Robinhood Earnings Beat Estimates Thanks to Surge in Investor Trading Activity

Robinhood logo on a smartphone screen (Dreamstime)

Robinhood Markets’ second-quarter earnings handily beat Wall Street estimates thanks to more assets coming into Robinhood accounts and an upswing in investor trading.

Robinhood reported earnings per share of 42 cents on revenue of $989 million. Wall Street analysts expected the brokerage firm to report EPS of 31 cents and revenue of $914 million, according to analysts surveyed by FactSet. For the second quarter of 2024, Robinhood reported EPS of 21 cents and revenue of $682 million.

Shares of Robinhood rose 1.08% Thursday morning. The S&P 500 was up 0.81%.

The surge in investor trading activity lifted Robinhood earnings for the quarter and helped the company achieve record quarterly equity and options trading volume for the three months ending June 30. The period included a sharp selloff and subsequent rebound in U.S. stocks in April because of President Donald Trump’s shifting tariff announcements.

In addition to stock trading, customers also traded cryptocurrency at a feverish pace during the quarter. Robinhood said transaction-based cryptocurrency revenue nearly doubled to $160 million. Total transaction-based revenue increased 65% year over year to $539 million. Other wealth management companies and brokerage firms’ quarterly earnings benefited from big upticks in investor trading during the quarter.

Customers also traded more on margin, meaning they borrowed money from the brokerage to buy stocks. Robinhood said its margin book hit a record $9.5 billion, up 90% year over year. Across the brokerage industry, investors’ use of margin hit a new record in June.

CFO Jason Warnick credited Robinhood’s growing margin book to market events and better pricing. Last year, the company cut the rates it charges customers. “We were laser focused on taking market share across our business,” he said on a media call. “You are seeing that show up in metrics across our business. Where we weren’t taking margin share was in margin because we weren’t industry leading in pricing.”

Customers weren’t just trading during the quarter. Robinhood said it added net deposits of $13.8 billion, its third highest quarter on record. CEO Vlad Tenev said net deposit growth is only partly driven by market activity as customers take advantage of buying opportunities.

“If the market is moving in crypto or another asset class, traders deposit money to take advantage of those opportunities,” he said during the company’s earnings call. “So there is a component that moves up and down, but if you look over the long term the trajectory for net deposits in this business has been quite strong. And when I look at tailwinds—new products, growth in customers, expansion into new services like banking—the long-term trends should help net deposits grow.”

The company had 26.5 million funded customers at the end of the quarter, a 10% increase from the same period a year ago.

Many of these customers are investing for the long term. Robinhood Strategies, the company’s digital advice service that launched in March, picked up thousands of additional customers, according to the company. Robinhood Strategies now manages more than $500 million in assets and serves more than 100,000 customers, according to the company. Robinhood is attracting new and existing clients to the service.

The company’s total platform assets increased 99% year over year to $279 billion due to market appreciation and customers adding more money to their accounts. Average assets per customer topped $10,000, almost double what it was a year ago. It’s a sign that Robinhood is attracting investors with larger balances.

Warnick says the company is pleased with the growth of Robinhood Strategies, adding that the company is drawing a mix of new and existing customers to the service. “We’re pleased with the growth so far,” he says.

More customers signed up for Robinhood Gold, too. The subscription service, which provides Robinhood customers with perks and discounts, reached a record 3.5 million subscribers in the second quarter. That’s up from 3.2 million at the end of the first quarter.

“It’s clear the retail crowd is back, and they’re not just YOLOing,” wrote David Bartosiak, a Zacks Investment Research stock strategist, referencing the acronym for “You Only Live Once.” “Now they’re subscribing to Gold, swiping the new credit card, and dropping deposits like it’s 2021 again.”

Robinhood has been steadily rolling out more products and services to attract new clients and win greater wallet share with existing customers. Tenev has set a goal of becoming a one-stop shop for customers’ every financial need. To that end, Robinhood has unveiled new products and services, such as a banking app and wealth management services. It’s also making improvements to its platform for active traders.

In addition, Robinhood is striving to grow its business overseas. In June, it unveiled new products and services, such as tradable stock tokens, for European customers.

Shareholders are bullish on the company’s strategy. The stock is up 416% over the past 12 months compared with a 15% gain for the S&P 500. That’s prompted some speculation that Robinhood could soon join the S&P 500 index, a milestone it has yet to achieve.

“It’s flattering to be in the conversation [about joining the index],” Warnick says. “It’s a strong signal we are on the right track as a company.”

Write to Andrew Welsch at andrew.welsch@barrons.com