Robinhood Markets (NASDAQ:HOOD) reported second-quarter 2026 financial results that topped analyst expectations, yet the stock declined as investors focused on valuation and shifting revenue streams. Total net revenue surged 32% year-over-year to $1.308 billion, while adjusted earnings per share came in at $0.48, beating the LSEG consensus of $0.44.
The most striking development in the quarter was the revenue breakdown: event contracts, which are prediction-market wagers on real-world outcomes, generated $156 million in transaction revenue. That figure surpassed both equities revenue at $129 million and cryptocurrency revenue at $100 million. Even excluding the $17 million contribution from the newly launched Rothera exchange, core event-contract revenue climbed approximately 34% to $139 million.
Options remained Robinhood's largest trading segment, contributing $342 million in revenue, up 29% from a year ago. However, event contracts accounted for 20.1% of total transaction revenue, up from 16.7% in the prior quarter, while crypto's share dropped sharply to 12.9% from 21.5%. The shift underscores a broader trend of retail traders gravitating toward prediction markets amid regulatory uncertainty surrounding digital assets.
Transaction revenue overall grew 44% to $776 million, driven by record volumes across equities, options, and event contracts. The event hub processed 13.6 billion contracts, a 55% sequential increase. However, the estimated revenue per contract fell 14% to 1.02 cents, indicating that growth was volume-led rather than pricing-driven. Chief Financial Officer Shiv Verma described the company as "firing on all cylinders," highlighting robust customer engagement.
Net income rose 48% to $573 million, though this figure included a $129 million gain from the deconsolidation of Robinhood Ventures Fund I, which added $0.14 to diluted EPS. Excluding that one-time benefit, core profitability still exceeded expectations. Adjusted EBITDA margin improved to 57% from 56% a year earlier, as operating expenses rose 33%, roughly in line with revenue growth.
Management revised its full-year guidance for adjusted operating expenses and stock-based compensation to a range of $2.675 billion to $2.775 billion, down from the prior outlook of $2.7 billion to $2.825 billion, reflecting costs related to Rothera and WonderFi. Customer metrics remained strong: funded customers reached 28.4 million, up 7% year-over-year, and total platform assets grew 32% to $369 billion. Net deposits hit a record $21.7 billion, representing an annualized growth rate of 28%. Gold subscribers rose 39% to 4.8 million, now representing 17% of funded users.
Robinhood's annualized revenue per user increased 24% to $187, providing a more stable revenue base compared to transaction-dependent income. However, the stock ended regular trading down 3.2% at $89.84 and slipped another 1% after hours. At Wednesday's close, the company traded at roughly 43.5 times trailing earnings, with a market capitalization of $81 billion.
Analysts remain cautious on valuation. "If there's one concern, it's valuation," said David Bartosiak, strategist at Zacks. Third Bridge analyst Jacob Zuller called prediction markets potentially the most significant growth catalyst for Robinhood, but regulatory risks loom. Event contracts face potential restrictions at both federal and state levels, and the company warned that regulatory changes could limit or prohibit such offerings.
Investors will watch for sustained contract growth and stable revenue per contract in coming quarters. Meanwhile, Coinbase Global (NASDAQ:COIN) is set to report results on Thursday, offering a comparative view of crypto trading trends. Coinbase shares fell 4.7% to $160.09 on Wednesday, suggesting broader industry headwinds.
