Robinhood (HOOD) posted a disappointing third-quarter profit on Tuesday, missing analyst expectations as falling interest income and rising expenses overshadowed record trading activity. The company reported a net income of $476 million, a 14% decrease from the previous year, while diluted earnings per share dropped 16% to $0.51. Revenue increased by 12% to $1.42 billion. Analysts had forecast earnings of $0.57 per share and revenue of $1.43 billion based on Bloomberg data. Following the announcement, Robinhood's stock fell 3% on Wednesday and has seen a decline of over 15% since the beginning of 2026, marking its worst annual performance since 2022.
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During the quarter, Robinhood's trading platform experienced record volumes in stocks, options, and prediction markets, leading to a 19% rise in transaction revenue to $867 million. However, this surge was counteracted by a 9% drop in net interest revenue to $415 million, attributed partially to decreased securities lending activity. CFO Shiv Verma noted that reduced demand for stock borrowing impacted securities lending, referencing fewer IPOs and less divergence in investor outlooks.
Verma stated, "The core business is on fire," despite these challenges. Operating expenses rose by 16% to $739 million, and provisions for credit losses nearly tripled to $71 million as the company expanded its credit card offerings. Robinhood declared $67 million in unrealized investment losses, largely from its venture fund. Excluding certain items, adjusted net income decreased by 3% to $550 million.
The firm attracted $15.7 billion in net deposits during the quarter, down from $21.7 billion in the previous quarter. Verma indicated that deposits had surpassed $13 billion, aided by the Dell family’s contributions to Trump Accounts. Prediction markets emerged as a significant growth area, with revenue from event contracts climbing to $173 million, an 11% increase from the prior quarter, as customers traded 16.4 billion contracts. Revenue from options trading rose 31% to $399 million year-over-year, and equities trading revenue increased by 41% to $121 million. In contrast, crypto trading revenue fell 55% to $120 million due to decreased activity.