Robinhood beats revenue estimates, shares fall on decline in users

Robinhood reported higher second-quarter revenue on Wednesday as interest rates continued to buoy the online brokerage’s interest income, achieving profitability for the first time as a public company even as it saw fewer users.

Shares of the company, which was at the center of 2021’s retail trading frenzy, were last down 4% in extended trading as investors scrutinized the platform’s decline in monthly active users.

Net interest revenue soared 243% to $442 million in the second quarter compared to a year earlier, as the brokerage’s margin investing business benefited from the U.S. central bank’s monetary policy tightening campaign to combat decades-high inflation.

Taking some of the shine off gains from higher rates, retail traders — who had used Robinhood’s platform through most of 2021 to pump money into so-called meme stocks — pulled back amid volatile market conditions.

As a result, transaction-based revenue declined 5% in the second quarter. Monthly active users also decreased to 10.8 million, one million fewer compared to the previous quarter and 3.2 million fewer than the year prior.

Earnings per share in the second quarter were $0.03, beating analysts’ average estimate of a loss of $0.01, according to Refinitiv data.

“We’ve been talking about for the last several quarters how we want to be lean and scrappy from a cost perspective, and we’ve been keeping our eye on that very closely,” Jason Warnick, Robinhood’s chief financial officer, told reporters.

In June, the Menlo Park, California-based company announced was buying financial technology firm X1 Inc for about $95 million in cash as it looks for new revenue streams to counter weakness in its mainstay trading unit. The company also said it was cutting some of its full-time jobs, as it looks to offset costs amid slowing demand for its services.