Robinhood posts surprise profit on interest income boost, trading rebound

Robinhood posts surprise profit on interest income boost, trading rebound

By Manya Saini

(Reuters) -Robinhood Markets posted a surprise profit in the fourth quarter on Tuesday, driven by higher interest income from customers paying back loans and a rebound in trading, sending shares of the online brokerage up 10% after the bell.

A higher-for-longer interest rate environment has benefited lenders across the financial spectrum, including Robinhood, with the industry capitalizing on interest payments.

“Looking at revenues, with the current macro backdrop, we’re finding for strong growth in 2024, driven by continued 20-plus percent net deposit growth, increasing gold adoption, double-digit gains and trading market share,” said CFO Jason Warnick in post-earnings call.

Warnick added Robinhood is aiming to deliver margin expansion and expects headcount to be roughly flat to slightly up this year.

The retail-investor focused firm reported a surprise profit of 3 cents per share in the quarter, compared with analysts’ expectations of a loss of 1 cent, according to LSEG data.

The financial services platform allows eligible customers to borrow money to purchase securities and charges interest on the debt. This ‘margin investing,’ has been a bright spot for retail investor-focused firm.

The Menlo Park, California-based company’s net interest revenue came in at $236 million versus $167 million a year earlier.

Transaction-based revenues also outperformed Wall Street expectations, growing 8% year-over-year to $200 million in the quarter, primarily driven by cryptocurrencies.

CEO Vlad Tenev in a post-earnings call with analysts said Robinhood’s trading market share climbed 14% for equities and 19% for options, compared with a year earlier.

Robinhood was at the center of the 2021 retail trading frenzy, driven by mom-and-pop investors who used the company’s commission-free platform to pump money into so-called “meme stocks” during the pandemic-era lockdowns.

Average revenue per user (ARPU) increased 23%, while monthly active users (MAU) declined 4% in the reported quarter versus a year earlier.

The company’s revenue rose to $471 million, sailing past expectations of $456.81 million.

(Reporting by Manya Saini in Bengaluru; Editing by Tasim Zahid and Shinjini Ganguli)