Why Robinhood Stock Crashed After Earnings
Key Points
Robinhood beat on earnings last night, but its sales growth was disappointing.
After growing rapidly all year long, Robinhood's growth slowed in Q4.
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Robinhood (NASDAQ: HOOD) stock tumbled 12.5% through 10:30 a.m. ET Wednesday after reporting mixed results for Q4 earnings last night.
Heading into the report, analysts forecast the online brokerage would earn $0.64 per share on more than $1.3 billion in sales. Robinhood beat the earnings forecast with a per-share profit of $0.66, but missed on sales, reporting just under $1.3 billion.
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Robinhood Q4 earnings
Q4 sales climbed 28% year over year, with 39% growth in interest income driving the result. "Transaction-based revenues" (i.e., trading) rose only 15%. Average revenue per user (ARPU) grew a similar 16%.
This led to a big drop in earnings for the quarter -- down 35% despite beating estimates.
For all of 2025, Robinhood scored 52% sales growth to $4.5 billion, with earnings up 31% at $2.05 per share.
Is Robinhood stock a sell?
That right there tells you why investors are upset with Robinhood. Q4 was a disappointment after Robinhood's gangbusters growth earlier in the year. Investors are shrugging off the earnings beat and wondering: if sales slow, is Robinhood still a growth stock?
That's a valid concern.
Consider: Priced at $77 billion in market cap, Robinhood stock costs just under 37 times trailing earnings. That doesn't seem expensive given the growth across 2025, but if earnings keep shrinking (as they did in Q4), the valuation gets concerning.
Free cash flow at Robinhood is $1.6 billion for 2025 -- better than burning cash, as Robinhood did in 2024. Still, free cash flow backs up only 84% of Robinhood's reported profits, so when valued on a price-to-free cash flow ratio, the stock is arguably even more expensive than it looks, valued on earnings.
Much as I'd like to recommend it, Robinhood looks like a sell to me right now.
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Rich Smith 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.
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