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Robinhood revenue doubles in Q2, warns trading is slowing

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Yahoo Finance’s Brian Sozzi, Myles Udland, and Julie Hyman breaks down the earnings reports for Robinhood, Nvidia, and Cisco.

Video Transcript

MYLES UDLAND: All right, let's turn our attention now back to the earnings picture and begin our conversation with the results we saw last night from Robinhood. We see here a beat on the top line, larger than expected. Adjusted loss, but of course, you've got a lot of stock-based comp and one-time charges related to the direct listing in there, so on and so forth. Stock down about 7% after hours. The company warning a little bit on slowdown in their trading activity.

And I think also, you know, my main takeaway when you look at the quarter, is what this company is, which is kind of an options and crypto dealer, ultimately, you get a lot of headlines on the payment for order flow, this, that and the other, but 70% of their total revenues were options and cryptocurrency-related. Options, revenues were up 48% in the second quarter. Crypto revenues were up thousands of percentages from $5 million in the same quarter last year to $233 million in the most recent quarter.

So Julie, I think we're starting to see what business Robinhood is really in and they talk on the call about wanting to offer retirement plans and they need to mature their customers, so on and so forth. But today, it's, like isn't it more like Coinbase really than anything else at this point? At least, that's kind of how I take away the quarter.

JULIE HYMAN: Well, what it is, is a FOMO play. Like it follows the various FOMO trades in the market. And I think that that is something that is giving investors pause. For example, the fact that the crypto was such a heavy part of its numbers seems to have been somewhat surprising to analysts. Not that it was big, but how big it was. M Science, there's an analyst over there, Corey Barrett, said that he was surprised about it. He said you saw the meme stock craze in the first quarter that really drove trading. You saw the crypto craze in the second quarter. What do we got now? That's sort of the question there.

And that's basically, when Robinhood talked about slowing this quarter, what is the next FOMO trade? You don't always have them, and you certainly don't always have them of a size to drive renewed interest and activity on the Robinhood platform. And so, yeah, it needs to do other stuff. It doesn't seem like it can just rely on those kinds of trends in order to fuel sustained growth.

BRIAN SOZZI: Yeah, I'm curious on what you both thought about the earnings call. Myles, you and I talked about just the composition of it. For me, outside of the fact that I think Robinhood is really going to be doing more battle with Coinbase, and that is going to be an interesting competition to watch over the next 12 months, it did seem a little weird to me, and maybe because I'm a little biased here as a former stock analyst, but the retail questions on the call.

To be asked on your earnings call if you're going to start selling swag to consumers, to me, an earnings call is not the time to be fielding those type of questions. I think the call was borderline ridiculous. I think you needed more analysts on there. More analysts that actually know what the heck they're talking about, because the questions from them weren't good to begin with as it is. It just, it lacked a lot of substance for me on a company that is still dealing with a ton of lawsuits and has a lot to prove.

MYLES UDLAND: I mean, do you want to do the whole what's the future of the analyst business conversation here? Because I think you're starting to see more companies do this, Tesla among them, now you've got Robinhood. I mean, you look at the way Netflix does their call. They do it with a single analyst, with someone from Fidelity, the most recent quarter. They used to have Peter Kafka, a journalist over at "Recode" manage the call, so you're starting to see those things change.

And I mean, look, it's been 30 years almost since since, I guess 20 years-ish, since Reg FD. So the analyst's job has already become repackaging what's out there in public. And perhaps now there needs to be more creativity and more, more of a take I guess you could say, from an analyst rather, than well, management told us this, that, the other, and so here's how we're going to tweak our model. But to your point, Sozzi, and the way that Robinhood structured the call, I mean, I don't really have a problem with it. I think it sort of is what it is. Maybe they're trying to break the ice.

Something that you flagged for me, the phrase, tell you, appeared on the call 14 different times with various management saying, well, I'd love to tell you, or let me tell you, which goes to a hack, or not a hack, but a tic that I find in my own writing, certainly in my own speaking, but that's going to be less clear anyway, is you never write I think because you're writing it. So obviously, you think it, you're writing it. So you don't need to tell someone, let me tell you. You're telling them. Whatever. I don't really know grammar or whatever, but like that certainly is redundant.

BRIAN SOZZI: Myles, let me tell you that I am all for change on how analyst calls are run. I mean, you run the gamut here, and now you're having these mix of retail investors, alongside Wall Street analysts. You have those management teams that talk for about 45 minutes and only field three questions, mostly because they want to hear themselves talk. Then hold the retail, hold a separate retail earnings call the day after. Make a bigger deal out of it. Field more questions, give it a good hour, and give it the attention it deserves. It deserves more attention, as we're getting more of these retail investors here now. Give it a full day. Give it an extra hour. Don't mash them in together, because the questions are all over the map. And I think ultimately, it just confuses the investors.

JULIE HYMAN: Well, guys, I would say two things. One, is it depends on where you are in your life cycle as a public company. Robinhood is still trying to prove itself, sell itself to investors. If you look at the other companies that have gotten more creative, Tesla taking those kinds of questions on its calls, I mean, that's as much a function of Elon Musk and his impatience with traditional financial systems. Or if you look at it AMC, which is actively and explicitly trying to court retail investors.

But if you look at a Robinhood, and most companies for that matter, and you look at the composition of their investors, by and large, they're not retail investors. The majority of investors in a given company is still going to be institutional. And so you got to give them, to your point, Soz, I would tend to agree. Yes, get more creative on those calls. I mean, we've all sat through them and they're boring as can be--

BRIAN SOZZI: Brutal.

JULIE HYMAN: --A lot of the time. But at the same time, you have to give institutional investors the information that they want. As long as you can figure out a way to do that, then you can do the fun stuff I think.

MYLES UDLAND: Yeah, and of course, Robinhood chose the questions. So they took the one on, how are you going to make sure the price of the stock isn't manipulated and they didn't say they were going to shut down Reddit. They just said, we monitor the trading activity on our platform. To that brief meme, early August, the brief meming of Robinhood and we all had fun with that for a day, and now we're kind of back to reality here, $50 per share or so.

All right, let's quickly get to a couple of big names in the chip space. Nvidia out with its earnings last night as well, and we can take a look at how the company performed relative to those expectations. Beating on the top and the bottom line here. Let's talk a little bit about what you made of the call here and of the quarter. Brian Sozzi, for a company that has really been a bellwether certainly for the chip space, and as we've mentioned many, many times on this program, is the appropriate end to replace Netflix within the FANG construction.

BRIAN SOZZI: Yeah, you sure think, you sure do believe that the time is coming. And I'm with you, Myles, here. I think this quarter can be boiled down into one big thing. For them, they had a lot of strength in their data center business. And that business, not that it hasn't been strong in the past, but now it really appears to be gaining a new leg of steam here. The street really likes that. I've been reading a lot of notes out this morning on Nvidia. That is the main takeaway.

And secondarily, the strength of the quarter came despite some weakness in their crypto business. Now they call that business CMP. And revenues from that segment, $266 million. That was below the company's guidance of $400 million. So the big takeaway here, data center good, the company is seeing higher average selling prices in many products that it sells, and they're not overly reliant right now on crypto. Put all those together and some positive comments on them closing the deal on Arm, you have the stock up 2% here in the premarket.

JULIE HYMAN: Yeah, although it did say Arm has taken longer than expected, but we'll see if it gets done in the end. A couple of quick things to note as well. That forecast above estimates is also helping out Nvidia. Nvidia, interestingly enough, even as a chip maker, it's really a chip designer. We call it a chip maker, but it doesn't actually make the chips. It contracts out the actual making of the chips. And so because of that, it is also being affected by the shortage in chip making capacity right now.

So that's just something to watch as we start to hear bubblings up once again of the chip shortage after it seemed to be abating. Now we've got Toyota and Ford coming out and talking about it once again. And we're going to talk about that a little bit later in the show. Now the CEO, Jensen Huang, said on the call, demand is going to outstrip supply for some time. The good news is, he says, we've secured enough supply to meet our growth targets. So we'll continue to watch that. And yeah, that cryptocurrency segment also going to be really interesting to watch. A lot of analysts talking about that this current quarter is going to be key for that particular business.

MYLES UDLAND: Yeah, seems like everybody manages along the way to get themselves distracted a little bit with crypto in some form or fashion. All right, let's stay within the tech industry, talk a little bit about Cisco's results. That company out with its latest quarter last night as well after the closing bell. Cisco here of course, fits into the category of, we need to outlaw the ability to end your fiscal year in the middle of the year.

Fourth quarter earnings for Cisco, $13.1 billion in revenue, adjusted earnings per share beating by a penny. Now revenue up 8% over the prior year. Company guiding to revenue growth of 7 and 1/2% to 9 and 1/2% in the first quarter, so still staying with that. But looking for a slowdown on a full year basis here, Brian Sozzi. Revenue expected to be up 5% to 7% for its fiscal 2022, which again, will end July 31, 2022.

BRIAN SOZZI: Yeah, fourth trending ticker on the Yahoo Finance platform right now is in fact, Cisco. And Myles, I think you covered the reason why the shares are down about 2% here in the premarket. Some disappointment over the guidance. My take from the call is that subscription revenue, that continues to be a good positive area for the company. Product revenue bounced back. All the regions for Cisco performed pretty well.

It really boils down to investors, analysts, do they believe that the company, was this quarter just driven by sales being pulled forward as people went back to work and offices reopened? Or is what they saw in this quarter strong growth around the world? Is that something more sustainable over the next 12 to 18 months? And I think you still have the market trying to figure that out this morning.

JULIE HYMAN: Well, and Cisco is also trying to convince the market and make the transition from being just a hardware company to a hardware and services company. But it still gets about 3/4 of its revenue or so from the hardware side of the business, the networking gear side of the business. And that side is costing it more. It's costing them more to get chips when it can get them. It's costing more to get other components. So even whether it's a revenue pull forward or it's going to continue to see that kind of revenue growth, that revenue is coming at a cost because of what's going on with all of those input costs.