Robinhood Markets shares fell in premarket trading on October 28 after the brokerage's third-quarter earnings report raised concerns about revenue growth and profitability. Despite record quarterly revenue, weaker cryptocurrency trading income and lower-than-expected GAAP earnings weighed on investor sentiment, and management's comments about tighter trading spreads added to questions about the near-term outlook.
Revenue and earnings miss estimates
Robinhood reported $1.42 billion in third-quarter revenue, up 12% year over year but below Wall Street's $1.43 billion estimate. GAAP diluted earnings per share fell 16% to $0.51, missing analysts' $0.55 estimate, while net income declined 14% to $476 million.
Adjusted earnings per share reached $0.60, but the revenue shortfall and the decline in reported earnings overshadowed the stronger adjusted result.
Operating expenses increased 16% to $739 million, outpacing revenue growth and raising concerns about margin pressure. The report presented a mixed picture: revenue continued to grow, but bottom-line performance weakened.
Crypto revenue drops 55%
The sharp decline in cryptocurrency activity was a central concern for investors. Crypto transaction revenue fell 55% year over year to $120 million, while crypto notional trading volume dropped 38% to $50 billion. Trading volume on the Robinhood app declined 48% to $21 billion.
The slowdown contrasts with stronger performance in other trading products:
- Options revenue rose 31% to $399 million.
- Equities revenue increased 41% to $121 million.
- Event-contract revenue climbed to $173 million.
Those gains were not enough to offset the crypto slump. Because cryptocurrency activity contributes to Robinhood's transaction-based revenue, investors will be watching for signs of a recovery in trading volumes.
Lower interest income and higher costs
Net interest revenue declined 9% year over year to $415 million, reflecting lower securities-lending activity and short-term interest rates. Operating expenses rose 16% to $739 million, putting additional pressure on earnings.
Adjusted EBITDA increased 9% to $808 million, even as net income and GAAP earnings per share both declined year over year. The divergence suggests revenue growth alone may not be sufficient to support the stock if costs continue rising faster than the core business.
Tighter spreads and a narrowed expense outlook
Management's commentary on early fourth-quarter conditions added to investor caution. Robinhood indicated that trading spreads had tightened, which could reduce the revenue generated from customer transactions.
The company lowered the upper end of its fiscal 2026 adjusted operating expense and stock-based compensation outlook by $25 million, bringing the range to $2.675 billion to $2.75 billion.
There were also positives in the report. Third-quarter net deposits reached $15.7 billion, and platform assets rose 19% year over year to $396 billion. October net deposits had already exceeded $13 billion, according to the company's reported update. Investors are likely to focus on whether these inflows can translate into stronger revenue and earnings as trading conditions change.
Share price move
Robinhood shares closed at $94.56 on October 27 before falling to approximately $87 in premarket trading, a decline of around 8%. The move puts the stock below the $90 mark.
