Robinhood Markets ( NASDAQ : HOOD ) On October 28th, the stock price fell by about 7% before the market opened, due to the company's third-quarter financial report raising concerns among investors regarding revenue growth and profitability. Although quarterly revenue set a record, weaker cryptocurrency trading income and earnings per share GAAP that fell short of expectations dampened investor sentiment. Management's statements about narrowing trading price spreads also raised doubts about the company's short-term prospects.
The following are the main reasons for the decline in the stock price of Robinhood today.
Robinhood Third-quarter performance falls short of expectations, stock price declines
Robinhood announced third-quarter revenue of $1.42 billion, a year-on-year increase of 12%, but it was lower than Wall Street's estimate of $1.43 billion. GAAP Diluted earnings per share decreased by 16% to $0.51 year-on-year, below analysts' forecast of $0.55; net profit also decreased by 14% to $476 million.
Although the adjusted earnings per share reached $0.60, the revenue gap and the decline in reported profits overshadowed this stronger adjusted performance.
Operating expenses increased by 16% year-on-year to $739 million, a faster growth rate than revenue, which has raised concerns about the pressure on profit margins. As a result, this financial report presents a mixed picture: Robinhood revenue continues to grow, but the bottom-line performance has weakened.
Cryptocurrency business revenue plummeted by 55%
The significant decline in cryptocurrency trading activities is a key concern for investors. The crypto trading revenue of Robinhood decreased by 55% year-on-year to $120 million, and the nominal trading volume of cryptocurrencies fell by 38% to $50 billion. The trading volume within the Robinhood application also decreased by 48% to $21 billion.
This slowdown stands in contrast to the stronger performance of other trading products. Options revenue increased by 31% to $399 million, stock revenue grew by 41% to $121 million, and event contract revenue also rose to $173 million.
However, the growth of these businesses is still not enough to offset the weakness in the crypto business. Since cryptocurrency activities contribute significantly to Robinhood's transaction-based revenue, investors will continue to pay attention to whether transaction volumes will pick up again.
Net interest income declined, and rising costs continue to exert pressure.
Robinhood Net interest income decreased by 9% year-on-year to $415 million, reflecting a reduction in securities lending activities and lower short-term interest rates. At the same time, operating expenses increased by 16% year-on-year to $739 million, further squeezing profits.
Although after the adjustment, EBITDA increased by 9% year-on-year to $808 million, both net profit and GAAP earnings per share decreased year-on-year. This divergence indicates that if costs continue to grow faster than the core business, revenue growth alone may not be sufficient to support the stock price.
Narrowing of trading price spreads raises concerns about the outlook
Management's comments on the operating environment in the early fourth quarter further exacerbated investors' cautious sentiment. Robinhood indicated that trading spreads have narrowed, which may reduce the company's revenue from customer transactions.
The company has lowered the upper limit of adjusted operating expenses and equity incentive expenditures for the fiscal year 2026 by $25 million, adjusting the range to between $2.675 billion and $2.75 billion.
There are also positive factors: net deposits in the third quarter reached $15.7 billion, and platform assets increased by 19% year-on-year to $396 billion. Updates disclosed by the company show that net deposits in October have exceeded $13 billion.
However, investors may still be concerned about whether this influx of capital can be translated into stronger revenue and profits as the trading environment changes.
HOOD Can it rebound from the pre-market selling?
On October 27th, the stock price of Robinhood closed at $94.56, but then fell to around $87 during pre-market trading, representing a decrease of about 8%. This caused HOOD to break below the $90 mark and also fall below the support range near $95.
The current test is whether the buying pressure after the market opens can stabilize the stock price. If it rebounds above $90, it may help to alleviate short-term selling pressure; if it manages to return to the $94 to $95 range, it will signal a stronger momentum for improvement.
If selling pressure continues and breaks below the pre-market low, it is still possible for the stock price to fall further to around $82 to $80. Until the company demonstrates more stable profit growth, investors' concerns may continue to suppress the stock price.
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