During Robinhood's first-quarter earnings call, CEO Vladimir Tenev expressed disappointment over the SEC's issuance of a Wells notice, characterizing it as an unexpected setback. Despite this development, the company reported a significant surge in cryptocurrency trading volume, which rose by 224% to reach $36 billion. Notably, crypto-related services accounted for nearly 40% of Robinhood's trading-based revenue, contributing to its second consecutive profitable quarter with a net profit of $157 million.
The Wells notice from U.S. securities regulators targeted Robinhood's cryptocurrency listing and custody business, prompting concerns among company executives. Tenev and CFO Jason Warnick underscored the company's commitment to upholding stringent legal and compliance standards across all aspects of its operations, including its crypto business. While acknowledging the disappointment of increased enforcement oversight, they assured that customer accounts would remain unaffected by these developments.
Despite the regulatory challenges, Robinhood's first-quarter results exceeded industry expectations, with revenue totaling $618 million, surpassing the $534.5 million forecasted by investment research firm Zacks. Following the earnings report, Robinhood shares experienced a brief uptick of 7.3% in after-hours trading, reaching $19.15, before eventually settling at $18.55. Additionally, the company reported a substantial increase in cryptocurrency custody, holding $26.2 billion worth of cryptocurrencies for users, reflecting a 78% surge from the previous quarter.
The notable growth in cryptocurrency holdings can be attributed in part to the rising market prices, particularly evident in Bitcoin, which saw a significant 65.1% increase during the quarter, reaching $69,700. Robinhood's foray into the cryptocurrency market began in February 2018, initially offering trading services for Bitcoin and Ethereum in select states. Over time, the platform has expanded its cryptocurrency offerings to include Litecoin, Uniswap, Avalanche, Chainlink, and various other tokens, reflecting its continued efforts to diversify its product portfolio.
