By Manya Saini
(Reuters) -Robinhood Markets posted a surprise profit in the fourth quarter on Tuesday, driven by higher interest income from customers paying back loans and a rebound in trading, sending shares of the online brokerage up 10% after the bell.
A higher-for-longer interest rate environment has benefited lenders across the financial spectrum, including Robinhood (NASDAQ:HOOD), with the industry capitalizing on interest payments.
"Looking at revenues, with the current macro backdrop, we're finding for strong growth in 2024, driven by continued 20-plus percent net deposit growth, increasing gold adoption, double-digit gains and trading market share," said CFO Jason Warnick in post-earnings call.
Warnick added Robinhood is aiming to deliver margin expansion and expects headcount to be roughly flat to slightly up this year.
The retail-investor focused firm reported a surprise profit of 3 cents per share in the quarter, compared with analysts' expectations of a loss of 1 cent, according to LSEG data.
The financial services platform allows eligible customers to borrow money to purchase securities and charges interest on the debt. This 'margin investing,' has been a bright spot for retail investor-focused firm.
The Menlo Park, California-based company's net interest revenue came in at $236 million versus $167 million a year earlier.
Transaction-based revenues also outperformed Wall Street expectations, growing 8% year-over-year to $200 million in the quarter, primarily driven by cryptocurrencies.
CEO Vlad Tenev in a post-earnings call with analysts said Robinhood's trading market share climbed 14% for equities and 19% for options, compared with a year earlier.
Robinhood was at the center of the 2021 retail trading frenzy, driven by mom-and-pop investors who used the company's commission-free platform to pump money into so-called "meme stocks" during the pandemic-era lockdowns.
Average revenue per user (ARPU) increased 23%, while monthly active users (MAU) declined 4% in the reported quarter versus a year earlier.
The company's revenue rose to $471 million, sailing past expectations of $456.81 million.