After the US stock market closed on November 2, Eastern Time, the US Internet brokerage Robinhood announced its third quarter 2022 results. The financial report showed that Robinhood’s total revenue in the third quarter was $361 million, beating analysts’ average forecast of $357.8 million. A net loss of $175 million was a 1% decrease from $365 million in the same period last year. A loss of $1.317 billion a year earlier.
Notably, Robinhood has seen seven straight quarters of declining revenue. In addition, Robinhood’s third-quarter revenue from cryptocurrency trading was $51 million, down 12% sequentially, as cryptocurrencies are in a bear market cycle.
As of the close on November 2, local time, the company’s shares closed at $11.4, and the stock has plummeted 36% this year and is down 70% from its initial public offering price of $38 per share in July 2021.
Cryptocurrency trading revenue fell 12% month-on-month
By business, Robinhood’s trading revenue totaled $208 million in the third quarter, up 3% from the previous quarter, mainly driven by a quarter-on-quarter increase in options and stock trading.
As the price of bitcoin and other cryptocurrencies remain depressed. Robinhood’s revenue from cryptocurrency trading fell 12% quarter-on-quarter to $51 million in the quarter, while revenue from stock trading rose 7% quarter-on-quarter to $31 million and options trading rose 10% quarter-on-quarter to $124 million.
Regarding the decline in cryptocurrency trading revenue, the company’s chief financial officer, Jason Warnick, explained on an analyst call that these are relatively quiet times for cryptocurrencies.
However, Wernick said that cryptocurrency activity has picked up over the past week. Since Elon Musk announced the completion of the acquisition of Twitter, the price of Dogecoin (DOGE), which he has been supporting, has continued to rise. %.
Cryptocurrency trading contributed $233 million in revenue for Robinhood in its second-quarter 2021 earnings report, with 62 percent of that coming from Dogecoin. But Wernick said at the third-quarter earnings analyst meeting that he wasn’t sure if Dogecoin’s rally was what drove the company’s cryptocurrency activity higher.
Rising rates lifted Robinhood’s net interest income to $128 million for the quarter, more than doubling from a year earlier. Wernick explained on an analyst call that Robinhood has about $17 billion in assets that generate interest income.
The earnings report showed that Robinhood’s September monthly active users fell 35% year over year to 12.2 million, the lowest level since the fourth quarter of 2020.
Since Robinhood still relies on user transactions for most of its revenue, the decline in trading activity has been affecting its business. That has led the company to adjust its strategy to cut costs by cutting jobs and closing offices, while rolling out features geared towards the most active users of its trading app.
So far this year, Robinhood has laid off almost a third of the company’s workforce. Among them, in August, the company announced that it would lay off about 23% of its workforce, which is the company’s second layoff this year, after announcing an 8% layoff in April.
Additionally, the online brokerage firm sought to capitalize on the growing interest in cryptocurrencies by expanding the number of cryptocurrencies traded on its platform to 19. Recently, the company launched a beta version of the “Web 3.0 Wallet” to 10,000 users. The wallet is independent of the main Robinhood trading app and allows users to trade and exchange cryptocurrencies without network fees.
Robinhood CEO Vlad Teneff said on an analyst call on third-quarter earnings that the company plans to launch the wallet globally early next year.
The third-quarter earnings report showed that Robinhood’s net loss narrowed to $175 million from $1.32 billion in the same period last year. Its shares rose 4.1% in after-hours trading on Wednesday.