Robinhood (HOOD) soars higher after beating Wall Street expectations on the top and bottom lines in its fourth-quarter earnings, posting $471 million in revenue versus an expected $457 million, and adjusted earnings per share of $0.03 versus an expected loss of $0.01. While the trading platform's monthly active users fell 4% for the quarter, other metrics like crypto trading rose 10% year-over-year, which brought in $43 million in revenue for the company.

Needham & Company Senior Research Analyst John Tadaro joins Yahoo Finance to discuss Robinhood's performance and the influx of crypto trading that boosted revenue.

Tadaro puts crypto trading in perspective for the company:
"2024, most of the growth we see, we do have coming from crypto. Crypto came in very strong in December and primarily made that beat in Q4 there. So, if it weren't for crypto, the transactional activity wouldn't have beat. So, we do see that as a growing segment. It's coming off a very low baseline, so crypto volumes obviously plummeted a lot last year, so you're seeing kind of a snapback that's really propelling the growth. For equities options, that growth is a little bit more moderated, it's a more mature business for Robinhood, so we do see crypto as kind of the growth component for Robinhood. That being said, what we would like to see is Robinhood come out and offer more crypto products."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

RACHELLE AKUFFO: Well, speaking of, shares of Robinhood moving to the upside this morning after posting a surprise beat on profit. The stock-trading platform reported adjusted earnings per share of $0.03 in the fourth quarter versus an expected loss of $0.01 a share. Revenue also beating. Robinhood seeing transaction-based revenue climb higher, driven primarily by crypto trading.

For more on the results, we turn to John Tadaro, Needham & Company senior research analyst. Good to have you on the show here. So, walk us through some of the expectations that we have for Robinhood, especially when you think about Coinbase and that hustle for getting that spot Bitcoin ETF proposal.

JOHN TADARO: Yeah, sure. So Robinhood's actually in kind of a sweet spot where they also trade equity. So when you have these Bitcoin ETF launches on I believe it was the first day that was launched, Robinhood added those to the platform. So they can trade the ETFs or they can trade the spot Bitcoin.

What I think the concern was for a lot of investors was, do the Bitcoin ETFs cannibalize the Bitcoin-trading business? And that concern is not only for Robinhood, but Coinbase. On the earnings call, that's not what played out. Robinhood management said that the Bitcoin ETF was additive to their Bitcoin-trading business, that you didn't see the ETFs kind of take share away from their direct buying and trading of Bitcoin on the platform.

BRAD SMITH: Yeah, John, looking at some of the transaction-based revenues, I mean, cryptocurrency, that was almost double the revenue that equities trading revenue saw here, where you saw the growth there move higher by about 10%. Well, it increased 8% year over year, primarily driven by cryptocurrencies, they mentioned. That was up 10%.

Equities revenue was up as well here. And so, ultimately, bringing in more revenue on the cryptocurrency front, how annexed is Robinhood's future growth profile to the broader crypto landscape and the ability for more users to be able to buy and trade or even just HODL?

JOHN TADARO: Yeah, so 2024, most of the growth we see, we do have coming from crypto. Crypto came in very strong in December and primarily made that beat in Q4 there. So, if it weren't for crypto, that transactional activity wouldn't have beat. So we do see that as kind of a growing segment.

It's coming off a very low baseline. So crypto volumes obviously plummeted a lot last year, so you're seeing kind of a snapback that's really propelling the growth. For equities, options, that growth is a little bit more moderated. It's more mature business for Robinhood.

So we do see crypto as kind of the growth component for Robinhood. That being said, what we would like to see is Robinhood come out and offer more crypto products. They've done a good job. They've added a MetaMask integration, but they still offer a lot fewer crypto assets for trading versus a platform like Coinbase or some of the other crypto-native exchanges, if you will.

But that being said, Robinhood has moved into Europe now. And so they're trying to grow that crypto presence internationally, the thinking being regulation is still a little bit tight in the US. And so that business, they're kind of keeping a little bit of a lid on it, almost.

RACHELLE AKUFFO: And then also on that call, they talked about focusing on driving net deposits even higher by improving the user experience and the value proposition. How do they get there?

JOHN TADARO: Yeah, you know, that's-- so they have taken share from other brokerages. So that has been a positive for us if they can continue to grow that component. We do notice that the platform has improved quite a bit for that traditional kind of equity brokerage business. So, that's a little bit more of a slugging match.

You have to take market share. There's not necessarily a ton of new assets coming in. So it's a little bit more of a market share battle there versus that crypto component where you can just benefit by more retail investors moving into that landscape. So that one, we do see as little bit more moderated moving forward.