Robinhood outgrows meme frenzy era as retail trading matures

Robinhood's earnings highlight how the app once at the center of the meme-stock mania has evolved into a broader platform to keep retail investors engaged even during market turbulence.

The trading platform reported a surge in volumes across equities, options and cryptocurrencies in its second quarter, with momentum continuing in July despite market jitters over tariffs and high interest rates.

That marks a sharp contrast from 2022, when Robinhood's business was closely tethered to retail stock buying. After the Federal Reserve kicked off its rate-hiking cycle in March, the firm's trading revenue slumped by nearly half from a year earlier, as many small investors moved to the sidelines.

"In 2021, when we went public, it felt to me like we were much more fragile than today," Robinhood CEO Vlad Tenev said on the earnings call on Wednesday.

"But now the road map, if you look at things that we expect to deliver in the short-term, medium-term and long-term, is pretty packed," he added, referring to new products such as tokenization and perpetual futures.

For the second-quarter, Robinhood reported transaction-based revenue of $539 million, up 65% from a year earlier. Options soared 46% and equities climbed 65%.

Crypto revenue nearly doubled. The company has also deepened its crypto presence with a $200 million acquisition of Bitstamp in June, boosting revenue.

"Retail engagement remains strong on the platform," analysts at Piper Sandler wrote in a note, adding that the variety of products was supporting the engagement, with equity and options trading volumes tracking at record levels in July, while crypto volumes are near a six-month high.

MEME-STOCK FRENZY

Earlier this month, a wave of meme-stock mania sent shares of several highly shorted companies, such as donut chain Krispy Kreme , retailer Kohl's and action camera maker GoPro , soaring on retail purchases but without any clear catalyst.

The moves echoed the 2021 retail trading frenzy, when individual investors used Robinhood to buy shares of video game retailer GameStop , squeezing hedge funds that had taken short positions against the stock.

While there have been some instances of elevated volumes this year, Robinhood CFO Jason Warnick said that the platform enjoys steady engagement even during quieter periods.

"Some months will be higher than others. But we feel really good about the acquisition of new customers and the high retention rate," he added.

CRYPTO BOOST

Crypto trading has soared since the election of Donald Trump as U.S. president for a second term. Volumes have declined from a burst after the election, but analysts see the crypto market remaining sharply above pre-election levels.

"We believe the Bitstamp acquisition solidifies Robinhood's crypto roadmap and increases crypto's future contribution to Robinhood's overall earnings, which has most frequently trended to about 10%-20% of revenue," analysts at J.P. Morgan said.

Robinhood shares recently touched record highs and the company now has a market capitalization close to $94 billion. Wall Street's average rating on the stock is "buy", with at least seven brokerages raising their price targets after the market-beating earnings report.