Robinhood's Q4 earnings report story

After the earnings report was released on February 10, HOOD (Robinhood) indeed seems to be nearing the end of this bull market cycle. I believe the short-term trend will be downward, followed by continuous fluctuations, and then a rebound after future performance improvements.

HOOD's revenue growth has slowed to 27%, and its operating profit margin has dropped from the past norm of 100-200% to 30.82%. With a market capitalization of $80 billion, the forward P/E ratio is estimated to soar from 35 times to over 45-50 times, and this growth is partly "bought" (for example, through the acquisition of Bitstamp), rather than achieved through the commercialization of new features as in the past.

So the question arises, what is the fundamental basis for HOOD? What caused this poor earnings report? What will HOOD look like in the future?

1. The Fundamental Basis of HOOD

1. Payment for Order Flow (PFOF)

This is the core (and most controversial) source of revenue for Robinhood.

Logic: When you click to buy stocks, options, or cryptocurrencies on its app, Robinhood does not directly match orders on exchanges but sends your orders to large market makers (like Citadel Securities).

Monetization: Market makers profit from the bid-ask spread and give Robinhood a certain "rebate."

Current Status: PFOF revenue from options trading far exceeds that from stocks. The Q4 2025 earnings report shows that options revenue ($314 million) is nearly three times that of stock revenue ($94 million).

2. Net Interest Revenue

As user asset sizes grow, this has become Robinhood's "cash cow."

Idle Funds: The platform deposits idle cash in user accounts into banks or invests in government securities to earn interest.

Margin Lending: Lending money to users for stock trading and charging interest.

Securities Lending: Lending users' held stocks to short-sellers and charging fees.

Data: In Q4 2025, interest income reached $411 million, a year-on-year increase of 39%, with its proportion of total revenue steadily rising.

3. Subscriptions and Value-Added Services (Robinhood Gold)

This is a key focus for the company in trying to establish "recurring revenue."

• Membership Fees: Users pay a monthly fee to subscribe to Robinhood Gold for higher idle cash interest (APY), lower margin rates, and faster deposit processing.
• Credit Card: Launched the Robinhood Gold Card, further monetizing user traffic through interchange fees.
• Data: The number of Gold members reached a historical high of 4.2 million by the end of 2025, a year-on-year increase of 58%.

These three areas are the core businesses of HOOD, which belong to standard brokerage operations. The innovative aspect is the PFOF, which helps market makers significantly profit from retail investors, as it is a transaction slippage harvesting model, much more advanced than traditional brokers' fixed percentages and minimum dollar amounts per share. Moreover, the small retail investors are often quite poor, and imposing fixed fees on them is not feasible.

2. What Caused This Poor Earnings Report?

In simple terms, it was the cryptocurrency trading that collapsed. The Q4 revenue from crypto was only $221 million, a significant year-on-year decline of 38%. Despite the company's acquisition of Bitstamp in an attempt to globalize, the sluggish crypto market in Q4 directly led to a sharp decline in retail trading interest. Retail investors have stopped trading. You can see that exchanges like OKX and Binance have suddenly focused on large clients in recent months, launching various favorable financial products for them and implementing VIP tier systems. Other exchanges have also suddenly launched VIP sections, which should clarify the situation: when retail investors are not making money, they leave, showing no loyalty, and exchanges naturally seek large clients to guide trading, as one large client's transaction is equivalent to hundreds or thousands of retail investors. It can only be said that the crypto market does not welcome the middle class, sob sob sob.

3. What Does the Future Hold for HOOD?

In the long term, it still has potential, but there are too many headwinds in the short term. The only lifeline may be a recovery in the cryptocurrency market, but BTC's short-term performance is quite poor:

The narrative in the crypto industry seems to have run its course and needs a new story.

This follows the comprehensive end of BTC's decentralization (the great dream of developers), ETH's DeFi (the logic of US Treasury bonds and liquidity pools sharing fees), the attempt to enter the consumer market with NFTs (a failed version of Bubble Mart), high-ticket driven GameFi (game items with exorbitant premiums, turning into a hot potato game), and meme tokens dominating attention (everyone has skills). A large number of people who made money have left this industry.

Currently, the only two hopes in the crypto market are the casino economy led by Polymarket and the tokenization of US stocks in Tradfi. The former is a crypto version of the gambling industry, while the latter is giving blood to Wall Street to extract fees, neither of which seems to be a long-term solution. Placing hope on both is indeed a bit too risky.

Now HOOD is betting on prediction markets, which I think is not particularly wise. Although prediction markets are growing rapidly, they are mostly dominated by Polymarket, which does not require KYC certification for US identities. The significance of newcomers entering this space is not particularly great, and many people, due to memory heat, are choosing traditional stock markets in Korea and Japan, with global large brokers like IBKR becoming the biggest beneficiaries.

The second issue is the cyclical problem—Net Interest Revenue.

This part is currently Robinhood's most stable source of income, performing excellently with $411 million in revenue, a year-on-year increase of 39%. This is mainly due to the growth in user assets (AUC) and the expansion of margin lending (margin balances have doubled year-on-year to $18.4 billion).

However, it faces continued pressure to lower interest rates.

Another concern is HOOD's user composition—it's too much like Bilibili.

Compared to Charles Schwab or Interactive Brokers, Robinhood's users resemble "high-frequency, small-amount" young players, while traditional brokers cater to "low-frequency, large-amount" wealth management clients. In contrast to Schwab's average account asset of $230,000 and IBKR's average of $150,000, HOOD only has $12,000, with a median asset of about $240, all retail investors, classic B-tier players.

What do you think?