Robinhood (HOOD) reported a disappointing third quarter on Tuesday, posting a net income of $476 million, a decline of 14% from the previous year, alongside diluted earnings per share of $0.51, down 16%. Revenue for the quarter increased by 12% to $1.42 billion, falling short of analyst expectations of $0.57 per share and $1.43 billion in revenue, as noted in Bloomberg's data. Following the earnings report, Robinhood's stock fell by 7% in after-hours trading.
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The decline marked a downturn of more than 15% since the beginning of 2026, heading towards its worst annual performance since 2022. Despite achieving record trading volumes in stocks, options, and prediction markets, rising expenses and a decrease in interest income impacted the online brokerage's overall performance. Transaction revenue rose 19% year-over-year to $867 million, but net interest revenue dropped 9% to $415 million, largely due to reduced securities lending activity, as stated by Robinhood CFO Shiv Verma. He pointed out that lower demand for stock borrowing was influenced by fewer initial public offerings (IPOs) and diminished investor disagreements regarding company prospects.
Verma remarked, "Right now, there was lower market volatility, and there were less IPOs, and so there were lower requests for demand." Operating expenses rose 16% to $739 million, and provisions for credit losses nearly tripled to $71 million as Robinhood expanded its credit card offerings. The company also reported $67 million in unrealized investment losses, primarily linked to its venture fund. Excluding specific items, adjusted net income decreased 3% to $550 million.
In terms of deposits, Robinhood attracted $15.7 billion during the quarter, down from $21.7 billion in the previous quarter, although CFO Verma noted that deposits surpassed $13 billion, partly due to contributions from the Dell family to Trump Accounts. Prediction markets remained a significant growth area, with revenue from event contracts climbing to $173 million, an 11% increase from the prior quarter, as customers traded a record 16.4 billion contracts. Options trading revenue surged 31% to $399 million, while equities trading revenue saw a 41% increase to $121 million. However, crypto trading revenue declined sharply by 55% to $120 million due to weakened market activity.