Robinhood Markets (NASDAQ: HOOD) delivered a surprise profit in the fourth quarter, driven by increased interest income from customer loans and a rebound in trading activity. Following the announcement, shares of the online brokerage surged by 10% after the market closed.
Benefiting from a higher interest rate environment, Robinhood capitalized on interest payments from customers, contributing to its unexpected profitability. CFO Jason Warnick highlighted the company’s optimistic outlook for 2024, anticipating strong revenue growth driven by continued net deposit growth, increased adoption of premium services like Robinhood Gold, and double-digit gains in trading market share. Robinhood aims to achieve margin expansion and maintain stable headcount levels this year.
Against analyst expectations of a loss of 1 cent per share, Robinhood reported a profit of 3 cents per share for the quarter. The company’s net interest revenue surged to $236 million from $167 million in the previous year, fueled by margin investing activities.
Transaction-based revenues, driven primarily by cryptocurrencies, exceeded Wall Street expectations, growing by 8% year-over-year to $200 million. CEO Vlad Tenev noted that Robinhood’s trading market share for equities and options increased by 14% and 19%, respectively, compared to the previous year.
While Robinhood gained significant attention during the 2021 retail trading frenzy, characterized by increased investment activity in “meme stocks” by individual investors, the company’s average revenue per user (ARPU) rose by 23%. However, monthly active users (MAU) declined by 4% compared to the previous year.
Overall, Robinhood’s revenue surged to $471 million, surpassing analyst expectations of $456.81 million. The company’s unexpected profitability and robust financial performance reflect its ability to navigate market dynamics and capitalize on evolving trends in the financial services industry.
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