By Prakhar Srivastava
July 29 (Reuters) – Robinhood Markets beat Wall Street estimates for second-quarter profit on Wednesday, as robust trading in equities, options and prediction markets helped offset weakness in cryptocurrency trading.
Retail trading remained robust during the quarter as heightened market volatility, driven in part by the U.S.-Iran conflict and its impact on inflation expectations and the Federal Reserve’s interest-rate outlook, kept investors active.
The online brokerage’s transaction-based revenue rose 44% to $776 million, driven by strength in equities, options and event contracts, which contributed $156 million in revenue.
Net interest revenue increased 9% to $389 million, supported by growth in interest-earning assets.
“The takeaway from the quarter is businesses (are) humming, firing across all cylinders, (with) record transactions across equities, options, prediction markets,” Shiv Verma, chief financial officer, said on a media call.
The rapid expansion of prediction markets has shifted investor focus away from cryptocurrency, with analysts expecting the business to play an increasingly important role in Robinhood’s revenue mix.
“This was not merely a prediction-market beat. Robinhood delivered better-than-expected transaction revenue, NII, deposits, subscription growth and expense control simultaneously,” said Bill Birmingham, managing director at REX Financial.
The Menlo Park, California-based company’s profit was $573 million, or 62 cents per share, for the three months ended June 30, compared with $386 million, or 42 cents per share, a year earlier.
On an adjusted basis, Robinhood earned 48 cents per share, topping analysts’ average estimate of 44 cents per share, according to data compiled by LSEG.
Shares of Robinhood fell 2.9% in extended trading. The stock has dropped 20.6% this year, as of last close.
“If there’s one concern, it’s valuation. After the stock’s huge run, expectations are elevated, and some of this quarter’s EPS benefited from one-time investment gains,” said David Bartosiak, stock strategist at Zacks Investment.
(Reporting by Prakhar Srivastava in Bengaluru; Editing by Shailesh Kuber)
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