Robinhood Just Said Trump Accounts Will Cost It $100 Million

Robinhood is becoming a Treasury contractor, and Wall Street isn't sure how it feels about that. The trading app missed Q1 earnings and revenue estimates Tuesday and warned that building the Trump Accounts app will cost $100 million more this year than expected. Shares fell.

The Numbers

Robinhood (HOOD -2.24%) reported $1.07 billion in net revenue for Q1, up 15% year over year, missing the Wall Street estimate of $1.14 billion.

Profit came in at $346 million, or 38 cents a share, compared with the 42 cents analysts expected.

Expenses jumped 18% in the quarter, which is the line that spooked traders. Robinhood raised its full-year expense outlook by $100 million tied to the Trump Accounts buildout.

What Trump Accounts Are

Earlier this month, the Treasury Department picked Robinhood and BNY to build out the Trump Accounts program. CEO Vlad Tenev said the deal puts Robinhood's tech in front of "the next generation of investors, 60 million of them."

The work runs on a cost-plus contract with a small margin, so Robinhood says revenue will eventually clear costs - but the spending hits first.

The Crypto Drag

Robinhood's other problem is crypto.

Fees from crypto trades dropped 47% from the same quarter a year ago, since the slump in digital assets started late last year and got worse through early February.

Tenev didn't try to call the bottom: "I can't tell you what the price is going to be in three months," he said on the earnings call. "But what I can tell you is crypto as technology infrastructure is going to be big and we're investing."

Options trade fees rose 8% and net interest revenue from cash, margin loans, and securities lending rose 27%, but both came in lighter than expectations.

The Diversification Push

Robinhood is trying to look less like a crypto and options trading app and more like a financial super app, which is why it launched a Platinum credit card earlier this year for high-spending customers.

"Other revenue" - which includes prediction markets, credit cards, and futures - hit $147 million. That's $101 million higher than a year ago, when prediction markets had just launched.

CFO Shiv Verma said customers "remained engaged and rapidly adopted new products," and the quarter was Robinhood's third-best for total net revenue.

What To Watch

Robinhood was already down 27% for the year going into earnings, and shares fell as much as 6% in extended trading. The stock now needs Trump Accounts to deliver real revenue, crypto fees to recover, or the new businesses to scale faster.