Two quarters ago, Robinhood said they needed to do better with customer and top-of-funnel growth. They re-prioritized that to elongate the growth curve and cater to a wider audience. Last quarter, that led to a noticeable uplift to nearly 1M in net new funded accounts (including about 300K acquired with WonderFi), surpassing the previous 3 quarters combined. That was a great result. It deserved a lot of praise. This quarter, that momentum seemed to go away. Funded customer growth remained around 7% Y/Y, marking another 3-point slowdown vs. last year. Net new funded account growth fell from 34% Y/Y last quarter to a little over 6% Y/Y this quarter. Additionally, they lost 1.1M MAUs. That’s not alarming for this volatile metric and has happened before; there are cyclical factors at play in the crypto market that aren’t at all the company’s fault. Still…not what you want to see just two quarters into trying to cultivate that top-of-funnel rejuvenation. 

Management viewed the MAU move as a single period rather than a trend, and said it does not over-index on one month or one quarter. It’s tied partially to retail investing cyclicality, which wasn’t overly favorable during the quarter. The team also said MAUs aren’t a demand metric they strongly focus on, but said there are initiatives in place to help for Q4 and 2027. These plans include products like peer-to-peer payments and Robinhood Social, which are both slated to be increasingly important helpers for this metric in 2027. Over the long haul, they’re also optimistic that brokerage of nearly 70M “Trump Accounts” in the USA gives them an encouraging foothold into the financial lives of younger Americans. That effectively gives them a first crack at convincing them to use more of their product suite, which is a nice advantage. MAUs have been range-bound between roughly 10M and 15M for 4 years (peaked at 21M in Q2 2021). It would be nice to see this metric begin to move convincingly higher, given that it’s correlated with funded accounts and their other important demand KPIs.

On guidance, the prior outlook for 2026 Adjusted Operating Expenses and SBC was $2.675 billion to $2.775 billion. Through Q3, Robinhood expenses were lower than the quarterly average of that prior outlook. While it will remain aggressive in pursuit of new growth opportunities, it’s doing this more efficiently than expected, allowing it to lower the top end of that expense guidance range by $25M. Management also still anticipates that diluted share count will be roughly flat in 2026.

HOOD trades for 32x forward EPS. EPS is expected to grow by 9% this year and by 34% next year.

Robinhood added a new business segment with over $100 million in annualized revenues this quarter as Rothera scaled rapidly, bringing the total to 14 (and 3 added this year). That is real progress. But it is worth being precise about what kind of diversification most of this is. A lot of these products cater to similar end markets in the sense that they are all tied to the health of the retail risk-taker. Equities, options, crypto, event contracts and margin all feed on the same customer being confident, flush and active, and they will all cool off together when that customer pulls back. Sports gambling is the only exception to this, as it has proven great resilience across consumer spending environments. Still, that’s the reality for the other products mentioned. In my mind, better diversification comes from areas like its credit card that aren’t quite as tightly correlated. That’s ideal right now when options, crypto and event contract revenue makes up nearly 50% of the company’s Q3 total revenue. Robinhood Banking is another initiative that I’d love to see grow into a $100M+ segment for the same reason. The visible net interest income opportunity and routine cross-sell opportunities that come from winning sticky direct deposit customers are valuable, to say the least.

Prediction markets are the most exciting part of the active trader story. Robinhood believes it is early innings for the asset class and is investing to be a leader in the space. Rothera, its own prediction market exchange, is a central piece of this push. Vertically integrating this aspect of the value chain gives HOOD more control over experience and pricing. It’s off to a great start for HOOD, as this is the 14th business that reached $100M+ in annualized revenue… and this happened during its very first full quarter (it was an existing business when HOOD bought it). 

Going forward, this will be the main exchange serving Robinhood customers, but not the only one. They’ve partnered with Crypto.com and OG.com to give their customers access to more lines and more liquidity within its own app. This helps with assortment and entails HOOD getting 1% stakes in each company (opportunity to earn up to 10%). While the company wants to offer most of its betting assortment in-house, partnerships like these can greatly help with filling in the gaps. And the door is open for other kinds of enterprise relationships too. Robinhood wants Rothera to become a neutral gateway for other brokers (futures commission merchants, or FCMs) to offer its lines to their own customers. The pitch is that since Rothera works only with FCMs and doesn’t compete with them for customers, partners don’t have to worry about it poaching their users. I would argue that Rothera does compete with them because HOOD controls it and owns a large chunk as part of their joint venture with Susquehanna.

I think prioritizing event contracts is the right decision, but two things still make me nervous. First, there’s real risk to sports contracts eventually being deemed illegal under other regulatory regimes. That is the biggest source of company growth right now and I don’t think its permanent legality is guaranteed. Second, data from TickerTrends points to them losing meaningful market share of the space over the last couple months. With the category growing so rapidly, HOOD can still expand at a blistering pace despite losing market share, but this does dampen the overall runway and make the potential for pricing wars more likely. For this reason, hearing that non-sports contracts jumped from 15% of total volume to 30% just since last quarter was my favorite part of the call. There’s a lower probability of those other types of bets being banned, as there are real hedging use cases tied to predicting the fed funds rate path or a quarterly revenue number.

For review, Agentic trading means giving an AI agent instructions and letting it trade on your behalf. The agent monitors markets and executes within the strategy you set, instead of you placing every trade yourself. A little terrifying, in my opinion, but some people clearly seem interested. The product already has 200K accounts, $250M in assets and $1.6B in notional trading volume, showing people are willing to trust machines with automated financial transactions involving their own money. Robinhood customers were accessing the app through HOOD’s model context protocol (MCP) to use popular 3P tools that can run their own agentic workflows. The company naturally wanted to provide a solution of their own and this one notched a strong start while now bracing for an expected acceleration.

Next, perpetual futures. A perpetual future is a futures contract with no expiration date, so a trader can hold the position indefinitely without rolling it into a new contract the way traditional futures require. Robinhood became the first U.S. broker to offer what it calls true perpetual futures, powered by its global derivatives exchange Bitstamp, settling continuously around the clock on a 15-minute settlement cycle. This matters because perpetuals are the dominant product in crypto derivatives globally, and U.S. customers have historically had to go offshore to trade them. Bringing them onshore under a U.S. broker, which it’s now rolling out to eligible U.S. customers, closes a real product gap.

This launch was one of many at its recent HOOD Summit event (already covered), which also included a 24/7 trading introduction, Robinhood Social’s ongoing development, earnings contracts and their new dedicated prediction market hub. To help customers navigate the increasingly broad financial services loop, the company is investing more time and energy in discoverability and product display personalization. This should make the app easier to navigate and drive much more cross-selling, which will become increasingly important if they can’t accelerate customer growth like they’re trying to do. Finally, HOOD is also using agents to introduce more product education, helping intimidating tools become easier to learn for new customers and assisting in retention, cross-sell and lifetime value. All the good stuff.

Robinhood’s Trump Account brokerage business got a nice boost this quarter from the U.S. Treasury making account creation the automatic default. This creates a pool of nearly 70M children’s accounts, again allowing Robinhood to establish relationships before their competitors to hopefully retain them for the decades to come and sell them a lot more products. The company has many plans over the coming years to capitalize on this advantage.

Robinhood Gold also continues to grow very nicely. While 18% of funded accounts are now subscribers, about 40% of new customers are opting into the subscription, showing how much higher that first number can climb. Alongside better discovery and product education, this is a great tool for driving product adoption, as it delivers a direct boost to that important metric.

Next, Robinhood Banking continued its strong start, reaching over 350K funded customers vs. over 240K Q/Q (about 40% signed up for direct deposit) and nearly $5B in deposits vs. over $3B Q/Q. Impressively, Robinhood Banking is also now the #1 destination for funds leaving their brokerage businesses. That means more money staying in the company’s ecosystem to generate more net interest income and showing the benefits of product broadening in action. It’s Robinhood winning more wallet share. This is something PayPal’s Venmo has been unsuccessfully trying to do for a few years but it looks like HOOD is having a lot more success. I say this to point out that an existing customer base and a beloved app aren’t the only things that matter for guaranteeing a new product will build traction and success. That product also has to be great when competing in such a competitive field. Robinhood is excellent at making great products.

Lingo:

Besides winning active traders and more of their wallet share, global expansion is the other item at the top of HOOD’s priority list. During the quarter, HOOD launched crypto trading in the UK and received authorization from the Dubai Financial Services Authority (DFSA) to launch in that region too. The authorization covers trading and custody across all ten DFSA-approved asset classes, including equities, crypto, ETFs and investment tokens, and Robinhood plans to begin rolling out its product suite in the area in 2027. It also received in-principle approval from the Monetary Authority of Singapore (MAS) for Singapore as an APAC and Southeast Asia hub.

As a reminder, Robinhood Chain is Robinhood's own Ethereum-based blockchain, built in partnership with Arbitrum, with the two splitting revenue 50/50. When I covered the public test of the Chain in Q1, the point was that this is how the company plans to greatly accelerate the pace of equity and other asset tokenization and enhance access for customers around the globe. HOOD had been using third-party blockchains, which limited its ability to customize and create new experiences; owning more of the technology lets it make more on these transactions and rapidly introduce products customers want. On July 1, the company moved the Chain from test to prime time with its Mainnet launch.

And it is why the Chain comes up in the exact same conversation as perpetual futures. DeFi perpetuals trade on the Chain, and in recent weeks they have exceeded $1 billion in daily notional volume, only a couple months after Mainnet launch. Customers clearly want these tokenized assets on-chain, and Robinhood believes it is building the Chain to be the best place to own and trade them, starting with stock tokens and perpetuals and expanding broadly from there.

This was a fine quarter for the company. They’re still growing at a solid double-digit clip with elite margins and taking market share across most major categories to buffer the impact of cyclical headwinds. The company is also finding some success in diversifying out of end markets tied to risk-taking retail investors. 36% of their revenue is still retail options and crypto, but other segments like credit card, banking, and event contracts are becoming much bigger pieces of the puzzle. That’s highly encouraging, especially with the added context of non-sports event contracts doubling Q/Q to 30% of total.

With all of that said, this is just not my favorite fintech name to own. I think there’s real regulatory risk tied to its best current growth outlet (sports event contracts). I also see much of its business at the mercy of retail investor sentiment and spending power. They can offset some of the periodic dips with higher market share and more product introductions, but certainly not all of it. That’s why (in addition to hard comps) this company we associate with hyper-growth expanded the top line at a modest 12% Y/Y. Crypto end markets cooled off and that greatly held back the entire business. I do think this company has built a better brokerage app and understand why so many find it compelling. For me, I prefer owning names like SoFi for exposure to fintech and view Robinhood’s stock in a more neutral light.