Robinhood Markets, Inc. (NASDAQ:HOOD) reported record quarterly revenue on July 29, 2026, and the stock faded anyway. Second-quarter revenue hit an all-time high of $1.31 billion, up 32%. Its EPS reached $0.62, surpassing the $0.41 consensus while generating a net income of $573 million – a 48% increase. However, the market is fixed on one red number instead – the crypto revenue that fell 38% to $100 million. Still pricing it as a crypto-beta stock, the traders sold the crypto miss and turned away from the line that changed the company.
The Line Everyone Skipped
Prediction markets made $156 million in revenue across 13.6 billion traded event contracts. Both revenue and contract volume increased more than tenfold year over year. For Robinhood, event contracts became its fastest-growing product launch ever. The revenue surpassed the company’s entire cryptocurrency segment for the first time. Event contracts, centered on elections, sports, and economic data, give Robinhood another transaction-revenue stream that is not directly dependent on stock or crypto bull markets.
Why the Crypto Fade Is a Category Error
In an urge to sell crypto weakness, the traders are misreading Robinhood’s position. The company’s total transaction revenue went up by 44%, reaching $776 million, with options revenue rising by 29% to $342 million. Meanwhile, cryptocurrency trading volume is declining and growing non-organic, with more than half of volume now flowing through the acquired Bitstamp exchange rather than through in-app activity. On the other hand, the engagement base continues to grow with 28.4 million funded accounts, a record 4.8 million Gold subscribers, and $22 billion in net deposits. This diversified platform is being misvalued by the market based on its weakest segment.
The Bear Case: Rich, and Regulated
The stock is not cheap, and hence caution is necessary. HOOD trades near 44 times forward earnings and 17 times sales. Its forward earnings multiple compares with roughly 16x for the broader financial-services industry, means that much of the stock’s growth is already priced in. Regulatory scrutiny from the CFTC and state gaming boards forms the headwinds for the prediction-markets engine. There is also tough competition from Kalshi and Polymarket and seasonal spikes tied to election and sports calendars. Accordingly, the market positioning is rather neutral than euphoric. Insider Monkey data shows 84 hedge funds held HOOD at the end of the first quarter, a small improvement from 83 in the previous quarter. Short interest sits near 4.2% of shares.
Bottom Line
The market mispriced Robinhood’s mix shift. From a crypto proxy, Robinhood Markets, Inc. (NASDAQ:HOOD) is transitioning to a multi-product exchange, driven by an overlooked prediction-markets business that generated $156 million in quarterly revenue. However, the 44x forward P/E ratio requires disciplined entry. Keep an eye on the regulatory developments and treat them as the primary risk. Await the next earnings reports to confirm that the surge in event-contracts trading is a structural shift instead of a temporary trend.
While we acknowledge the risk and potential of HOOD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HOOD and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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