Robinhood's Q3 crypto trading revenue fell 55% year-over-year, earnings missed expectations, shares dropped over 7% after hours.

BlockBeats news, October 28 - Robinhood's third-quarter earnings fell short of market expectations, as slowing cryptocurrency trading and rising expenses overshadowed strong performance in options and prediction markets. The company reported earnings per share of $0.51, below the analyst estimate of $0.55 compiled by LSEG, and its stock fell more than 7% in after-hours trading.

In the third quarter, Robinhood's cryptocurrency trading revenue fell 55% year-over-year to $120 million. However, options trading revenue rose 31%, and event contracts revenue grew more than sixfold, driving total transaction revenue up about 19% year-over-year to $867 million.

Meanwhile, the company's quarterly operating expenses rose 16% year-over-year to $739 million, mainly driven by an increase in credit loss provisions, investments in new businesses such as Trump Accounts and Rothera, and higher marketing spending.

Robinhood Chief Financial Officer Shiv Verma said: Prediction markets have become a business with annualized revenue approaching $500 million, less than two years after launch, and are an important growth driver for the company. Both sports and non-sports event contracts grew strongly, with non-sports contracts accounting for a larger share of overall trading volume.

Bill Birmingham, head of research at REX Financial, noted that revenue growth is lagging behind contract trading volume growth, indicating that growth is increasingly concentrated in a few areas. He said: "Prediction markets are becoming a second trading channel for the same core active traders, rather than an entry point for attracting new customers." Some of the volume may come from a shift in existing trading activity rather than new business.