabilities The new offerings come as Robinhood's customers have shifted over the past year away from cryptocurrency trading to options and prediction markets.
Robinhood said transaction-based revenue grew 19% from a year ago to a record $867 million in the quarter.
For the second quarter, Robinhood reported that transaction-based revenue soared 44% year over year, but the increase was largely driven by event contracts revenue and options. Transaction-based cryptocurrency revenue was down 38%.
Analysts are looking to see how sustainable prediction markets growth is. Robinhood's offering is one of 13 business lines at the company that have reached $100 million or more in annualized revenue.
Prediction markets enable individuals to wager on the outcome of events via simple yes/no contracts. Although they can be used for financial-related events, much of the volume in event contracts is sports-related. The third quarter included the FIFA World Cup and the start of the professional and college football seasons.
Robinhood has been expanding its prediction markets service for customers and building infrastructure to support the offering. In June, the company launched Rothera, a Commodity Futures Trading Commission-licensed exchange, through a joint venture with Susquehanna International Group.
Rosenblatt analyst Chris Brendler initiated coverage of Robinhood this month with a Buy rating and a $135 price target. Brendler says Robinhood's business has been maturing since its early days as a free stock-trading app.
"Growth is increasingly driven by product expansion and deepening customer relationships, and we see a long runway ahead especially as international expansion accelerates," he writes in an Oct. 20 research note.
J.P. Morgan Securities analyst Kenneth Worthington raised his December 2027 price target for Robinhood shares to $115 from $103 for December 2026 because of estimated higher trading volumes in equities, options, and event contracts, according to an Oct. 20 research note. Worthington rates Robinhood shares Neutral.
Analysts expect Robinhood to benefit from regulatory changes that relaxed restrictions on day traders. The company's efforts to make it easier for customers to use AI to buy and sell stocks could also boost trading volumes.
In May, Robinhood began allowing customers to hook up their own AI agents to dedicated brokerage accounts. Although it requires a little technical know-how, more than 150,000 customers opened agentic trading accounts. In September, the company unveiled a new in-app offering, Robinhood Agents, that enables customers to open a dedicated agentic account and choose an AI model from a lineup of models.
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