Robinhood Posts First-Ever Profit Amid Crypto Tumble and User Drop-Off

Robinhood Markets just notched its first profitable quarter since the platform went public in July 2021.

But shares of the company, which was at the center of 2021’s retail trading frenzy, have been trading down around 5% after hours on other news in the financial services firm’s second quarter 2023 earnings report posted Wednesday (Aug. 2).

Particularly the revelation that the company has seen its crypto-based revenues slide to $31 million this quarter, alongside smaller decreases in equities and options trading.

The firm also shed a cool million monthly active users, dropping to 10.8 million for the quarter, down from 14 million the same quarter last year.

“We’re seeing our market share of retail traders grow,” Robinhood Markets Co-Founder and Chief Executive Officer Vlad Tenev. “Crypto has continued to soften, which can be reflected in those monthly users,” Tenev added.

The company has lost 3.2 million monthly active users compared to this quarter a year ago, and is at its lowest monthly active user level in the past nine quarters.

Total accounts, however, grew by 70,000 compared to the previous quarter this year, and numbers are up by 310,000 year over year.

“In Q2, we reached a significant milestone by achieving GAAP profitability for the first time as a public company,” Tenev said. “Guided by our bold product road map, we’re continuing to innovate for our customers, grow assets, gain market share, and change the industry for the better.”

Crypto trading on the retail-focused investment platform is down 18% quarter over quarter.

“Staying mindful of applicable regulations … we look forward to continuing to invest in crypto,” Tenev said.

Read more: Robinhood CEO: Every Company Will Transition Into an AI Company

What Is Behind User Decline

Last quarter, Robinhood leadership was focused on artificial intelligence (AI), telling investors that “every company will have to transition into an AI company.”

There was little mention of any advancements on that front this quarter, despite the broader buzz AI tools are generating across other tech platforms.

As PYMNTS has reported, there’s been a new commercialization — or at least drumbeat of announcements — regarding improved AI chatbots meant to streamline customer interactions by providing quick responses to queries and optimizing customer experiences by responding to text and voice-based queries with intelligent and creative answers.

These tools represent a revolutionary step in conversational AI, as well as one of the best use cases to date of generative AI’s foundational large language models (LLMs), and could be an opportunity area for Robinhood to develop robo advisory services, one of the more talked about innovations for AI within the retail trading landscape.

When asked by an investor about the company’s AI plans, Tenev gave no specifics but did reiterate his conviction that, “every company will need to become an AI company.”

Profitable for the First Time Since IPO

The company posted a net income of $25 million, or earnings of 3 cents per share, on revenue of $486 million. Most analysts covering the company were expecting a loss of 1 cent per share on revenue of $473 million.

The company’s stock is up more than 50% this year, but down about 82% from its record close notched in August 2021, a few weeks after being publicly listed.

The retail trading platform is increasingly making its money from interest-earning assets, with net interest revenues having more than tripled year over year to $234 million, while revenue from customer transactions has fallen — with transaction based revenues down 4% to $193 million.

As reported by PTMNTS, in July Robinhood acquired X1, a platform that offers a no-fee stainless steel credit card with rewards on each purchase.

The $95 million cash deal will enable Robinhood to offer its customers access to credit, bringing the company “closer towards our goal of serving the entirety of our customers’ critical financial needs,” Tenev said.

But perhaps most importantly, where does all this leave the platform on PYMNTS’ Provider Ranking of Personal Finance Apps?

The platform ended the first quarter of 2023 at the No. 3 spot, but now finds itself sliding down one rung to the fourth position.

Last month, Robinhood made its 24 Hour Market available to all customers — letting users invest in select stocks and ETFs on their own schedules, five days a week.