Robinhood Shares Drop as Growth Push Takes a Toll on Q3 Results
Thursday, Oct 31, 2024 6:14 am ET
2min read Robinhood Markets, Inc. (HOOD) shares took a hit on Wednesday after the company reported its third-quarter earnings, which missed analyst expectations. The online brokerage, known for its commission-free trading platform, saw its shares drop by 10.84% in after-hours trading following the release of its Q3 results.
Robinhood reported quarterly earnings of $0.17 per share, meeting analyst consensus estimates, but its revenue of $637 million fell short of expectations of $650.67 million. The company's revenue grew by 36.4% year-over-year, driven by a 72% increase in transaction-based revenues, primarily from options and cryptocurrency trading. However, the company's total net revenues were reduced by $27 million due to matches paid to customers on transfers and deposits.
Despite the revenue miss, Robinhood's earnings per share (EPS) increased significantly, up from a loss of $0.09 in the same period last year. The company's adjusted EBITDA (non-GAAP) also grew by 96% year-over-year to $268 million, indicating that Robinhood's revenue growth outpaced its expenses. However, the company's adjusted operating expenses (non-GAAP) increased by 12% year-over-year to $397 million, primarily due to increased marketing and growth investments.
Robinhood's customer base continued to grow in Q3, with funded customers increasing by 1.0 million year-over-year to 24.3 million, and investment accounts growing by 1.5 million to 25.1 million. Assets under custody (AUC) surged 76% year-over-year to $152.2 billion, driven by continued net deposits and higher equity and cryptocurrency valuations. The company's average revenue per user (ARPU) also increased by 31% year-over-year to $105. Robinhood's Gold subscription program, which offers margin trading and other premium features, reached an all-time high of 2.2 million subscribers in Q3.
Despite the strong customer growth and increased ARPU, Robinhood's shares fell due to concerns about the company's ability to maintain its growth momentum. The increased expenses associated with marketing and growth initiatives, as well as the regulatory challenges and increased competition in the online brokerage space, may be weighing on investors' minds.
Robinhood's expansion into new markets, such as options and cryptocurrency trading, has driven significant revenue growth, but it has also come with increased expenses and regulatory scrutiny. The company's focus on increasing wallet share with customers has driven strong user growth and assets under custody, but it has also led to higher operating expenses.
In conclusion, Robinhood's Q3 results showed strong customer growth and increased ARPU, but the company's shares fell due to concerns about its ability to maintain its growth momentum and manage its expenses. The company's expansion into new markets has driven revenue growth, but it has also come with increased expenses and regulatory challenges. As Robinhood continues to focus on winning the active trader market, increasing wallet share with customers, and expanding internationally, investors will be watching closely to see if the company can maintain its growth momentum and manage its expenses effectively.
Robinhood reported quarterly earnings of $0.17 per share, meeting analyst consensus estimates, but its revenue of $637 million fell short of expectations of $650.67 million. The company's revenue grew by 36.4% year-over-year, driven by a 72% increase in transaction-based revenues, primarily from options and cryptocurrency trading. However, the company's total net revenues were reduced by $27 million due to matches paid to customers on transfers and deposits.
Despite the revenue miss, Robinhood's earnings per share (EPS) increased significantly, up from a loss of $0.09 in the same period last year. The company's adjusted EBITDA (non-GAAP) also grew by 96% year-over-year to $268 million, indicating that Robinhood's revenue growth outpaced its expenses. However, the company's adjusted operating expenses (non-GAAP) increased by 12% year-over-year to $397 million, primarily due to increased marketing and growth investments.
Robinhood's customer base continued to grow in Q3, with funded customers increasing by 1.0 million year-over-year to 24.3 million, and investment accounts growing by 1.5 million to 25.1 million. Assets under custody (AUC) surged 76% year-over-year to $152.2 billion, driven by continued net deposits and higher equity and cryptocurrency valuations. The company's average revenue per user (ARPU) also increased by 31% year-over-year to $105. Robinhood's Gold subscription program, which offers margin trading and other premium features, reached an all-time high of 2.2 million subscribers in Q3.
Despite the strong customer growth and increased ARPU, Robinhood's shares fell due to concerns about the company's ability to maintain its growth momentum. The increased expenses associated with marketing and growth initiatives, as well as the regulatory challenges and increased competition in the online brokerage space, may be weighing on investors' minds.
Robinhood's expansion into new markets, such as options and cryptocurrency trading, has driven significant revenue growth, but it has also come with increased expenses and regulatory scrutiny. The company's focus on increasing wallet share with customers has driven strong user growth and assets under custody, but it has also led to higher operating expenses.
In conclusion, Robinhood's Q3 results showed strong customer growth and increased ARPU, but the company's shares fell due to concerns about its ability to maintain its growth momentum and manage its expenses. The company's expansion into new markets has driven revenue growth, but it has also come with increased expenses and regulatory challenges. As Robinhood continues to focus on winning the active trader market, increasing wallet share with customers, and expanding internationally, investors will be watching closely to see if the company can maintain its growth momentum and manage its expenses effectively.
Comments
No Comment Yet
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
