HOOD Revenue Hit a Record. Why Did the Tax Bill Nearly Double?

A Record Quarter With a Falling Profit, Explained by One Tax Line

Over these 12 quarters: share price $13 to $113 (+783%); operating income 26 to 685 US$ million; operating income margin 5.5% to 48.1%. One graph in actual numbers: bars are the quarter's operating income, over them the share price at quarter-end (left axis) and the operating income margin (right axis); each line is fitted to its own range, so read the timing, not the heights. Prices are adjusted for splits.

Robinhood's net income fell year-over-year for the first time in any of its individually-reported quarters since it returned to quarterly profitability in 2023 - and almost the entire decline traces to the tax line, not the business. Total net revenues hit a record $1,424 million, up 12% year-over-year, and operating income grew 8% to $685 million. But income before income taxes was essentially flat (-1%, to $625 million), while the provision for income taxes jumped 91% to $149 million - pushing the effective tax rate from 12.3% a year ago to 23.8% this quarter. That one line is why net income attributable to Robinhood fell 16% to $468 million and diluted earnings per share ("EPS") fell 16% to $0.51, even though the operating business kept growing. Robinhood's press release offers no explanation for why the tax rate nearly doubled. (Robinhood only ever discloses Q4 net income as part of the full fiscal year, not as its own standalone figure, so the comparison here covers Q1, Q2 and Q3 only - every one of those quarters from Q1 2024 through Q2 2026 grew net income attributable to Robinhood year-over-year; this is the first to fall.)

The Business Grew; the Government's Share Grew Faster

Every line above the tax provision moved the way a healthy, growing brokerage should: transaction-based revenues rose 19% to $867 million (options +31% to $399 million, equities +41% to $121 million, event contracts - Robinhood's prediction-markets product - up over 6x to $173 million, partly offset by cryptocurrencies down 55% to $120 million), while total operating expenses rose a more modest 16% to $739 million and the operating margin stayed roughly steady at 48.1% (down slightly from 49.8% a year ago). None of this operating-line growth shows up in the number that reaches shareholders - the tax line, not the business, is what moved that one (see above).

Revenue Growth Itself Is Decelerating Sharply

The 12% year-over-year revenue growth this quarter is itself a sharp deceleration from 32% in Q2 2026 and roughly 15% in Q1 2026 - the same pattern shows up in Net Deposits (annualized growth rate slowed to 17% this quarter from 28% last quarter) and in Adjusted EBITDA^» growth (9% this quarter versus 35% last quarter). Event contracts, the product that carried most of Q2's growth story (see above), grew only 11% sequentially this quarter after growing 15.6x year-over-year in Q2 - the headline "up over 6x" year-over-year figure is true, but it's measured against a small base from a year ago, not against the pace the product was setting three months ago.

The Prescription

Robinhood should keep leaning into the parts of the business that compound on infrastructure and customer relationships rather than any single product's trading-volume cycle: Rothera (the derivatives-exchange joint venture with Susquehanna) crossed $100 million in annualized revenue in its first full quarter and traded over 6.4 billion contracts since launch, and the company now counts 14 separate business lines that have individually reached that $100 million annualized-revenue bar - a genuinely different risk profile from depending on one trading product's popularity. The newly-launched Trump Accounts relationship with the U.S. Treasury, now scaling toward automatic enrollment for nearly 70 million children, fits the same pattern.

What it should stop doing: introducing new, flattering non-GAAP profitability measures in the exact quarter its GAAP profit fell, without plainly explaining in the same release why GAAP profit fell. Adjusted Net Income and Adjusted EPS^» are brand new this quarter - Robinhood's own press release calls them "new non-GAAP financial measures introduced this quarter" - and on an adjusted basis EPS fell only 3% instead of GAAP's 16%. That's a real difference in optics landing in the same quarter the tax rate nearly doubled with no stated reason. Explaining the tax line would cost nothing and would matter more to a reader than a new non-GAAP label.

Key Financial Metrics

US$ billion; margin is operating income as a percent of net revenue, per quarter. Values are standalone quarters; 3 derived from annual, half-year or nine-month figures (Q4 2023, Q4 2024, Q4 2025).

Three months ended September 30, 2026 vs. three months ended September 30, 2025 - consolidated, reported in USD.

Income before income taxes was $625 million, essentially flat (-1%) against $634 million a year ago - but the provision for income taxes rose 91% to $149 million, from $78 million, pushing the effective tax rate from 12.3% to 23.8%. That gap - not operating performance - is nearly the entire story behind net income falling 16% to $468 million. Separately, the release discloses that net income included $67 million ($0.07 of diluted EPS) of unrealized losses "primarily related to the mark-to-market of Robinhood Ventures Fund I" ("RVI," see Beyond the Usual below); adding that back to the $468 million attributable-net-income figure gives roughly $535 million, down a much smaller 3.8% year-over-year against Q3 2025's $556 million - real, but nowhere near the headline 16% decline, and the tax-rate jump still accounts for the larger share of the gap. Total operating expenses rose 16% year-over-year to $739 million, driven mainly by a 173% jump in the provision for credit losses (tied to the growing Robinhood Gold Card loan book, now 1.3 million customers and over $19 billion in annualized payment volume) and a 139% jump in Operations expense, while general and administrative expense actually fell 12%.

This is the first quarter in a while with a cleanly disclosed standalone-quarter cash flow figure: operating cash flow of $1,225 million against $21 million of combined capex (property/software/equipment $10 million plus capitalized internally-developed software $11 million), for free cash flow of $1,204 million - a genuine swing from the $(1,588) million standalone Q3 2025 figure, which was driven by a $1,392 million one-time outflow into segregated-cash regulatory requirements that quarter, not weak operations. Long-term borrowings grew to $2,660 million (from zero at the end of 2025), after the $2.2 billion convertible-note issuance in Q2 2026 and a further $500 million draw this quarter - real corporate debt, but still small enough relative to the $101 billion market capitalization (see Target Valuation Range below) to not change the valuation conclusion meaningfully.

Where Q3 2026's Revenue Went

Net revenue, and how much of it was left as operating profit and net income, in one view. Figures are the same standalone-quarter figures as the metrics table.

US$ billion, Q3 2026. Operating costs are net revenue less operating income; other items & tax are operating income less net income.

Key Operational Metrics

As of and for the three months ended September 30, 2026. Arrow = the way the number moved year-over-year; green = good for the business, red = bad, grey = flat.

*Total Platform Assets and ARPU for Q3 2025 are derived by reversing the company's own stated growth rate (396/1.19 and 200/1.05 respectively) since the press release doesn't give the prior-period dollar figure directly; treat as approximate. Funded Customers, Investment Accounts and Gold Subscribers for Q3 2025 are exact, computed from the company's own stated absolute increase (e.g. 28.7M less the disclosed 1.9M increase).

Net Deposits were $15.7 billion this quarter, down from $21.7 billion in Q2 2026 - a 28% sequential decline that matches the annualized Net Deposits growth rate slowing to 17% (from 28% last quarter and 22% in Q1 2026). Robinhood frames this as still-healthy growth (trailing-twelve-month Net Deposits of $71.0 billion, a 21% growth rate against the year-ago asset base), and October is already running ahead on this metric - management disclosed that October month-to-date Net Deposits had already topped $13 billion, including $6 billion from the Dell family's pledge to Trump Accounts (see Beyond the Usual) - but the quarter-over-quarter deceleration in the metric Robinhood has leaned on hardest since 2025 is real and worth tracking into Q4's own numbers rather than taking the October preview as confirmation. Robinhood continues to report as a single operating segment, so there is no segment breakdown to run beyond the revenue-mix detail above.

Beyond the Usual

Two New Non-GAAP Profit Measures Debuted the Same Quarter GAAP Profit Fell

Robinhood introduced Adjusted Net Income and Adjusted EPS this quarter - its own press release states plainly that these are "new non-GAAP financial measures introduced this quarter to provide a view of profitability before certain non-operating items." Adjusted Net Income excludes SBC tied to the CFO transition and restructuring, restructuring charges, unrealized and realized losses/gains, and intangible-asset amortization, net of a tax adjustment. On this new measure, Adjusted EPS fell only 3% year-over-year to $0.60, compared with GAAP diluted EPS falling 16% to $0.51 - a materially softer story than the GAAP numbers tell. Introducing a new, flattering profitability framing in the same quarter the as-reported numbers got meaningfully worse, with no explanation offered anywhere in the release for why GAAP profit fell, is exactly the kind of timing a skeptical reader should notice.

Robinhood's press release introduces two brand-new non-GAAP profitability measures - Adjusted Net Income and Adjusted EPS - in the same quarter GAAP net income fell 16% and the effective tax rate nearly doubled with no stated reason. On the new measures, the decline looks like 3%, not 16%. The release never explains the tax-rate jump that drives most of the real decline.

The Event-Contracts Litigation Thread Goes Unmentioned This Quarter

The Q1 2026 and Q2 2026 posts tracked an escalating legal fight over Robinhood's event-contracts business - six "Gambling Recovery LLC" state-law suits, RICO claims from four Native American tribal nations with an appeal pending before the Ninth Circuit, and five pre-emptive suits Robinhood itself filed against state gaming regulators. This quarter's press release makes no mention of any of it. That silence doesn't mean the litigation resolved - a quarterly-results press release exhibit isn't where legal-proceedings detail usually lives, and Robinhood's own Q3 2026 Form 10-Q, which would carry that disclosure, had not yet been filed as of this post. The thread stays open and unresolved; it simply isn't updated by anything in this particular document.

The litigation cluster around Robinhood's event-contracts business, tracked in detail in the last two quarters' posts, gets zero mention in this quarter's press release. With no Q3 2026 10-Q filed yet, there's no way to confirm from this document whether any of the eight-plus lawsuits or the Ninth Circuit appeal moved during the quarter - this is an open gap to close once the filing lands, not a resolved thread.

A CFO Transition Still Showing Up as a Cost Line, Never Once Narrated

Robinhood's non-GAAP reconciliation tables carry a line item for "SBC attributable to CFO transition" in every quarter shown this year - $2 million this quarter, $22 million cumulative over the first nine months of 2026 - but the press release's own text never says what that transition was. The Q1 2026 Form 10-Q's exhibit index names it directly: a "Transition Letter between Robinhood Markets, Inc. and Jason Warnick, dated February 2, 2026," and Shiv Verma - quoted in this quarter's press release as "Chief Financial Officer of Robinhood" - signed both the Q1 and Q2 2026 10-Qs in that role. A reader relying on the press release alone would have no idea Robinhood changed CFOs this year; the only trace is a cost line with no story attached.

Robinhood has a new CFO this year - Jason Warnick's separation was dated February 2, 2026, and Shiv Verma has since signed the company's 10-Qs and is quoted in this release as CFO - but the transition itself goes unmentioned in both this quarter's and last quarter's press releases, surviving only as an unexplained "CFO transition" cost line in the non-GAAP tables.

A Second Deconsolidation Event Happened This Quarter - Four Cash-Flow Lines Confirm It, None Name the Entity

The Q1 2026 post covered Robinhood Ventures Fund I ("RVI") in detail - the closed-end fund that gave retail investors access to late-stage private companies, which Robinhood took public in March 2026 while retaining majority economic control, then deconsolidated in June 2026 (see the Q2 2026 post). A second fund, Robinhood Ventures Fund II ("RVII") - a closed-end fund that has elected to be regulated as a business development company - was disclosed in Robinhood's own Q2 2026 Form 10-Q as "currently consolidated" in its financial statements as of June 30, 2026. This quarter's press release carries four supplemental cash-flow lines that, read together against that Q2 2026 10-Q, confirm a second, distinct deconsolidation event happened in Q3 2026 - though the release never names which entity it involves.

Robinhood's Q2 2026 10-Q named all four of these lines for RVI specifically, for the six months ended June 30, 2026: a $106 million "Gain on deconsolidation of RVI," $220 million "Cash derecognized upon deconsolidation of RVI," $351 million "Derecognized assets and liabilities (net)," and $435 million "Retained RVI interest at FV." This quarter's press release restates the same four lines on a nine-month basis - but relabeled plural and unnamed: "Gain on deconsolidations" ($107 million), "Cash derecognized upon deconsolidations" ($225 million), "Derecognized assets and liabilities (net)" ($376 million), and "Retained RVI and RVII interest at fair value" ($461 million) - and each nine-month figure exceeds the Q2 10-Q's own six-month RVI-specific figure by exactly the amount this quarter's own standalone column shows: $1 million, $5 million, $25 million and $26 million respectively. Four separate line items, not one, all reconciling cleanly to a second event recorded specifically in Q3 2026, and all four labels dropping RVI's name for a plural or unnamed form the moment that second event appears.

RVII is the only other fund Robinhood has disclosed as consolidated, and it was still "currently consolidated" as recently as the Q2 2026 10-Q, so it's the natural read for what this second event involves - but the press release itself never names it, so this is this post's own inference, not a confirmed fact. What's confirmed, line by line, is that a second deconsolidation happened in Q3 2026, sized at $1 million to $26 million depending on which line is read - not which specific entity it was.

Either way, Robinhood will have deconsolidated two venture funds within two consecutive quarters - a pattern, not an isolated one-off, and one worth confirming by name once the Q3 2026 10-Q is filed.

Four separate cash-flow-statement lines in this quarter's press release - a gain, a cash outflow, a net derecognized-assets figure and a retained-interest figure - each exceed the Q2 2026 10-Q's own six-month RVI-specific figures by a small amount that reconciles exactly to this quarter's own standalone column, confirming a second deconsolidation event in Q3 2026. The press release never names the entity; RVII, the only other fund it has disclosed as consolidated, is the natural read but not a stated fact.

Rothera Crossed $100 Million in Annualized Revenue in Its First Full Quarter

Rothera - Robinhood's derivatives-exchange joint venture with Susquehanna International Group (SIG), formed when the JV acquired 90% of MIAXdx in a deal that closed in January 2026 - reached over $100 million in annualized revenue in its first full quarter of operation, with more than 6.4 billion contracts traded since launch. This is a genuinely different kind of growth than a retail trading product's popularity cycle: Rothera is exchange infrastructure, earning on volume that flows through it rather than depending on any one asset class staying in fashion with Robinhood's own retail customers.

Trump Accounts Scaled to Near-Universal Enrollment, With a $6.25 Billion Private Pledge Behind It

Trump Accounts - where Robinhood serves as broker and sole initial trustee for the U.S. Treasury, a relationship first disclosed in the Q2 2026 post - reached automatic enrollment for nearly 70 million children nationwide this quarter. Separately, 25 million children already have $250 invested through Susan and Michael Dell's $6.25 billion pledge to fund Trump Account contributions. Robinhood's CFO disclosed that October's Net Deposits already include $6 billion tied to that single pledge. This is a genuinely large, non-speculative source of future assets and Net Deposits, distinct from anything tied to a trading product's popularity - though the press release gives no indication of what fee or revenue economics Robinhood actually earns on the program.

A Wave of New Products Launched at HOOD Summit, Including Perpetual Futures and Agentic Trading

Robinhood hosted its third annual HOOD Summit in Houston in September, announcing 17 new products and features: 24/7 trading of select U.S. equities, perpetual futures for eligible U.S. customers, earnings contracts inside the Prediction Markets Hub, and "Agentic Trading Accounts" that let an AI agent trade on a customer's behalf. Roughly 200,000 customers have already opened Agentic Trading Accounts, driving over $1.6 billion in notional trading volume. This is a meaningfully broader product push than prior quarters' incremental additions, and several of these (perpetual futures, agent-driven trading) sit in genuinely untested regulatory territory for a US retail brokerage - worth watching for how regulators respond once volumes are large enough to draw attention, rather than assuming the launch itself settles the question.

Target Valuation Range

Verdict: richer on both revenue and earnings than a quarter ago, on a business that just decelerated sharply. HOOD's $112.50 quarter-end close implies a market capitalization of roughly $101.4 billion and an EV/Adjusted EBITDA multiple of about 29.6x annualized Q3 2026 Adjusted EBITDA - up from 28.6x last quarter, even as Adjusted EBITDA growth slowed from 35% to 9% year-over-year. On a GAAP basis the stock's implied P/E jumped from about 40x to about 54x in a single quarter, almost entirely because net income fell while the price kept rising; on the company's brand-new Adjusted Net Income measure, the same stock looks like it trades at about 46x instead.

HOOD closed the quarter at $112.50, up 12% from Q2 2026's $100.28 and still about 23% below the stock's all-time closing high of $146.78 set in October 2025 - a partial recovery from the 53% drawdown the Q1 2026 post covered, not a full round trip back to the peak.

With 901.0 million shares outstanding (793 million Class A plus 108 million Class B, both from the balance sheet's own quarter-end share count, not the weighted-average diluted count used for EPS) and the September 30, 2026 close of $112.50:

*As in the Q1 and Q2 posts, Robinhood's $48.2 billion of total liabilities is overwhelmingly customer-related (payables to users, securities loaned, the fractional-shares repurchase obligation), so this enterprise value nets only cash against market cap. The $2.66 billion of long-term borrowings (convertible notes, grown from $2.2 billion at Q2 2026's close after a further $500 million draw this quarter) is real corporate debt, but adding it back would raise enterprise value only to about $98.2 billion - a roughly 3% difference that doesn't change any conclusion below.

Against Q2 2026's own table (16.2x EV/Revenue, 28.6x EV/Adjusted EBITDA, 40.2x annualized P/E), every multiple expanded this quarter, on a business whose annualized-quarter revenue and EBITDA growth both decelerated sharply - the stock is pricing in more, not less, even as the growth rate it's being asked to sustain fell.

Trailing-twelve-month basis, for comparability with how SoFi (SOFI) and Block (XYZ) present their own multiples: on a TTM basis - summing the last four standalone quarters (Q4 2025 through Q3 2026, with Q4 2025's standalone figures derived as FY2025 less the nine-month 2025 figures this release discloses) - HOOD's TTM revenue is $5,082M, TTM Adjusted EBITDA $2,842M, and TTM net income attributable to Robinhood $1,984M, giving TTM EV/Revenue of 18.8x, TTM EV/Adjusted EBITDA of 33.6x, and TTM P/E of 51.1x. The TTM P/E is actually lower than the single-quarter-annualized figure above (51.1x vs. 54.2x), because annualizing Q3 2026's weaker net income alone overstates how expensive the stock looks on earnings; TTM smooths over the tax-driven dip this quarter and the unusually strong Q4 2025 and Q2 2026 quarters behind it.

Peer-multiples comparison. SoFi's and Block's own latest posts cover their Q2 2026 quarters - both have Q3 2026 press releases and decks already on file, but neither has been written up yet, so this comparison is one quarter behind HOOD's own. Each company's cell below is taken directly from that company's own post, on that post's own stated basis (both use trailing-twelve-month multiples, not the quarter-annualized basis in HOOD's own table above), not re-derived here:

On a like-for-like TTM basis, HOOD still trades at a real premium to both peers, though the gap is narrower against SoFi than it was in Q2 2026: about 1.2x SoFi's revenue multiple (18.8x versus 16.2x) and about 1.4x SoFi's earnings multiple (51.1x versus 36.4x), but about 8.4x Block's revenue multiple (18.8x versus 2.25x) and about 2.4x Block's EBITDA multiple (33.6x versus 14.3x) - Block remains the far cheaper peer on every multiple both companies disclose. Some of HOOD's premium over both peers is earned (its TTM Adjusted EBITDA margin is well above either peer's), but a stock that got richer on every multiple in a quarter where its own growth decelerated sharply, net income fell, and the company just introduced a more flattering way to describe its profits is priced for a clean read on the tax line and the growth deceleration both resolving in its favor - not merely for growth to continue.