CEO Vlad Tenev on Robinhood's Record Year (+200%, ~$100B Market Cap)

0:00I heard you want to be the LeBron James of earnings balls. Did I say that? You're coming off of a record year. What happened? Robinhood was pretty much a options and crypto and equities business. And now we have 11 business lines that generate 100 million in annual revenue or more. Global domination. Of your finances. Maybe like a week or so after the Yes No event, can you share more about what you release? One is a big upgrade to prediction markets. You can see prediction markets now on web. So that makes it a lot easier for people to engage and interact with our prediction markets. The second thing is the ability to trade individual player actions.

0:40So the sports experience in Robinhood is just getting much deeper and much more dynamic. You're on the cover of Men's Health. I can sign it for you. I actually have about 75 copies in there. Is Harmonic gonna solve time travel? If there is a solution. If there is a solution. Yeah. What is your hottest prediction for 2026? That's a tough question.

1:07Vlad, welcome to Sorcery. Happy to be here. Thanks for having me in Robinhood's HQ. Oh yeah, I'm happy that you're here actually, I should say. Well, you're coming off of a record year. This is going to come out in January. And you've deployed two new business lines that have reached over, well, they're not new, but they've reached over$100 million in revenue. What happened last year? Yeah, you're talking about prediction markets and Bitstamp. So very different business lines, obviously. But if you look back, the time we went public, Robinhood was pretty much a options and crypto and equities business.

1:48And now we have 11 business lines that generate$100 million in annual revenue or more. So I think the story is, for a long time, we were criticized that we were sort of a business that would do well when markets were going up, interest rates were going down, as was the case in 2020 and a large part of 2021. But what happened when interest rates went up and we had sort of like the reversal of most of the trends that were powering our business and our IPO during COVID, we had to kind of bear down and pivot our business into one that was more all weather. So the Robin Hood you see today, much more diversified, where we have 11 business lines that are at scale, and a couple more that are also in that 10 to 100 range, but that we feel like are going to grow over time.

2:53So I like to use the analogy of automobiles, right? Maybe a couple of years ago, we were a V6. Then we went to a V8. There's not a lot of automobiles with 11 cylinder engines, but we're pretty close to a V12. And then maybe one day soon, W16, like a super hyper car. And then I'll have to find a new analogy. We'll have to do jet planes or rockets or something. That's pretty good. Okay, so what are these 11 business lines? Can you explain them out a little bit more? Yeah, I mean, you can slice it a couple of different ways. One way to look at it is how much of our business is generating revenue from transactions.

3:35So we have transaction revenue, which you can think of as trading commissions, rebates from market makers, payment for order flow. So we have a card product, so we earn interchange from swipes. And those are all money we make from every transaction. Then there's also net interest revenue, which you can kind of think of as money that we make from being the custodian of assets. And also lending against those assets. And so we have a spread that we take on the cash that we hold on our platform. That's probably the simplest one. So we offer a great yield on cash. Right now, I think 3.5 % with some added incentives on top, which still gives us 75 basis points for ourselves.

4:31And the cash sweep program, we call it, the high yield offering has gone from basically nothing in 2022 to tens of billions of dollars under custody. So that's grown into a big business. The margin book, which is a tool, margin is a tool that active traders use to use leverage on their portfolios. We weren't really that competitive on margin, to be fair, up until 2024. And then we really started competing on rates, competing on user experience. And now the margin book is, I mean, it's well more than doubled in the past year. And now that's grown into a big business. And Robinhood Gold itself, which is a subscription product, we're up to 4 million gold subscribers.

5:22And that's really ramped. Now at this point, 15 % of all of our customers, thereabouts, are Robinhood Gold subscribers. And of the customers that join on a quarterly basis, the new customers, it's like upwards of 40%. So we've really done a good job. And just the gold subscription itself is now a nine-figure business. And that's really before we've made significant progress on expanding Robinhood outside the U.S., still very much a U.S. business. And very little progress sans Bitstamp, which is our institutional business, on expanding from retail only to business and institutional. So if I think through like Robinhood's trajectory, I think right now the engine behind our business is active trading.

6:14So that's sort of like the first area where we're targeting being number one. We want to be the number one business for active traders. But we don't want to just stop there because not everyone trades. The second arc of our business, we call it, is number one in wallet share for the next generation. So we really want to be the place where you put all of your money and we want to handle all of your financial needs. And that's where we track assets under custody and gold subscribers. We want to be a big platform with lots of assets serving all of your financial needs. And then the third arc, which is the one that's longer term, I kind of call it our 10-year arc, how do we go from US primary to fully global and retail only to business and institutional?

7:03And I think if you look 10 years from now, we see a world where more than half of our revenue could be outside the U.S. And also, cut another way, more than half of our revenue could be business and institutional rather than retail. So there's just multiple vectors by which we could grow the business by 10x. And I think we have a plan to pursue all of them. Global domination. Of your finances. Yeah, it's like, and we view it really as can we apply technology to make it so that, you know, we know people have options and there's a lot of services that want to do this. But can we apply technology to cut down costs and at the same time give you the best customer experience so that you just don't have any reasons to move money outside of Robinhood?

7:56You have plenty of reasons to move it in, but Robinhood products and services can serve you better on platform. And you shouldn't have to need to withdraw money to your bank account or to another service because it should just be a no-brainer to keep it with us. So we're maybe like a week or so after the Yes No event. Can you share more about what you released? We released a few things. One is a big upgrade to prediction markets. So one of the things is you can see prediction markets now on web, whereas in the past you had to be logged into the app. I think one of the big use cases of prediction markets is not just as a trading product, but almost as a news media product, the source of information.

8:44So that makes it a lot easier for people to engage and interact with our prediction markets. The second thing is combos for sports and the ability to trade individual player actions. So the sports experience in Robinhood is just getting much deeper and much more dynamic. You can put together lots of trades into one big one. Is this like a parlay kind of alternative? Very, very similar. And I think the other thing that gets me excited about that is you can imagine doing it for any category of prediction markets, not just sports. So these contracts over time will get much more personalized and specific.

9:29And you'll get into things like bespoke insurance products, which I think will be really cool. And then the other thing we released was Robinhood Cortex. Now you've seen Robinhood Cortex is our AI model. You've seen us do a few things that are AI powered in the app. We've had Cortex stock in Crypto Digest, which explained to users exactly what's going on with a stock in real time. And then we've also added Cortex powered screeners and indicators on Legend, which is our pro trading platform. Now you can talk directly to Cortex. So basically, Cortex has an interface in the app, which has full context of all of your financials.

10:19and also real-time market data. It knows about all the tradable stocks and prediction markets and instruments, and it can do stuff for you. So for example, if you want to scan through the entire universe of traded symbols and place a trade, you can just ask Cortex to do that with your voice. So it's like a full AI assistant that has like a super intelligent and financial knowledge at your disposal. What are you most excited about? I'm excited about that one because, you know, there's just a lot of times where I have a specific question and I don't have a way to easily take all of my financial data, put it into chat GPT or another AI model and get a good answer without doing a whole bunch of work.

11:12So this sort of like gives you that type of intelligence where all of your financial data is. Sorcery is brought to you by Brex, the financial stack trusted by more than 30 ,000 companies, including one in three venture backed startups in the U.S. Nearly 40 percent of startups bail because they run out of cash. Brex is literally built to help founders avoid that. Unlike traditional banks that let your money sit idle, chipping away at it with fees, Brex is designed to help you spend smarter and move faster. Their all-in-one solution combines checking, treasury, and FDIC protection into one powerful account.

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12:33Turing builds realistic reinforcement learning environments and data systems based on real operational traces. the kind of infrastructure frontier labs need to train superintelligence. Visit Turing.com slash S-O-U-R-C-E-R-Y. On Jack Altman's podcast, and hello Jack, he was so helpful with some of the questions. You guys talked a lot about the generational differences between attitudes and behaviors in brokerages and financial services. So how do you, one, can you just reshare that? And then two, how do they fit into each of these different products that you have? Yeah, I think one of the things we spend a lot of time talking about is we have to do two things that are simultaneously somewhat challenging, which is make sure we grow with our customers.

13:27Like we don't want someone to just be 24 years old opening a Per Robinhood account and then graduating to Schwab or something like that, which means we have to actually add more products and features as those customers grow and their lives get a little bit more complicated so we could serve them there. While at the same time as we do that, make sure the product is still attractive to someone that's starting out for the first time. So we don't want to lose the next generation because a lot of our predecessors get into this trap of being a generational company. And I think that's certain death, right?

14:06Because eventually, nobody's figured out how to live forever. So eventually, their kids are going to inherit the money. And their kids are probably less tied to the legacy brokers than their parents and grandparents. So yeah, I think it's simultaneously growing with our customers, making sure we add the products and services while also making sure we pay attention to the next generation and continue to be relevant for them and add all the new things that get the 18-year-olds and the 24-year-olds into the markets. Is that prediction markets? I think young people love prediction markets, obviously.

14:44But we also see a lot of people in their 40s and 50s engaging with prediction markets. You do tend to see young people adopting technology sooner and earlier and just being open to trying new things. But I think the reason we got into prediction markets was we were just very interested in it. Yeah, it's right that it's turned into a young person thing. But yeah, I didn't really see it going that way necessarily. You look at some of our competitors, some of them have been offering prediction markets for quite a long time. You look at even the big guys like Chicago Mercantile Exchange, Interactive Brokers.

15:30But really with prediction markets, it was the 2024 election that was, I think, ground zero. That was the time that everything changed. because up until that point, there wasn't an event big enough to actually bring in a lot of customers. And I think the presidential election just started it all, really, and created this new prediction market super cycle. And a lot of it now is sports, but we see a world where prediction markets can disrupt multiple gigantic industries, not just sports. Like I was talking to someone last week, and you might know Robinhood just added weather prediction markets on the platform.

16:16And, you know, nobody really thinks of using weather prediction markets in this way. But, you know, you can trade and hedge fire risk. You can hedge hurricane risk. And if you think about the process of insuring yourself against a fire or a hurricane, it can be very expensive and it's cumbersome. You have to talk to a broker on the phone. And the contracts that we have available right now are already competitive with some of those products. And this is before they get more bespoke and personalized. So I see a world where the insurance industry can just be disrupted by a lot of these products. So I think, yeah, there's a lot more to build.

17:07We're still pre-institutional adoption at large scale. I think that it's still early innings in the prediction market super cycle. Yeah, it's super early. At least what I've seen working with Calci over the last year on some things, they were a sponsor. What I've learned from prediction markets over the last year is it's crazy to see what it takes. And there's similar parallels here with the story to get federally regulated and become legal and all that kind of stuff and be able to then provide access to everybody, democratize access to it. But the crazy part is you never really know what something will look until it's out into the public.

17:50People start to adapt it to themselves. So they've been working on prediction markets for forever. And so, you know, you're hoping that people use it for these great financial, cool arbitrage moments, that kind of thing that are a little bit more sophisticated. But then you unleash it to the masses. You have to market it really aggressively because it's super competitive. And then it becomes somewhat degen. And that's become a narrative that comes along with it. And I think that's where the younger generations come along. But it's cool because there's also a lot of really sophisticated people that are taking it on and using it and making good amounts of money, whether it's in weather or anything like that.

18:26But my biggest observation from this was you never really know what something will become until it's actually unleashed into the world. And then it takes a lot of effort to kind of conform it back to what you want and the principles around it. Are you concerned at all about any of the aura around that, how it's perceived? I think that you definitely make a good point that the shape of something is not clear. And I think there's definitely been a lot of questions and a lot of things that we have to work out from market integrity and what kinds of contracts lend themselves to easier spoofing and manipulation than others.

19:12For example, you can look at the mentioned markets and say, well, if someone's aware of a mentioned market, then they can just say the things, right? And we've been generally pretty careful about what we list. I think the thing we want to make sure we get right is integrity. Because if people are concerned about market integrity, then they stop participating in the markets. And that makes everything downstream a little bit more challenging. It's harder to pull liquidity. Prices get worse. customers are sort of reluctant to participate. So I think there's probably more that can be done. But I do think we've got the tools to do it.

19:53I mean, if you look at other asset classes like equities, we've had to do surveillance and market integrity and monitoring for insider trading for many, many decades. So I do think this is one thing that the industry is poised to do. And I think we'll do a pretty good job of it. And there might be some twists and turns where we kind of settle on some common standards and common ways of doing things. So I was talking to Amit, right? I think we were at Palantir. He's great. Right around the Palantir interview, which is really funny. I saw some clips from that. I don't follow stocks as closely as I used to.

20:34I want to know from him, he covers this every day. He covers the top stocks, really fun ones too. And this last year, we had a little bit of resurgence of this Wall Street bets energy. And so what's the difference between retail traders today versus retail traders in COVID? And I ask you that too. Yeah. I mean, my take on that is COVID was a little bit idiosyncratic. So there were a couple of waves of activity that I remember. OK, one of the waves was, you know, companies that had filed bankruptcy. Like there was a little bit of a spike of activity around Hertz, for instance, which hit the news cycle.

21:17And then and actually, I think in hindsight, that was like a negative criticism of Robinhood. Oh, we're, you know, facilitating, making it easier for these people to invest in bankrupt stocks. And I think we've done a lot to make it clear this company has filed bankruptcy. Because we actually, my general philosophy is we want to make it easy for people to do what they want to do. Of course, so long as it's compliant and everything. But we should also give them the information so that they're aware of what they're doing. Now, it turns out, I think, in the Hertz case that those traders made money through an interesting contortion of bankruptcy proceedings.

22:04But again, that was a little bit of a trend. Then there were the companies that got hit hard by COVID. And maybe in the past, the government could have bailed them out. But this time, they didn't. And so I kind of think of it as a retail bailout. You know, rather than the companies getting the money as they had in the past, retail investors got money in the form of stimulus checks. And a lot of that went into brick and mortar retailers like GameStop and AMC and also the airlines like American Airlines for was a trending stock at that time. So there was a component of nostalgia, I think, associated with it.

22:48People were familiar with the names. Maybe millennials remember a world where they would go to the movies and would go into GameStop and shop for games. and they kind of like missed that because everyone was locked up at home and that seemed like a very, very, that's like the furthest thing you wanted to do. Mixed in with some actual due diligence where, you know, some people were very systematic about understanding what the Fed was going to do. There were a lot of people that were broadcasting and actually, you know, doing deep intelligence about who's buying the stock and what the prospects are.

23:34But yeah, it was, and then all of this, of course, culminated in the GameStop sort of like meme craze followed by the inflection of crypto activity that I think culminated in our IPO in middle of 2021. But I think the feeling that at least I got in 2021 was it felt very unstable in a sense. The thesis behind why people were investing in these companies were sort of like ephemeral thesis. They had to do with the state of affairs at the time, whereas now it feels a little bit more meaningful. I mean, we're in the middle of a big technology disruption wave with AI. The feeling that I get, and I think many people get, is that we're still pretty early in that.

24:26And of course, there's talks about whether we're in an AI bubble. But if you look at how many chips are being produced, how much inference is being purchased, how many weekly active users ChatGPT has, It does seem like there's actual substance and real revenue and real products behind it. And the companies that retail is investing in are companies that, by and large, have—I mean, they're not like stories. They're companies with real revenue and real growth. So I think it does feel qualitatively different. And I kind of juxtapose this. I think Robinhood, for better or worse, is kind of a bellwether for what retail is doing, right?

25:11And you look at our business right now, we've got about 350 billion assets under custody. And it's fairly well diversified. You know, the bulk of it is in stocks, and we have a little bit of crypto as well. And if you look at the volumes, the volumes are really spread out. I mean, we're seeing record trading volumes pretty dispersed among a lot of different stocks. Whereas in 2021, Robinhood was much less diversified. We had higher concentration in crypto, particularly Dogecoin. And a lot of the activity was much more concentrated in stocks that were sort of like these meme story stocks. So I think the health of the retail investor has improved.

26:06I don't want to say that some people say, okay, retail investor has grown up and matured. I don't want to be pejorative because I think retail investors have always been smarter than people give them credit for. But I think the maturation of the retail investor has kind of mirrored the maturation of Robinhood the business. We've gotten more diversified. They've gotten more diversified. and there's sort of like much more stable foundation underneath the activity and also our company. Quick note before we keep going, I've been investing on Public for a while now and it's a really solid platform that combines stocks, bonds, options, and crypto with incredible AI tools that let you do things like build a completely custom investable index from a prompt.

26:51Right now, Public will give you an uncapped 1 % match when you transfer your portfolio. Check it out at public.com slash sorcery public. Thank you.

27:31One of the coolest stories from this year, I think, was Open Door. And this was an amazing moment. This happened kind of a little bit spontaneously, but I was able to capture Keith Reboi right after he rejoined the board. You saw the run-up of Open Door, and then you actually saw action happen against it. They brought a new board. They brought in really phenomenal actual executives or going about change in a way that you wouldn't have expected a huge run-up would happen from just retail investors. It was a really, really cool story. I think being public gets a bad rap in many ways. I don't know.

28:11You probably talked to a lot of people, some of which are public. And if you ask anyone whether they like being public, they'll probably say, no, it's terrible. It's just you have to do earnings. It's a chore. You can't do anything. And I actually think it's incredibly powerful to be a public company for a couple of reasons. I think one, and we've tried to do this ourselves, if you start thinking about earnings as an opportunity to engage with your shareholders, both institutional and retail, you can do a lot more with it than if you're just sort of going through the motions and you think of it as a chore.

28:48So one year ago, we were kind of doing earnings the old-fashioned way, right? We had the Polycom. We had the script. I would read the script. We would take the questions over Polycom. Sell-side analysts would be on the call exclusively. And then I was looking at the recordings. Even back then, we had a community of retail fans that would listen to our earnings and stream on YouTube. I always looked at that. And it was Amit. Amit was one of the first, but there were a bunch of others as well. and I was just like sitting there looking at it. And I said to myself, man, I'm bored. And if I'm bored, the people watching this must be really bored.

29:32And at one point, the live streamer, I forgot who it was, he kind of apologized to the audience. He's like, yeah, I know it's a little bit dry. Sorry, guys, but maybe we'll get to Q &A soon. And they would get to the Q &A, which would be the engaging part because we would be unscripted, even though the Q &A was also quite scripted. So I was like, all right, let's like tear this down from first principles and make it fun. What's an example? What's an analogy, something we could learn from and lift from maybe another industry that is similar to this, but entertaining. And I thought, well, you know, it's kind of similar to a NBA playoffs post-game interview.