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Robinhood Q2 Earnings: Loss Expected, Focus On Retail Trading Activity

Investors await results as higher interest rates and declining transaction revenues impact performance.

Robinhood Markets Inc (NASDAQ:HOOD) is on deck to issue its second-quarter earnings on Wednesday after the closing bell. With the potential to act as an indicator of retail trading activity, investors are keenly watching the results.

The Menlo Park, California-based company is expected to issue a loss of 2 cents per share on revenues of $475.02 million.

“The Fed is likely on hold for the near term, and the timing of a first-rate cut will depend both on how quickly inflation slows and how quickly the job market becomes less tight,” said Bill Adams, chief economist for Comerica Bank in Dallas.

In this photo illustration, a phone screen displays ‘X1’ logo and a laptop screen displays ‘Robinhood’ logo in Ankara, Turkiye. The Menlo Park, California-based company is expected to issue a loss of 2 cents per share on revenues of $475.02 million. AHMET OKUR/ANADOLU AGENCY VIA GETTY IMAGES. 

Revenue expectations are 49.38% higher on a year-over-year basis, but a 9.6% decline from the previous quarter. The projected 2-cent-per-share loss would stand in stark contrast to last year’s performance, equating to an increase of 93.55% on a year-over-year basis.

 “Leading indicators of the job market like layoff announcements and job openings have weakened considerably over the last year, while more coincident indicators like the unemployment rate are still the strongest in half a century.” said Bill Adams on the Street.

One of the key elements underpinning Robinhood’s second-quarter performance is the effect of higher interest rates. The Federal Reserve’s hike to 5%-5.25% during the same period is predicted to have boosted the company’s net interest income (NII).

Consensus estimates for NII stand at $230 million, suggesting a 10.6% increase, a sign that Robinhood may have successfully navigated the interest rate environment. Another aspect investors will be watching out for is transaction-based revenues, which are estimated to hit $187.1 million. The figure will be affected by predicted decreases in options, equity and crypto transaction revenues.

Shares of Robinhood are trading 3.78% lower to $12.38 Wednesday afternoon, according to Zenger News Pro.

In this photo illustration, a phone screen displays ‘X1’ logo and a laptop screen displays ‘Robinhood’ logo in Ankara, Turkiye. The Menlo Park, California-based company is expected to issue a loss of 2 cents per share on revenues of $475.02 million. AHMET OKUR/ANADOLU AGENCY VIA GETTY IMAGES. 

According to the Zacks news and Insights, Consensus Estimate for transaction-based revenues is pegged at $187.1 million, indicating a 9.6% decline from the prior quarter. This is expected to be a result of lower options, equity and crypto transaction revenues. The consensus estimate for options transaction revenues stands at $120.5 million, suggesting a 9.4% fall.

The Zacks Consensus Estimate equity and crypto transaction revenues are $24.7 million and $34.7 million, respectively. Both equity and crypto transaction revenues are pegged to be down 8.7% each on a sequential basis. On the other hand, higher interest rates are expected to have immensely supported Robinhood’s net interest income (NII) in the to-be-reported quarter. The Federal Reserve increased the rates to 5-5.25% during the second quarter. Thus, the consensus estimate for NII is $230 million, implying a 10.6% increase.

The Zacks Consensus Estimate for other revenues stands at $55.7 million, suggesting a substantial jump sequentially.On the cost front, total operating expenses are anticipated to remain elevated as the company invests in key areas to enhance platform capabilities, drive product innovation, improve customer support and build upon regulatory and compliance functions.

Further, given the founders’ decision to cancel nearly all of their share-based compensation (SBC), HOOD expects lower quarterly SBC expenses.

Produced in association with Benzinga

Edited by Eunice Anyango Oyule and Judy J. Rotich

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