Verdict: Justified
Since last dive
- Prior dive: Oct 15, 2026, verdict mixed, price $99.22. The thesis was that the drop came from a valuation downgrade plus sector beta, not from the business, and that Q3 earnings on Oct 27 would be the next real test.
- Price: $99.22 to $94.56 at the Oct 27 close (-4.7%), then reported lower after the report (see Move).
- Earnings (affects the judgement): the test came back weaker. Revenue growth slowed from +32.3% to +11.8%, GAAP EPS fell 16% and missed, and management said early Q4 spreads are tighter. The prior dive called HOOD the growth leader of its group; on this quarter it is the slowest-growing of the three brokers.
- Sector (affects the judgement): IBKR (+18.1%) and SCHW (+16.0%) both reported solid Q3 revenue growth, so this quarter is a HOOD-specific problem (crypto and net interest), not a sector one.
- Analysts (minor): Wells Fargo cut its target again, $120 to $100.
- Insider selling (minor, not new): the CEO sold 375,000 shares on Oct 5 under a pre-set plan (reported Oct 12, not covered in the prior dive).
- Verdict flipped: mixed -> justified.
Key finding: Revenue growth slowed to +11.8% (from +32.3% last quarter), now below IBKR (+18.1%) and SCHW (+16.0%), while HOOD still trades at the richest multiple in the group (~16.7x sales vs ~12.5x for IBKR). The headline GAAP EPS miss ($0.51) is partly a $0.07 non-cash mark on Robinhood Ventures Fund I, but the CFO also said early Q4 spreads are tighter and October volumes are about 5% below the Q3 peak.
Scorecard
| Ticker | Rev last Q ($M) | Rev YoY last Q | Rev YoY prior Q | Gross margin (last Q, trend) | Op margin | EPS last Q vs yr ago | P/S | Mkt cap | 1-mo price % |
|---|---|---|---|---|---|---|---|---|---|
| HOOD | 1,424 | +11.8% | +32.3% | — (Q2: 82.0%) | 48.1% | $0.51 vs $0.61 | ~16.7x | $84.9B | -20.8% |
| IBKR | 3,193 | +18.1% | +19.6% | 95.8% (up from 95.2%) | 86.9% | $0.69 vs $0.59 | ~12.5x | $144.6B | -7.8% |
| SCHW | 8,168 | +16.0% | +25.0% | 87.8% (up from 83.0%) | 46.2% | $1.62 vs $1.26 | ~5.0x | $154.4B | -9.8% |
| COIN | 1,220 | -18.5% | -30.5% | 84.4% (up from 69.7%) | -6.0% | -$1.36 vs $5.14 | ~6.8x | $42.5B | -17.4% |
Quarters ending Sep 30, 2026 (COIN: Jun 30, 2026; its Q3 is not reported yet). HOOD Q3 figures are from the company release: operating margin = revenue minus $739M GAAP operating expenses; gross margin not available for Q3. HOOD market cap = 898M weighted basic shares x $94.56 close; P/S on trailing revenue of $5,082M. 1-month = Sep 25 to Oct 27 close.
HOOD has gone from growth leader to the slowest-growing broker in the group (+11.8% vs +18.1% IBKR and +16.0% SCHW) while keeping the highest multiple (~16.7x sales). Growth slowed at all three brokers, but HOOD slowed the most, and its 1-month drop (-20.8%) looks more like COIN (-17.4%) than like the brokers (-8% to -10%).
Move
- Oct 27 (report day): closed $94.56 (+1.85%) on 23.2M shares, 24% above the 20-day average, before results came out after the close.
- After hours: reported down about 5.5% to $89.22; on the morning of Oct 28, coverage reported the stock down about 7-8% premarket. No regular-session price yet at the time of writing, so the gap is not final.
- Into the print: -20.8% in a month (from $119.40 on Sep 25), -24.2% from the Sep 3 closing high of $124.72, -35.7% from the 52-week closing high of $147.08 (Nov 3, 2025), and +45.1% above the 2026 closing low of $65.16 (Mar 30).
- Averages: 50-day $108.78, 200-day $93.04. The reported after-hours price sits below the 200-day.
Catalyst
- Revenue: record $1,424M, +12% y/y and +8.9% vs Q2, roughly in line with the ~$1.43B consensus.
- Options $399M (+31%), equities $121M (+41%), crypto $120M (-55%) (above the ~$114M estimate), event contracts $173M (more than 6x y/y, +10.9% vs Q2), other revenue $142M (+61%).
- Net interest revenue $415M (-9%), which the company attributed to lower securities lending and lower short-term rates.
- Earnings: GAAP diluted EPS $0.51 (-16%) vs ~$0.55 consensus. It includes $67M of unrealized losses (~$0.07 a share) from marking Robinhood Ventures Fund I to market. Adjusted EPS $0.60 (-3%), adjusted EBITDA $808M (+9%, 57% margin). GAAP operating expenses rose 16%, faster than revenue.
- Customers: net deposits $15.7B (17% annualized, down from $21.7B / 28% in Q2), platform assets $396B (+19%), funded customers 28.7M (+7%), Gold subscribers 5.2M (+34%), ARPU $200 (+5%).
- Outlook and October: the top end of 2026 adjusted opex+SBC guidance came down $25M to $2.675-2.75B. October net deposits were over $13B, but $6B of that is a one-time Dell family contribution to Trump Accounts. Equity, options and crypto daily volumes are running about 5% below the Q3 peak, event contracts are up about 10%, and the CFO said "early indications are spreads are a little bit tighter."
- Analysts: Wells Fargo cut its target to $100 from $120 (hold). KeyBanc kept Buy and cut to $135 from $140, saying October volumes and take rate came in below expectations. Mizuho kept Outperform and its $130 target and called the dip a buying opportunity.
- On the same day, Robinhood announced a Ripple partnership (RLUSD stablecoin on Robinhood Chain and Bitstamp). It is not a driver of the move.
Sector
- Brokers are healthy: IBKR and SCHW posted +18.1% and +16.0% Q3 revenue growth with stable-to-rising margins. (inference) HOOD lagged them because of the lines they lack or have less of: crypto (-55%) and rate- and lending-sensitive net interest (-9%).
- Crypto is weak: Robinhood crypto volume across the app and Bitstamp fell 38% to $50B. Management said the drop in take rate came mostly from its lower-margin stablecoin Earn product. COIN is down 17.4% in a month.
- Prediction markets are the growth line: event-contract revenue ($173M) passed crypto revenue ($120M) for the first time. Non-sports contracts rose to about 30% of the mix (from 15%), and Robinhood took initial 1% stakes (up to 10%) in the crypto.com and og.com venues.
- Rates: the CFO said each 25 bp rate change moves revenue about 1.5%. The Fed decision is due Oct 28.
Risks
- Take-rate squeeze: tighter Q4 spreads plus October volumes about 5% below the Q3 peak. (inference) Q4 transaction revenue could be flat to down from Q3.
- Valuation: ~16.7x trailing sales is the highest in the group, now paired with the slowest broker growth.
- Crypto and net interest: crypto revenue fell 55% y/y and net interest 9%. About $40B of roughly $80B in interest-earning assets is rate-sensitive.
- GAAP noise: marks on Robinhood Ventures Fund I can swing reported EPS again.
- Insider and holder selling: the CEO sold 375,000 shares (~$42.6M) on Oct 5 under a pre-set 10b5-1 plan, and ARK sold about $38M (247wallst).
- Binary dates: the Fed decision on Oct 28. KPI event contracts are awaiting final approvals (per the call).
- Dilution: none seen. Diluted shares were 911M vs 913M in Q2, and Q3 buybacks were small ($25M at ~$105).
Judgement
Justified. The selloff rests on real numbers. Revenue growth fell from +32% to +12%, below both larger brokers. Crypto and net interest shrank. Management guided to tighter Q4 spreads and softer October volumes. And the stock still carries the highest sales multiple in its group. The business is not broken: it is profitable (48% operating margin), Gold subscribers grew 34%, deposits keep coming in, prediction markets are scaling, and the GAAP miss is overstated by a $0.07 non-cash mark. The stock had also already fallen 21% in the month before the report. Those points limit the downside case, but they do not make the drop an overreaction: the growth premium that justified the multiple did not show up this quarter.
Sources
- https://www.sec.gov/Archives/edgar/data/0001783879/000178387926000164/q32026robinhoodexhibit991.htm
- https://www.sec.gov/Archives/edgar/data/0001783879/000178387926000170/q32026robinhoodamendedex991.htm
- https://www.fool.com/earnings/call-transcripts/2026/10/28/robinhood-hood-q3-2026-earnings-call-transcript/
- https://www.investing.com/news/transcripts/earnings-call-transcript-robinhood-q3-2026-revenue-tops-14-billion-stock-falls-93CH-4977221
- https://www.cnbc.com/2026/10/27/robinhood-hood-q3-2026-earnings.html
- https://coincentral.com/robinhood-hood-stock-falls-6-after-q3-earnings-miss-as-crypto-revenue-drops
- https://www.kucoin.com/news/flash/robinhood-stock-drops-7-as-crypto-revenue-falls-55
- https://www.tipranks.com/news/robinhood-stock-hood-sinks-8-as-analysts-split-after-q3-earnings-miss
- https://stocktwits.com/news-articles/markets/equity/robinhood-stock-drops-despite-mizuho-s-130-price-target-as-crypto-revenue-falls-55/cZU9QvGRB6w
- https://stocktwits.com/news-articles/markets/equity/s-and-p-500-nasdaq-futures-mixed-ahead-of-fed-decision-big-tech-earnings-googl-msft-hood-sofi-in-focus/cZU99nwRB6s
- https://247wallst.com/investing/2026/10/12/robinhoods-ceo-sold-42-6-million-of-stock-and-cathie-wood-dumped-38-million-more/