(Reuters) - Robinhood Markets missed Wall Street estimates for third-quarter revenue on Tuesday, weighed by a slowdown in trading activity, sending shares of the online brokerage down nearly 7% in extended trading.
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-led lockdowns.
The boost has since faded as Americans grappling with a cost-of-living crisis, high interest rates and elevated levels of inflation put trading on the back foot.
Robinhood's transaction-based revenue decreased 11% year-over-year to $185 million amid a 13% decline in equities and a 55% decrease in cryptocurrencies. Monthly active users dropped 16% to 10.3 million from a year earlier.
The muted trading activity took the shine off Robinhood nearly doubling the income it earns from charging customers interest on their loans against the backdrop of the U.S. Federal Reserve's rapid monetary policy tightening.
Net interest revenue increased 96% to $251 million in the third quarter.
Robinhood allows eligible customers to borrow money to purchase securities and charges an interest on the debt. The feature, known as "margin investing", has provided sanctuary to the retail investor-focused firm from taking a hit due to muted trading activity.
Separately, the fintech firm also announced plans to launch UK brokerage operations and EU crypto trading in the coming weeks.
The company's net revenue rose 29% to $467 million in the three months ended Sept. 30, but missed Wall Street expectations of $478.4 million, according to LSEG data.
Loss in the quarter narrowed to 9 cents per share, compared with a loss of 20 cents per share last year.
(Reporting by Manya Saini in Bengaluru; Editing by Shilpi Majumdar and Shounak Dasgupta)