Robinhood Markets, Inc. (HOOD) Earnings Call Transcript & Summary

Okay. Good morning, everyone. I'm Devin Ryan, Head of Financial Technology Research here at Citizens. Really pleased to be sitting next to Shiv Verma, who is CFO of Robinhood, I think, as of a few weeks ago formally, but we're all looking forward to you stepping into this role. And obviously, I think a key architect of a lot of the growth and initiatives at Robinhood over more than a handful of years. And so I've always loved spending time with you, Shiv, because I just appreciate your perspective on the space. I think you have such a good kind of world view of the fintech landscape, but also where Robinhood is going. And it's been a fun story to follow as an analyst. And so looking forward to this conversation here.

Where I want to start before we kind of get into, I think, the bigger picture is just the landscape over the past couple of months here have been pretty volatile in the markets, particularly in parts of the market that are maybe higher risk pockets, whether it's crypto volatility or tech stocks. And so I love to start with kind of how your customer base is behaving in this backdrop. We just wrapped up February. So I don't know if there's anything you can share around whether they're buying the dip or how they're reacting to some of this volatility, which I know can create opportunities, but at the same time, can be a little bit unsettling in the moment.

Yes. No, first, thank you for having me. And yes, we've known each other almost the full 8 years I've been here. And so very excited to be up here with you. It's a great question. Big picture, our customers are healthy, and they're doing the same thing a lot of institutional investors are doing. They're relooking at their portfolio. They tend to be net buyers. They tend to be techno-optimists. And so during periods of volatility, they tend to lean in a little bit. Little bit I'll tell you about what we're seeing in February. Our North Star's net deposits, we saw over $5.5 billion of net deposits in February alone, so over $10 billion to start the year, really, really healthy engagement. On trading, a couple of things I'll share with you. Equities and options were both up year-over-year in February. So again, really healthy engagement. And then crypto was up month-over-month from January. So we'll release full monthly metrics in a week or so, but I think just wanted to preview that, yes, our customers are excited. They're leaning in. They're doing their work. They're looking at their portfolio, but everything we're seeing is engagement is really healthy.

Are they rotating around what they're doing? Or is it just kind of stick to the same strategy and just do more of the same? Like do you see changes when you have these couple of months of volatility.

Yes. I think customers tend to use it, what are the names that they love for the long term and what can I go in and buy that 50% discount that it was before. You see a little bit of rotation. And again, similar to institutional investors that are doing their work, but it's a lot of the big tech names that they like, a lot of the consumer names that they like where relative to even 3, 6 months ago are much lower multiples, and they're using these opportunities to come in and either dollar cost average or add to their position.

Got it. Okay. Fantastic. So I want to zoom out here a little bit. And investor conversations I've had recently, people are asking, Robinhood had such a great 2025. You look at Wall Street estimates for revenue growth in 2026, the kind of the growth rate is slowing a little bit. So the question is like, is 2026 a digestion year for the company after what was such a great 2025? How do we think about it? But then take a step back and you had $50 billion of deposits in 2025. I think you had $17 billion in 2023 and over half of that $50 billion came from products that you didn't even have in 2023. So when I think about the road map of Robinhood, how many new products have come into the system, it seems like you planted a lot of seeds in 2024 and 2025 that should be contributing. So how would you answer that question? Like is 2026 a digestion year? Or is this just a continuation of what we've been seeing over the past couple?

Yes. Great question. Big picture, 2026, we want to go even faster. So I wouldn't call the year of digestion. We're putting our foot on the gas. So a couple of things we shared on our earnings call. There's things that are important to us. First is our product velocity. That is one of our North Stars. We need to be shipping faster. We need to be delivering for customers. Our road map is still full. So our goal is to go even faster than we did last year. One of the things we're going to keep focusing on is net deposits. So we've said before and we said in our last earnings, our goal is on an annualized basis, can we go 20% plus. And so we believe that the road map we have is able to deliver that. We're going to do it profitably, though. To your point, we've done a lot. We've been building for the past few years. We're in brokerage, we're in crypto, we're in money. So the way we balance our product velocity is profitable growth. That allows you to be disciplined, that allows you to stay focused, but we have to keep investing. We are a growth company. That's not going to change. So if anything, you should see it accelerate even faster. You mentioned last year, we did $68 billion of net deposits at a 35% annualized growth rate. And so it won't always be linear, but the seeds we're planting years ago, you're now starting to see the fruition, and that's what we're going to keep doing this year as well.

Yes. One area that is obviously driving that growth is prediction markets, probably the hottest topic in finance right now, and you guys are kind of in the middle of it. And another example of maybe people thought that we'd see kind of this plateau or even slowing down early in the year after the football season and January, February metrics look pretty good there. So talk a little bit about how you see prediction markets within Robinhood. What -- is this the first inning of something that's going to be much bigger? Or how do you view it? And then how do we evolve beyond sports? I think there's a big question around sports gambling, but I know you guys have a perspective that this is probably something much bigger than that. So just talk a little bit about what it is today for Robinhood. And then how do we get from where we are today to becoming this much bigger category?

Oh, absolutely. So we believe we're at the start of prediction market super cycle. This is just the beginning, early, early innings. And so when we think of what prediction markets could be, our mental model is a digital newspaper and source of information. So whether you're looking for economics, financials, lifestyle, sports, everything there is instantly and in real time. So a couple of ways we expand it from here. So first is just product selection. That's what we've been working on. We have close to 2,000 different assets in the platform today, and our customers are asking for more. So that's one thing we're really making investment in. The second is just the product experience. It's only a year old. And so our product teams are really making sure that it's got good discoverability. People understand how to use it, how does it interplay with other parts of the app. And so you'll see that in the near term. Another thing we're going to be focused on the near term is how do you make everything on Robinhood better. So one of the things we have different from our competitors is we have brokerage, we have crypto, we have prediction markets. There's a really interesting interplay between these. So for example, some of the prediction markets can be what is the KPI. We did deliveries for Tesla, for example. If you're a Tesla shareholder and you're on the stock detail page looking at Tesla, you can also see real-time information there. So you're going to see us integrating that a little bit. In the medium term, another thing we're super excited about is Rothera, the JV that we just did. So we're now vertically integrating like we always do there. So you're going to see us making investments on there. And then lastly, right now, it's just a U.S. product, but how do you make it a global product as well and how do you make it from retail to institutional. So there's a lot packed in there, but big picture, like we are at the beginning of what we think is a super cycle.

Yes. And you mentioned institutional. This is obviously a product you can imagine that institutions are also going to be pretty interested in economic events and earnings events. And how do you -- as a firm, you're obviously very retail focused, but how do you bring more institutions, which will bring more liquidity and ultimately, in my view, probably bring a lot more revenues to Robinhood, particularly with the exchange and the JV that you just mentioned. But how do you guys play a role in doing that?

Yes. So when you look at our 3 arcs, the third arc is global financial ecosystem. And ecosystem is there specifically because that means institutional, that means B2B. So we start institutional through some M&A. So we bought Bitstamp, the crypto exchange. We're now an institutional player. We bought TradePMR, B2B custodian. And so we're already in institutional. When you talk to institutional customers on prediction markets or something else, they want the same thing retail wants, great design, low cost, ease of use and all their assets in one place. And so that's the same exact thing we can do. Rothera is going to be a great way to do this. And so we will now be able to onboard institutional customers as well who want to trade with our exchange. That in turn will bring more liquidity, and that will give better execution for our retail customers. So there's a really natural synergy there. And so in addition to vertically integrating, it's another vector to go into the institutional space as well.

Yes. We're just going to go rapid fire here so much for you, Shiv. So on the private markets, another kind of newer area for the company, and you and Vlad have said this could be bigger than prediction markets. So go to the next one. You just launched kind of the first major product in private markets. Talk about what the vision is for private markets for Robinhood? And how does this become something that is much bigger than probably one product? Like what is the sequencing and the road map there?

Yes. Great question. This is one where I'm personally spending a lot of time, super passionate about this. We actually have our first fund in market this week, and it's taking orders, and so excited to finally get that out to customers. There's kind of 2 big vectors to do that. The first is Robinhood Ventures and the second is tokenization. So Robinhood Ventures, this is what we started today. That is the parent umbrella. It's a new RA advisory. And so we think the best way to give access to retail and institutional is through these listed 40 Act funds. Chairman Atkins of the SEC gave a speech last year where he said the best way for retail to access private markets is not anything new. It's these fund structures that already exist. And so our first fund is out there, but one way to really get this out there is to keep doing new funds, give customers new engagement, and there's a lot of interesting asset classes you can put out there. So anything that institutional can access that retail can't, you can do it in the venture format. And it has a couple of key benefits. One, daily liquidity because it's exchange traded. Two, you don't need to be accredited. 85% to 90% of Americans are not accredited. So you ask how can this be bigger than prediction markets. That's the key thing there. And then third, in kind of true Robinhood fashion, low fees and no carry. So that's super important to retail customers, but also to institutional. The other way to do it is through tokenization. And so we started that in Europe, where we have regulatory clarity, and we started with publicly listed equities. We also show that you can do private equities. We started with 200 listed tokens last year. We're now up to 2,000. So we have 10x in just about a span of the year. And this is just the beginning. Any asset that you have, there's no reason it can't be tokenized. You can look at real estate, you can look at credit. And so we're starting with kind of public equities that going there. So if you combine those 2 together, ventures plus tokenization, it's a really massive opportunity, and we're at the forefront.

Yes. So it's not just about gathering assets and delivering a private market fund to an end investor, but there's a lot of other ways to potentially monetize being in this marketplace, and that's connection of tokenization and others as well, right?

Yes, absolutely. So you can be the fund administration, to your point, you could be the custodian of the tokenized asset. You could be the one that trades the actual assets. We also have tokenized money market funds in Europe, so you could be the one issuing the money market funds. And so there's a lot of different ways. Big picture, when we talk to customers, private assets is the #1 thing they want right now. We want to do for private markets, what we did for public markets. And so we're very, very early days here, but yes, I think the TAM and opportunity here is pretty massive.

Yes. So we'll come back to tokenization. But just in crypto overall, so you guys were early to delivering access to crypto for your customer base. It feels like we're at this really pivotal moment for the space. We're going from primarily speculating on crypto tokens to actually crypto tokens, Ethereum, Solana, et cetera, being used as commodities to power blockchains and so they become utility tokens, which is what they always have been, but now we're progressing from kind of pilot phase to mainstream adoption. How do you think about crypto, delivering it for your customers? And where do you feel like we are in that progression? Like you guys were early, you saw it wasn't just pure speculation, but there's a bigger picture here. So how do you feel about it today and this moment where we're probably on the verge of hopefully getting some legislative clarity with the Clarity Act, kind of what that means for the space Robinhood.

Yes. So crypto, again, I think we're early days. We're big fans of the technology. And so there's lots of different ways it could go. If you start just with the retail component, we started as more of a casual trader product. We announced last year our smart exchange routing where active traders can come in and the more you trade, the better deal you get similar to some of our competitors, see really good engagement there, and that's causing us to grow market share. I mentioned on the earnings call, as a result of that, our take rate was down a little bit. It will probably be down about 7 basis points quarter-over-quarter. But mainly, that's because we're seeing active traders come in. That was a big an issue. But then you step outside of retail, we're going to institutional. I mentioned the Bitstamp exchange. We think institutional is going to be a large component of that market. The next thing we're doing is we're going global. So we started in the U.S. We're now in the EU, and we're going to other countries as well. And then the last piece that you mentioned is you can use the technology to power other things. Tokenization is a great example. We just announced last week the Robinhood chain. So that's how you can build on top of our own chain. It's in the test net phase, and we're seeing really good adoption there. So those are some of the new use cases you're going to see. It's not just going to be retail trading, but it's going to be institutional, it's going to be global. It's going to be tokenization. It's going to be having your own chain. And so we're super excited to keep building in the space.

Yes. I think it's becoming more tangible for people, obviously, stablecoin is very tangible and then oh, tokenizing real assets versus just speculating on the token itself, right, on Ethereum or Solana or others. What do you think the time line of like getting to more mainstream tokenization is I know probably legislation will help but we are seeing regulators like the SEC and CFTC taking the steps that are necessary even without getting legislation. So we're talking about it, but is this a 2026 story would actually be material? Is it 2027, 2028? Or is it like how do you think about like a sequencing and timing of when this becomes like a material business for Robinhood? And it seems like it's more than just trading, it's a lot of other areas where you guys are going to be involved.

Yes. So on the trading side, last year, it was close to almost $1 billion of revenue, but big picture was about 18% of revenue. So still relatively small compared to brokerage. I think it's in the near term, the technology exists. And so if you look at what we've done overseas, we can already tokenize. The tokenization engine already exists. There's no reason you can't just port over to the U.S. So there's a couple of things that we're looking for. One is regulatory clarity will obviously help. That will help in terms of the rules and guidelines. I think you're already starting to see institutional come in. Again, if you get regulatory clarity, you'll start to see institutional come in there as well. You're starting to see some of these real-world use cases really take hold. So I mentioned we're tokenizing money market funds. That was an initial proof of concept, but it works. You found product market fit. We're already getting inbounds from people who are coming up to us real use cases where you can tokenize assets. Think anything on the credit cycle or mortgage cycle, things like that. So I actually think we're not that far distant in the future. The technology already exists. If we can get a little bit of regulatory clarity, I think there's going to be a pretty big tailwind behind it.

Yes. And Robinhood as a technology firm, but a financial firm with customers, huge distribution, kind of connect the two together. Do you -- like obviously, there's trading, but do you see yourself as like an infrastructure layer and then ultimately, like a capital raise or capital like this becomes a new capital markets infrastructure for where Robinhood can be at the center of something that's new but probably the future.

Yes, absolutely. So yes, we started in trading. We found product market fit there, but we think it's much broader than that. And so the first foray was institutional. The next thing is, can you -- that allows you to vertically integrate that, but can you do that even more? When you can tokenize assets, to your point, you can start to become a center of capital markets. And one part that we think really plays in nicely to Robinhood Ventures is if you're a company, you can span your whole life cycle on Robinhood. You can raise your first capital on Robinhood, whether it's through Robinhood Ventures or through tokenization. You can then do follow-on investments. We can help you go public. We've already done 50-plus IPOs. We can then support you in the public markets as well. And so tokenization and blockchain is just another way to do that. And so yes, the vision is not just to become a trading platform. It's to be vertically institutional, global and also to help be the infrastructure that powers that as well.

Artificial intelligence. I'm sure no one wants to talk about that. But it's -- like my view is that this is going to be such a big deal for the brokerage space, the ones that are embracing it and then you kind of go to this next world of agentic and what that could mean for trading activity. And obviously, you're already delivering tools that are integrating AI, but I think probably maybe another phase will be having agents going on behalf of customers and that can drive essentially the tail of your customer base is maybe less active towards the most active or maybe a multiplier on that. Talk from a product perspective, where are we with AI with Robinhood today? How do you see the future? And then what is the pushback that somebody says, I think AI is going to disrupt Robinhood because there's going to be a bunch of agents and you don't need a wallet or a brokerage account.

It's a great question. We think AI is here to stay, and we are at the forefront. If you look at financial services and who has the right to win in AI, it's going to be Robinhood. Our founder is a PhD in math. He has a second company that's AI native. And so this is one we're heavily invested in. I'll give you a couple of different vectors of where we're investing in. The first is software development. Again, we've been talking about that for years. When OpenAI enterprise came out, Vlad was on the phone with Sam, the first weekend, we were one of the early adopters. We are seeing really good productivity gains there, and it's just getting started. The second is on operations. We start with customer service. We're then doing fraud ops, account ops, all of those. It is allowing us to grow in the volume, but keep our expenses low and the models are just getting better and better. We've said before, about 75% of our customer service tickets are now answered through AI. That is drastic improvement from just a few years ago and still getting better. The third and the most exciting is the consumer-facing part. So what are we doing there? So we have a couple of things. Cortex is our brand for our AI products. We announced last year Cortex Digests. So it goes in there and it can tell you why is the stock moving? Why is your portfolio moving? For me personally, it has changed the way I engage with the app. The first thing I do in the morning is I open it up, it tells me what's going in the portfolio, it synthesizes all of it. I can go to each individual stock. Customers are loving that. The second thing we're working on, which we shared at our event last year is what we're calling scanners and screeners. You want to go in and ask, hey, with the software sell-off, can you tell me all companies that are below this market cap and this EV and their valuations change, you can talk to it in natural language, and it will do that. So that's a big one. The third is what we announced is our AI assistant. So that should be embedded throughout Robinhood. Anything you want to do within the app or on the web, there's an AI tool there to help you there. So these are really, really early days. But yes, big picture, it's going to make it even better. You should be at a disadvantage if you're not trading on Robinhood, specifically for these things. And then to your last point about being disruption, it is early. Nobody knows what's going to happen, but the best way to do it is to just keep investing and be at the forefront. So whenever it comes there, you can be the one that's leading the charge there rather than the 2 kids that I see that are coming out.

Yes. What about just the Agentic piece of it and having agents -- is that a regulatory hurdle that we need to figure that piece out? Or do you think that's not too far in the future where you essentially plug in, here are the characteristics of what I want, and I don't have all day long to be looking at my screen, but this is what I want you to do and go do it. And then all of a sudden, you're empowering an agent to go on your behalf. And I can imagine they're going to be a lot more active in the market than I would be if I'm in a meeting all day. So how do you see that playing out? What's the time line of getting to there?

Yes. So if you look at the spectrum, the first thing is I want tools. The second thing is I want the agent to help me do what I want to do. The third thing is just have the agent do the whole thing. I think the first two were basically there and the products are coming out. The third one, it's actually not the technology. It's more just regulatory clarity. And so on Reg BI rules, we have to be careful as a brokerage and what recommendations to give. But we're having really good discussions with dialogue with the regulators because they understand. They know this is a nascent technology. We want to do it the right way. We want to work with them. And so I do think we're going to need a little bit of clarity there, but that's coming. And if that happens, I think you can do some really interesting things in the product. But yes, that's the main gate at this point. It's just making sure that regulators are comfortable with the Reg BI rules.

Yes. I want to switch gears a little bit and talk about a whole another vector that's new, banking and even getting into mortgages. Talk about where you are right now? It's obviously a recent rollout, but some of the KPIs of how that's going. And then what does success look like over the next 12 to 24 months? I appreciate you're kind of slow rolling into it to not stub your toe. But like talk about the progression, the adoption, what you're seeing in momentum? Is that affecting new deposits? Where are we right now?

Yes. We love bank and the momentum we're seeing. And so you want to be the financial super app, you have to be able to do everything. You have to be able to trade, invest, spend, save. And so you can see us kind of building the pieces together. So we already had the Robinhood credit card, great adoption. We said we've seen over 600,000 customers. We just announced banking. We said on the earnings call that it was over $400 million deposits, about a 50% direct deposit rate. The earnings call was less than a month ago, and we've already approximately doubled our assets for the banking since then. So again, really, really strong adoption there. The nice part about banking is it can roll out much faster than the credit card. So the credit card structurally, you have to be a little careful when you roll it out. You have to make sure that the underwriting is there and the unit economics are positive. But banking is just like any of our other products. We roll it out, we get some customer feedback and we keep doing that. So that one, you're going to see us accelerate much faster and seeing the growth there. Big picture, when we talk to our customers before we announced it, they already said, hey, I bank with Robinhood. That was their mental model, even though we weren't a bank and they had a brokerage account, and this just makes it even simpler. What is the North Star goal? Any financial transaction, anything you want to custody, you should be able to do it in the app. And so this is just another way to do that now that you have the checking and the savings and continue to grow it out. So yes, we really like the early adoption there. I do think in a lower rate environment or if you get some volatility in the markets, banking is a really nice natural hedge against the transaction products. And it will be another way for customers to engage to us even if they don't want to be trading or doing something like that. So yes, we're really excited. I think it will be a stronger driver of net deposit growth in the near term.

Yes. Like is there -- as you think about scaling it and the sequencing of that, like when do you kind of let the governors off a little bit and let the floodgates really open? And because it seems like, obviously, you want to manage it and not, again, go too fast. But where are we on that? And is that more of like 2026 is a learning year and 2027 is where you really let it loose? Or how do we think about that in terms of full customer and pushing it more to customers...

Yes. No, I think the 2026 is going to be the year. So banking, I think there's no structural reason it's going to take multiple years like the credit card. This should be the year where it gets out and it's open. Again, right now, we're doing it like we do any other software product, but there's nothing structural that will hold it. So I think '26 will be a big year for that. Even on the credit card, I know you still see people saying, hey, I'm on the waitlist and doing this. Again, we're over 0.5 million customers today and the waitlist is still pretty solid. But we are really loving what we're seeing on the cohorts, on the unit economics, on anything around the credit metrics. And so we're starting to scale the credit card a little bit faster as you've seen from the prior few quarters as well. So both of those should have a pretty big 2026, hopefully.

Yes. In terms of just managing -- actually, we didn't even hit -- I want to just maybe put 60 seconds on TradePMR and the RIA custody, it's another trillion TAM, you think you're in that ZIP code, and you guys obviously have a nice business there. It's been a little bit quieter in terms of like hearing about it from the outside. Are you going to do a lot more on that front this year? And what should we expect there?

Yes. This will -- we hope this is a big year for it. So we purchased it last year. We're in the digestion mode, integrating all that good stuff. Now you can get back to product velocity. So actually, today, the platform is putting out a blog post that we are beta testing our referral network. So that was the main thesis that the RIAs would like to have access to customers who can match them together for what they want and Robinhood customers who really like advice. So you can build a really interesting referral network there. This already exists in some of our competitors. But what we hear is they actually compete with their own IRAs because they also have their own business, what we don't. And so we think there's a really nice way to have it super simple, intuitive to go into the app and say, this is the adviser I would like. This is the demographics and match them together. And then conversely, the advisers can come in. And so that's in test mode right now. We just announced the first 4 RIAs that are in there. Employees are testing it, and you should expect to see more coming out of that later this year. So that's one we're super excited about there. It's also a place over time. You mentioned AI where you can -- where that's another powerful place to do that. Again, we haven't announced anything there. But if you think about the vectors of where you can invest in AI, that's one. And so yes, I think you're going to see us investing more in the business. That platform has their own conference in the middle of the year called Synergy. And so we'll have some more product news to share there, but super excited to see the referral network out in the wild.

Great. And kind of the last minute here, Shiv, like we just hit a lot of products, a lot of growth areas. At the same time, you got to manage expenses and buck stop to do there. How do you keep control on the expense base. I'm sure everybody within the firm wants more money. So talk about the balance there and how you think about expenses and the trajectory.

Yes, great question. This is what I've been doing for the better part of 8 years. So very happy to continue doing this. I think there's 2 North Stars we look for. One is we are a growth company. We need to be growing. And so every year, we're going to keep investing for growth across the 3 arcs, and you can judge that on the 20% net deposits annualized is a good way to do it. But profitable growth. I know I keep saying that over and over again, that's how you maintain focus. That's how you maintain discipline. And so that's the part that kind of the check metric there. The other thing is we have about 85% fixed cost. And so if something were to happen in the market environment change, we have a lot of discretion across headcount and marketing dollars. I don't want to oversteer. And so we're going to make sure we're investing. But if anything were to change, we can do that. And then the last thing, I'll say it over and over again, what are we optimizing for, for shareholders? Earnings per share, free cash flow per share over time. That's how you should judge us. That's what we're focused on. If you keep focusing on the inputs and the customers, those output metrics will take care of themselves.

Great. Well, it doesn't feel like a digestion year. So I think we figured that piece out. But Shiv, thank you for doing. We went through a lot and always just great to catch up and see you. So thanks for coming. And thank you, everyone, for joining us today for Robinhood.

Yes. Thank you. Appreciate it.

You're welcome, sir.