Robinhood's third quarter falls short of expectations, with a 78% drop in cryptocurrency trading revenue; Q4 expected to see a further decline in retail trading.

Despite total net revenue reaching $365 million in the third quarter, Robinhood's cryptocurrency revenue was much lower compared to the second quarter, and its total net revenue fell below Wall Street analysts' expectations. Following the release of the financial report, the stock price dropped nearly 10% at one point.

Total Net Revenue Growth

According to the third-quarter financial report released by Robinhood, the details are as follows:

• Total Net Revenue of $3.65 billion in 2020 Q3 was $2.7 billion
• Options trading revenue of $1.64 billion in 2020 Q3 was $1.27 billion
• Cryptocurrency trading revenue of $51 million in 2020 Q3 was $5 million
• Stock trading revenue of $50 million in 2020 Q3 was $69 million

Although there was growth compared to the same period last year, all the data and total net revenue are significantly lower than the $5.65 billion in the second quarter, and also below the Wall Street analysts' forecast of $4.371 billion. After the financial report was released, the stock price fell nearly 10%, with an after-hours price of $36.22, a decrease of 8.4%.

Sudden Decline in Cryptocurrency Revenue

Earlier reports showed that Robinhood's cryptocurrency-related revenue in the second quarter reached $233 million, accounting for 52% of total trading revenue, with 62% of the $233 million coming from Dogecoin trading.

However, this quarter's cryptocurrency trading revenue was only $51 million, a decrease of 78% compared to the second quarter. The financial report explained:

The business in the third quarter was affected by various factors, including seasonality, market conditions such as volatility, retail trading behavior, and significant, unforeseen market events. In the upcoming fourth quarter, it is expected that seasonality and reduced retail trading may continue to occur.

Sharing the Cryptocurrency Market Pie

After achieving record profits in cryptocurrency trading in the second quarter, Robinhood took action promptly. In September, they launched a cryptocurrency dollar-cost averaging feature, announced the testing of a cryptocurrency wallet and transfer function in development, and introduced 24-hour phone customer service in early October to prevent last year's regrets from happening again.

Robinhood co-founder Vlad Tenev stated:

The focus of the third quarter was on product development and service, including the cryptocurrency wallet, with over 1 million people already on the wallet waiting list, along with 24/7 phone support. We believe Robinhood is becoming the most trusted platform for retail and cryptocurrency investors.