Robinhood Stock Is Crushing the S&P 500 in 2025, but I'm Worried About This 1 Thing

Anthony Di Pizio, The Motley Fool

Tue, May 6, 2025, 4:31 AM 6 min read

• The S&P 500 is trading in the red this year because of growing economic and political turmoil.

• At the same time, Robinhood stock is up 29% as its investing platform experiences a surge in activity.

• But its biggest source of transaction revenue is at risk of shrinking dramatically, if history is any guide.

The S&P 500 (SNPINDEX: ^GSPC) is off to a bumpy start to 2025. It was down by as much as 15% year to date in April, but it has since staged a recovery and trimmed the loss to 4%. The volatility was triggered by President Donald Trump's "Liberation Day" tariffs, which investors fear might lead to an economic slowdown.

But Robinhood Markets (NASDAQ: HOOD) thrives on volatility. It operates a popular trading platform where investors can buy and sell stocks, options, futures, and cryptocurrencies, so large swings in the broader market can result in significant commission revenue for the company. As a result, Robinhood stock is up by 29% in 2025 so far, crushing the S&P 500.

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However, cracks are starting to appear in one of Robinhood's biggest growth areas, so here's why I'm worried its stock could lose its recent momentum.

The company breaks its revenue into two parts: transaction revenue, which is the money it earns from processing investment transactions for customers, and net interest revenue, which is the money it earns on cash sitting in the bank (its own cash and its customers' cash), and on margin loans.

Transaction revenue is more important, because it's the money Robinhood generates from its core business. During the first quarter of 2025, it came in at $583 million, which was a 77% increase from the year-ago period. The cryptocurrency segment was the single largest contributor to that figure, bringing in $252 million, which doubled year over year.

However, crypto transaction revenue was down 30% from the fourth quarter of 2024. Crypto prices plummeted in the early stages of 2025 as growing economic and political upheaval pushed investors into safer assets like cash. And most digital coins are susceptible to steep corrections because they simply don't have fundamental uses to support their value.

Robinhood experienced a similar boom -- then bust -- in its digital token business a few years ago. Its cryptocurrency transaction revenue soared by 4,560% year over year during the second quarter of 2021 and accounted for more than half of the company's total transaction revenue. However, the market frenzy quickly fizzled, and crypto transaction revenue was down by 75% just one year later.