Robinhood’s quarterly profit misses estimates on weak transaction revenue

April 28 (Reuters) – Robinhood Markets missed expectations for first-quarter profit on Tuesday, as weaker-than-expected transaction revenue and lower take rates in options and cryptocurrency trading overshadowed growth in customer assets and deposits.

Shares of the online brokerage fell over 8% in extended trading. The stock has slipped more than 27% this year, as of last close.

The Menlo Park, California-based company’s revenue missed Street expectations due to weaker take rates – fees charged for processing a transaction, Chief Financial Officer Shiv Verma told journalists on a media call.

Analysts said the take rate for options and crypto trading was weaker-than-expected in the reported quarter.

“When active traders trade more, take rates naturally go down because we have tiered pricing. It means they’re engaged, they’re using our products,” Verma told analysts, adding that the firm was focused on expanding market share.

Robinhood’s transaction-based revenue was $623 million in the quarter, below estimates of $728.2 million, according to data compiled by LSEG.

Profit was $346 million, or 38 cents per share, in the three months ended March 31. Analysts were expecting a profit of 44 cents per share.

“This is a good company with a great story, but a messy earnings profile. This is no longer just a growth story, it’s now a prove-it story,” said David Bartosiak, stock strategist at Zacks Investment Research.

“If they can’t turn this engagement into real margin expansion, the market’s patience is going to wear thin and that’s the immediate reaction we are seeing in after-hours.”

CRYPTO WEAKNESS

Crypto trading revenue was also weak as volumes remained low, offsetting gains from stronger trading volumes in options and equities.

The crypto sector has been in a rut since a record crash last October, as optimism following President Donald Trump’s return to the White House faded. Bitcoin, the world largest cryptocurrency, has shed roughly 13% this year.

Transaction-based revenue from cryptocurrencies plunged 47% to $134 million from a year earlier.

But Robinhood executives said the second quarter was off to a good start in April, with strong rebound in trading volumes, including on the equities and options front.

Robinhood also said it expects to invest an additional $100 million to build and support the user interface of the new Trump Accounts, the government-supported investment accounts for babies.

It was earlier this month tapped as the brokerage for the program.

(Reporting by Arasu Kannagi Basil and Pritam Biswas in Bengaluru; Editing by Sahal Muhammed)