Robinhood’s crypto revenue rises 20% – So why did HOOD fall 7%?

Robinhood’s L2 and prediction market bet continue to pay off as a key revenue driver. According to the fintech’s Q3 earnings report, its crypto revenue surged by 20% to $120M from Q2’s $100M. The Q3 crypto revenue was primarily driven by prediction markets and its Ethereum L2 Robinhood Chain.

In particular, prediction markets raked in $173M, marking an 11% increase from Q2’s $156M. The L2, on the other hand, brought in $26M, offsetting crypto trading revenue, which cooled to $94M from Q2’s $100M.

Robinhood’s crypto revenue beats expectations

The crypto trading revenue includes the Robinhood consumer app and Bitstamp activity. Overall, the fintech generated $1.4B in revenue in Q4, up 12% on a year-over-year (YoY) basis. But this was slightly below analysts’ estimate of $1.43B. It also missed the earnings per share (EPS) by 6% ($0.60 against expected $0.64).

But crypto’s $120M revenue contributed 8.4% to the revenue share. Interestingly, the $120M crypto revenue was above analysts’ estimate of $114M.

The prediction markets section contributed 12%, while the remaining 79% was from options, equities, etc.

That said, the L2 was launched in July and leverage memcoin mania to attract users before offering tokenized stocks and other services. As of late October, the L2 has $1.24B in total value locked (TVL), underscoring impressive DeFi activity.

The chain also did nearly $90B in DEX volume in Q3 and is already handling $25B in Q4, underscoring strong speculation.

As such, whether the L2 makes more money in Q4 may depend on broader crypto trading volume and market sentiment. In fact, VanEck’s head of digital research, Matthew Sigel, echoed a similar sentiment.

That said, Robinhood stock, HOOD, dumped by 7.45% to $92.84 on Tuesday due to a revenue and EPS miss. Overall, the stock has declined 31% from its September peak of $126, amid a broader US equity meltdown.

Despite the pullback, Wall Street analysts’ consensus price target is $130, implying a 38% upside potential from current levels.

Overall, Robinhood’s crypto trading activity softened, but its L2 and prediction market boosted revenue. Whether the growth will extend into Q4 remains unclear.

Final Summary

• Robinhood’s crypto revenue increased by 20% to $120M in Q3, up from $100M in Q2
• HOOD stock dumped 7% on revenue and EPS miss, extending the price pullback to 31% since September