Challenging Quarter for Robinhood: Will Prediction Markets Be the Next Big Catalyst?

For its Q1 2026 earnings report, crypto was the big story for Robinhood Markets (NASDAQ: HOOD), and not in a good way.

Revenue for that business segment plummeted, which sent the stock price racing downward.

For shareholders, the good news is that Robinhood has another revenue growth opportunity up its sleeve. If the management team executes on capturing a larger share of the prediction market, it could help the Robinhood's stock price regain upward momentum in the long run.

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Slumping sales

In Q4 2024, Robinhood reported a massive quarter for its crypto segment, with revenue of $358 million. For comparison, it was $61 million in Q3 2024. Since then, however, crypto revenue totals have not been anywhere close to that $358 million figure.

The problem is, the crypto market can be cyclical, so there's not always a consistent level of investing and trading for Robinhood to generate revenue from. Even so, the company is still heavily judged on its crypto revenue.

The stock took a sharp drop after the company's recent earnings announcement, as crypto revenue in Q1 2026 fell 47% to $134 million. That's why the company needs to expand its other revenue streams.

Prediction markets

The prediction markets have seemingly popped out of nowhere. Monthly trading volume was less than $100 million a month in early 2024 but jumped to more than $13 billion a month by the end of 2025, according to Forbes. That's only expected to grow, with an analyst at Bernstein Research forecasting that the prediction market's trading volume will reach $1 trillion a year by 2030.

For Robinhood, the prediction market, or what it labels as event contracts in its earnings report, is a potential source of revenue growth. For Q1 2026, its other transaction revenue segment, which mainly consists of event contracts, generated $147 million in revenue. That was a 320% increase from the same time last year. Event contracts traded were also up 4% quarter over quarter.

Offering an early look for 2026 second-quarter results, revenue from Robinhood's prediction markets is expected to be $3 billion in April, likely making it the company's second-biggest month ever for that segment.

What's next for Robinhood?

The markets will still fixate on Robinhood's crypto revenue for a while. It's going to take a more bullish crypto environment to drive more activity and help Robinhood grow revenue in that segment.

If the pieces can fall into place, Robinhood can start offsetting those declines in its crypto segment with multiple other revenue sources, including the prediction market. Then, the stock price could really gain some fuel to rally if crypto enters a bull market. That will still take time, however, so investors will need patience as that side of the business is built out.

For the long term, Robinhood still looks promising, but it's going to have to navigate through some short-term volatility.

Jack Delaney 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.