Robinhood's third-quarter profit fell to $476 million even as revenue rose to a record $1.42 billion, with prediction markets overtaking shrinking crypto trading as a revenue source.
Robinhood Markets reported a drop in third-quarter profit on Tuesday as slower cryptocurrency trading weighed on growth, despite robust trading across other asset classes. The Menlo Park company posted a profit of $476 million, or 51 cents a share, for the three months ended September 30, compared with $556 million, or 61 cents a share, a year earlier, while revenue rose to a record $1.42 billion.
Transaction-based revenue rose about 19 percent to $867 million, driven by strength in equities, options and prediction markets, according to Reuters. Crypto trading revenue fell 55 percent year over year to $120 million, while revenue from prediction markets reached $173 million, surpassing crypto trading revenue for the first time. Event contracts traded hit a record 16.4 billion, more than seven times the year-earlier figure.
The quarter included $67 million in unrealized losses, mainly from a lower market value of Robinhood's investment in Robinhood Ventures Fund I, which cut 7 cents from diluted earnings per share. Excluding those losses and other items the company treats as nonoperating, earnings were 60 cents a share, down 3 percent from a year earlier under an adjusted measure introduced this quarter. Operating expenses climbed 16 percent and the tax provision nearly doubled, according to coverage of the company's filing with the Securities and Exchange Commission.
Reuters corroborates the headline profit, revenue and transaction-revenue figures, and two outlets covering the company's filing agree on the crypto and prediction-market details. Shares fell in after-hours trading, though the reported size of the fall differed between outlets because their quotes were taken at different times in the evening. The company's chief financial officer, Shiv Verma, told CNBC that event contracts tied to crypto price moves did well in the quarter, giving customers another way to take a view on crypto while prices and spot trading slumped.
With crypto revenue down to 8.4 percent of total revenue from about 21 percent a year earlier, the company's trading mix has shifted materially within a year. Prediction markets, not crypto, carried the quarter's transaction growth, and whether that strength holds while crypto trading stays soft is now the central question for the final quarter of the year.