Robinhood Announces Big Layoffs, Analyst Notes Underperformance in Multiple Areas

© Reuters Robinhood (HOOD) Announces Big Layoffs, Analyst Notes Underperformance in Multiple Areas

By Senad Karaahmetovic

Shares of Robinhood (NASDAQ:HOOD) are trading around 3% higher in premarket trading after the company reported worse-than-expected Q2 revenue and announced it will reduce 23% of its workforce.

The financial services company reported a Q2 loss per share of 34c, while analysts were estimating a loss per share of 37c, according to Refinitiv. Revenue came in at $318 million, up from $299 million in the first quarter, but below the $565 million revenue it reported in the year-ago quarter.

Revenue also missed analyst expectations of $321 million. Robinhood also reported a decline in monthly active users (MAUs) and assets under custody.

Robinhood’s CEO Vlad Tenev said in a press release that the company plans to cut its workforce by roughly 23%, mainly in operations, marketing, and program management segments.

The move comes due to the “deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash”. This is the second time Robinhood announced layoffs this year, after reducing its workforce by 9% in April.

“I want to acknowledge how unsettling these types of changes are,” Tenev added.

"As CEO, I approved and took responsibility for our ambitious staffing trajectory — this is on me," he wrote. "In this new environment, we are operating with more staffing than appropriate."

On the same day as the announcement, New York’s top financial regulator fined Robinhood $30 million for breaching anti-money-laundering and cybersecurity regulations.

A JPMorgan analyst reiterated an Underweight rating and a $7 per share price target.

“The market environment remains particularly poor for Robinhood, but still the company is underperforming expectations in multiple areas,” he said.

A Goldman Sachs analyst took note of recent developments and commented:

“We believe the 23% headcount reduction is the most important detail, and while investors will likely want to understand the company’s ability to invest in growth initiatives with a lower cost base, we believe these cost reductions will likely drive the company to profitability in the near term and could drive shares higher.”