Is Robinhood's Business Too Dependent on Crypto?

Shares of Robinhood Markets (NASDAQ: HOOD) fell after the company released its latest quarterly numbers last week. Its results fell short of analyst expectations, and a big reason for that was lighter crypto trading. Robinhood's platform can be used for stock trading, crypto trading, and making bets on prediction markets.

While the business has generated strong growth in recent years, the excitement (or lack of it) in the crypto markets can play a big role in its performance. The big question for growth investors, however, is whether it has become too dependent on crypto, and whether that could make the stock a risky option for the long term.

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Crypto-related revenue crashed by 47% last quarter

During the first three months of 2026, Robinhood generated $623 million in transaction-based revenue, which was up a fairly modest rate of 7%. While event contracts (i.e., prediction markets) have unlocked a huge new growth opportunity for the business, that relatively new revenue stream (which totaled $104 million and was up from just $3 million a year ago) merely helped to offset the sluggish performance in crypto trading; Robinhood generated $134 million from cryptocurrency transactions during the period, which was a decrease of 47% from the same period last year.

Cryptocurrency transactions accounted for 43% of the company's total transaction revenue in the prior-year period, and that share dropped to just 22% this past quarter. It's good that the business is becoming more diversified, but it also highlights just how much of its growth has come from cryptocurrency trading.

Robinhood's business has plenty of growth potential, but it doesn't come without risks

Robinhood's success over the years has come from its ability to draw in retail investors, who look to its platform as a one-stop option for all types of trading. The challenge for Robinhood, however, is that with an increasing number of ways for people to make predictions, trade cryptocurrencies, and buy and sell stocks, whether it will continue to be as popular as it has been in recent years is the big question moving forward. That uncertainty, along with a fairly high dependence on crypto trading, does make the stock a bit of a risky buy.

While Robinhood stock has the potential to rise higher in the long run, its valuation isn't all that cheap; the stock trades at close to 40 times its trailing earnings. If its growth rate isn't strong, it'll be difficult for investors to justify paying such a high multiple for the stock.

If you're OK with the risks that come with the stock, it may be worth buying on weakness right now, as it is down more than 30% since the start of the year. However, with its valuation still not being all that cheap and question marks hovering around its long-term growth, a rally may not necessarily be around the corner; this is an investment that will require patience.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.