Software ate the world, and now generative artificial intelligence (AI) is eating that software.
Robinhood Markets Co-Founder and Chief Executive Officer Vlad Tenev told investors on the commission-free trading app’s first quarter 2023 earnings call, “Every company will have to transition into an AI company.”
As PYMNTS reported, “AI” was mentioned more than 200 times on earlier first quarter earnings calls by Meta, Microsoft and Alphabet.
“The companies that have been able to move ahead throughout history and create differentiated value have been the technology companies,” Tenev said. He added that in the same way “every company today needs to be a technology company,” every company tomorrow will have to be an AI company.
“The impact of AI and other tools that we’ve seen thus far is going to be extraordinary,” the CEO emphasized.
Maybe becoming an AI business will help Robinhood with its own long-term business model.
The retail trading platform’s most recent reported financial results were up quarter-over-quarter (QoQ), beating Wall Street estimates, but remained down year-over-year (YoY) across key metrics. The firm reported earnings per share losses of 57 cents.
Balance sheet losses jumped nearly a third (30%) to $511 million, much of that due to a hit from a one-time $485 million share-based compensation expense, compared to revenues of $441 million, which was up 16% for the quarter.
Looking forward, the company estimates its total operating expenses for fiscal year 2023 to range between $2.35 billion and $2.9 billion, and announced plans to roll out 24-hour, five days a week trading of select stocks and exchange-traded funds starting next week.
“We grew revenues four quarters in a row while getting to a leaner operating model. At the same time, we delivered new products and features that led to outsized improvements in customer satisfaction. Going forward, we remain focused on serving customers, growing our business, and driving long-term shareholder value,” said Jason Warnick, the platform’s chief financial officer.
As revealed in PYMNTS’ Provider Ranking of Personal Finance Apps, the Chime app remains No. 1 while Robinhood recently lost its No. 2 spot to Fidelity, whose platform rose one spot.
“We are the most innovative trading platform in the marketplace, we’ve introduced several innovations that have become norms,” Tenev told investors.
Robinhood’s monthly active users (MAU) increased by around 400,000 to 11.8 million for the most recent quarter, nearly half of the platform’s 21.3 million MAU count during retail investing’s peak in the second quarter of 2021.
The trading app’s first quarter 2023 MAU of 11.8 million represents more than a quarterly (26%) YoY decline in activity.
Asked during the Q&A portion of the call about the recent turmoil and collapses in the banking market, Warnick assured listeners, “We are not a bank, we keep our assets liquid.”
The platform’s net deposits annualized growth rate was 29% for the quarter, and 18% over the past year.
Net interest revenue ($208 million) surpassed transaction-based revenue ($207 million) for the first time.
The platform’s executives repeatedly emphasized throughout the call that Robinhood was critically focused on launching and providing products that continually put customer safety at the forefront.
“We’ve been a safety-first company for a long time, it’s our top company value,” Warnick said.
Robinhood’s notional crypto trading volumes were down 46% YoY, but up 12% for the last reported month of March. Equity trading was down 20% YoY.
“Resiliency continues to be great for crypto, and we see a future there and will continue to grow our market share,” Tenev told investors on the call.
“The crypto environment has faced increasing regulatory scrutiny, and what this has meant is we’ve been very deliberate in the way we expand our coin offering and the way we evaluate those coins,” said Warnick.
The company CFO added, “We consistently demonstrate that we have respect for the securities regulators in this country, which has led to us making tough decisions on product selection. We want to be on the right side of these decisions while innovating for customers.”
Additional regulatory clarity would be “super helpful” on that front, Warnick noted.
Tenev also announced potential plans for an AI-powered robo-adviser, telling investors, “We want to use technology to give personalized advice much like what a HNW [high net worth] investor would be paying a 1% AUM advisory fee for. Robinhood can build a great experience for that, which is mobile-first, and we’ll use every technology we think will be useful to make that happen and do it in a scalable way.”
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