Robinhood 10-K Analysis: 55% of Revenue Flows Through Market Makers

Robinhood reported $4.47 billion in revenue — up 52% — with $1.88 billion in net income and a 42% margin. Three revenue engines, 27 million customers, and zero debt. It looks like a transformed business.

The FY2025 10-K, filed February 18, 2026, tells a more complicated story. Behind the headline growth, the filing's concentration footnote — Note 13 — reveals that 55% of that revenue, $2.46 billion, flows through market maker counterparties. Citadel Securities alone accounts for $581 million. These arrangements are described in the filing's risk factors as "often not documented under binding contracts."

Payment for Order Flow (PFOF) is how Robinhood monetizes "commission-free" trading. When a customer places a trade, Robinhood routes it to market makers — firms like Citadel Securities — who pay a per-share or per-contract rebate for the order flow. The market maker profits from the bid-ask spread; the broker earns the rebate instead of charging commissions. Most retail brokerages earn some PFOF revenue, but Robinhood's model routes the majority of its transaction revenue through this channel, making it uniquely dependent on market maker willingness to pay.

Three Revenue Engines, One Counterparty Network

"With respect to the year ended December 31, 2025, as compared to the year ended December 31, 2024: total net revenues increased 52% to $4.47 billion compared to $2.95 billion; net income increased 33% to $1.88 billion compared to $1.41 billion; diluted EPS increased 31% to $2.05 compared to $1.56; total operating expenses increased 25% to $2.38 billion compared to $1.90 billion."

The numbers are impressive on every line. Revenue up 52%. Net income up 33%. Operating expenses growing at half the rate of revenue. By any conventional measure, Robinhood delivered a breakout year.

The revenue breaks down across three engines that appear diversified. Transaction-based revenue — options, crypto, equities, and prediction markets — accounts for 58.7% of the total at $2,628 million. Net interest income represents 33.8% at $1,514 million. Other revenue, led by Gold subscriptions at $179 million, makes up the remaining 7.4%. On the surface, this looks like a business with multiple independent growth drivers.

But the story changes when you read the filing's concentration footnote. Note 13 of the 10-K discloses that three customer groups — all market makers — account for 55% of Robinhood's total revenue. Citadel Securities at 13%, Wintermute Trading at 6%, and an aggregate of smaller market makers individually below 10% accounting for another 36%. The dollar amounts are substantial: Citadel alone represents approximately $581 million, Wintermute approximately $268 million, and the remaining market makers approximately $1,610 million.

10-K Note 13 Revenue Concentration: Citadel Securities 13% ($581M), Wintermute Trading 6% ($268M), all others individually below 10% representing 36% ($1,610M). Total market maker concentration: 55% ($2,460M).

This concentration has been growing. In FY2023, market makers accounted for 40% of revenue. By FY2024, the figure had jumped to 56%. FY2025's 55% represents a slight stabilization, but the dollar amount grew from roughly $1.2 billion to $2.46 billion over two years as the revenue base expanded.

The 55% figure deserves emphasis because it is far higher than the commonly cited PFOF exposure. Most analysis focuses on options ($1,123 million) and equities ($302 million) as PFOF revenue lines — roughly 32% of total revenue. But the concentration footnote reveals that crypto market maker rebates push the actual counterparty dependency to 55%. Options, crypto, and equities all route through the same market maker channel.

The comparison to peers makes this concentration unusual. Interactive Brokers earns revenue directly from customers through commissions on its IBKR Pro platform, achieving a 79% operating margin without PFOF dependence. Charles Schwab monetizes customer assets through advisory fees and net interest income — no single counterparty represents 10% or more of revenue. Robinhood is the only major brokerage where 55% of revenue flows through intermediaries rather than directly from customers.

Robinhood's 10-K reveals that 55% of its $4.47 billion in revenue ($2.46 billion) flows through market maker counterparties — Citadel Securities at 13%, Wintermute at 6% — in PFOF and rebate arrangements the filing describes as "often not documented under binding contracts."

The Revenue Fragility Trifecta

Transaction revenue grew $981 million — up 60% year over year — powering the headline growth story. Each of the three transaction engines individually reported strong results. But the 10-K's Management Discussion and Analysis reveals that each engine grew on a fragile driver: options on rebate rate mix rather than trading volume, crypto on an acquisition rather than organic growth, and prediction markets on a product line facing RICO litigation.

Options: The Rebate Rate Mix Story

Options revenue was the largest single contributor at $1,123 million, up $363 million or 48%. The 10-K explains exactly how this growth happened.

"Options revenues increased primarily due to higher option rebate rates due to the mix of ticker symbols traded as different ticker symbols pay different rebate rates. In addition, options revenues increased due to a 12% increase in Options Contracts Traded per trader and a 16% increase in the number of users placing option trades."

The primary driver was not more trading — it was which stocks were traded. Different ticker symbols pay different PFOF rebate rates. When Robinhood users shift toward higher-volatility names — meme stocks, high-volume options tickers — the average rebate per contract rises. This is a cyclical, mix-dependent driver. If retail traders rotate back toward index options or lower-volatility names, the same mechanism works in reverse. Robinhood's largest revenue line grew principally because of what retail traders happened to trade in a given period, not because of any structural expansion in trading activity.

Crypto: The Bitstamp Dependency

Cryptocurrency revenue reached $901 million, up $275 million or 44%. Again, the 10-K provides the decomposition.

"Cryptocurrencies revenues increased primarily due to higher cryptocurrency rebate rates from crypto market makers and a 6% increase in the number of users placing cryptocurrency trades, partially offset by 9% decrease in the average Notional Trading Volume traded per trader. In addition, cryptocurrencies revenues benefited from our acquisition of Bitstamp."

The filing reveals that volume per trader actually declined 9%. User growth was modest at 6%. The primary driver was higher rebate rates — the same pricing-driven mechanism as options. And then there is Bitstamp. The Q4 2025 press release disclosed that Bitstamp processed $48 billion in crypto notional volume during the quarter, compared to $34 billion on the Robinhood app itself. Just seven months after the acquisition closed, the acquired platform was already processing more crypto volume than organic Robinhood.

This reframes the crypto narrative from "Robinhood crypto is surging" to "Robinhood bought its way into institutional crypto volume." The sustainability question shifts from retail crypto trading activity to Bitstamp customer retention and integration success.

Prediction Markets: Growth Under RICO

The most dramatic growth came from prediction markets. Other transaction-based revenues — primarily event contracts and instant withdrawals — surged to approximately $302 million, up 260% from $84 million. Robinhood facilitated 12 billion event contracts in FY2025, including a record 8.5 billion in Q4 alone. This revenue line now matches the entire equities business.

But the 10-K's legal proceedings section discloses extensive litigation that could eliminate this revenue entirely.

The 10-K discloses extensive event contracts litigation: Blue Lake Rancheria filed RICO allegations and state gambling statute violations. Ho-Chunk Nation filed RICO claims plus state gambling actions spanning six states — Wisconsin, Nevada, South Dakota, Colorado, Washington, and Massachusetts. Six additional state gambling recovery suits are pending.

RICO — the Racketeer Influenced and Corrupt Organizations Act — is the most severe legal characterization a financial services company can face. Three regulatory scenarios exist: full shutdown of event contracts (eliminating ~$302 million at current run-rate), restructuring with modified terms or state-by-state licensing, or favorable resolution that validates the business model and unlocks further growth. No peer faces this specific combination of risk and reward. CME Group operates regulated derivatives exchanges without gambling-statute exposure.

The one bright spot in the fragility analysis is equities. The 10-K notes that equities revenue grew because of a 65% increase in average notional trading volume per trader — genuine volume growth rather than pricing or mix. But equities at $302 million represents only 6.8% of total revenue. The largest engines — options and crypto at a combined $2,024 million — grew primarily on non-durable drivers.

Robinhood's $1,123 million options revenue grew primarily because retail traders shifted to higher-PFOF tickers, not because of more trading — a fragility confirmed by the 10-K's disclosure that "different ticker symbols pay different rebate rates."

The Rate-Sensitive Balance Sheet

Net interest income grew 37% to $1,514 million, making it Robinhood's second-largest revenue engine at 33.8% of total revenue. The growth appears healthy — margin interest surged, securities lending doubled, and the customer asset base expanded to $322 billion. But the 10-K's Note 5 provides a component-level breakdown that reveals how much of this income is directly tied to the interest rate environment.

10-K Note 5 disaggregation of net interest revenues: margin interest $573M (+80%), segregated cash and securities $319M (+22%), Cash Sweep $229M (+28%), securities lending net $190M (+102%), corporate cash and investments $167M (-35%), credit card net $64M (+167%), credit facility interest expense ($32M), other $4M. Total NII: $1,514M (+37%).

The eight-component breakdown tells a story the headline growth obscures. Four components — margin interest ($573 million), segregated cash ($319 million), Cash Sweep ($229 million), and corporate cash ($167 million) — are directly rate-sensitive. Together they represent $1,288 million, or 85% of total NII.

Corporate cash revenue has already fallen 35%, from $288 million in FY2023 to $256 million in FY2024 to $167 million in FY2025. Rate cuts that have already occurred are visibly eroding this component. Margin interest at $573 million — the largest NII line at 38% of the total — reprices with Fed rate changes across Robinhood's $16.8 billion margin book. Cash Sweep income depends on the spread between what Robinhood earns on $32.8 billion in swept balances and what it passes through to customers.

Our component-level model estimates that a 100-basis-point Fed rate cut would reduce NII by $230 to $330 million — a 15-22% headwind. This is worse than crude estimates suggest because margin interest, the fastest-growing component, is fully rate-sensitive across the entire $16.8 billion margin book.

"We anticipate any potential future rate cuts by the Federal Reserve will negatively impact our net interest revenues and adversely affect our customers' returns on cash deposits."

Management's own language is unambiguous. The question is whether balance growth — more margin loans, more deposits, more securities lending — can outpace the rate headwind. The evidence is mixed. NII grew from $456 million in Q3 2025 to $411 million in Q4 — a 10% sequential decline that suggests rate cuts are already winning the tug-of-war against balance growth.

The sustainability question deepens when you examine where the platform assets came from. Of the $129.2 billion increase in total platform assets (from $192.9 billion to $322.1 billion), approximately $51.8 billion — 40% — was acquired through Bitstamp and TradePMR. Organic net deposits of $68.1 billion represent strong but decelerating growth: 35% relative to prior-year assets, down from 49% in FY2024.

The peer comparison provides context. Charles Schwab's NII of $11.8 billion grew 28% despite rate cuts — Schwab reduced funding costs to outpace the rate decline. Schwab's NII is nearly 8 times Robinhood's, demonstrating how much room remains for balance-growth-driven NII expansion at scale. Interactive Brokers' NII grew 21% through margin loan growth, a volume-driven approach. SoFi's net interest margin of 5.72% is 12 times Robinhood's approximately 47 basis points, reflecting a fundamentally different model — SoFi holds loans on its own balance sheet, while Robinhood primarily earns spread on swept customer cash.

The rate-agnostic floor provides some reassurance. Securities lending net ($190 million, up 102%) and credit card net ($64 million, up 167%) are the fastest-growing NII components and relatively insulated from rate changes. Together they represent $258 million — 17% of NII — and grew 110% year over year. This natural hedge is real but small relative to the $1,288 million in rate-sensitive income.

Robinhood's 10-K reveals that 85% of its $1,514 million net interest income is rate-sensitive — margin interest ($573M), segregated cash ($319M), Cash Sweep ($229M), and corporate cash ($167M, already down 35%) — making a 100-basis-point Fed cut a $230-330 million headwind.

The Operating Leverage Story

Revenue grew 52%. Operating expenses grew 25%. Operating income nearly doubled, up 99% to $2,094 million. The math is straightforward and genuine: Robinhood added $1,522 million in revenue while spending only $479 million more to generate it. This is textbook operating leverage.

The most striking line item is stock-based compensation. SBC was $305 million in FY2025 — essentially flat compared to $304 million in FY2024 and down from $871 million in FY2023 (which included co-founder awards). As a percentage of revenue, SBC compressed from 46.7% in FY2023 to 10.3% in FY2024 to 6.8% in FY2025.

"Total Stock-Based Compensation expense for the year ended December 31, 2025 was $305 million." SBC decreased from $871M in FY2023 (co-founder awards) to $304M in FY2024 and remained stable at $305M in FY2025. SBC/Revenue: 6.82%.

The SBC story is real. But the 10-K reveals two complications that reduce its net impact on earnings.

The first is the SBC-ETR feedback loop. Robinhood's effective tax rate was 10.7% in FY2025 — roughly half the 21% statutory rate. The primary reason: SBC deductions reduced the effective tax rate by 8.7 percentage points.

"Share-based compensation deductions significantly reduced the effective tax rate by 8.7% in 2025."

The 8.7 percentage point reduction translates to approximately $184 million in tax savings on $2,094 million in pretax income. Here is the hidden feedback loop: as SBC/Revenue improves (which is good for profitability), the SBC tax deduction shrinks (which raises the effective tax rate). The ~$100 million saved by holding SBC flat at $305 million while revenue grew $1,522 million was partially offset by approximately $30 million in higher taxes. The net benefit is roughly 70% of headline SBC savings, not 100%.

The second complication is the FY2024 baseline. Net income of $1,413 million in FY2024 included an approximately $360 million deferred tax asset release that will not recur. Normalizing for this one-time benefit, net income growth was approximately 79%, not the reported 33%. The operating leverage is actually stronger than the headline growth rate suggests — but the comparison year was artificially inflated.

One additional caveat: TradePMR's acquisition included $100 million in unvested stock vesting over four years, which will add approximately $25 million per year to SBC starting FY2026. The "SBC flat at $305 million" narrative may not hold.

The peer table crystallizes the trajectory. Interactive Brokers at approximately 2% SBC/Revenue with a 79% operating margin represents the mature broker-dealer endpoint — proof that retail brokerage can be enormously profitable without high SBC. Schwab at 1.3% shows where large-scale brokers converge. Robinhood at 6.8% is on the right trajectory but has not arrived yet. And the ETR comparison is telling: Robinhood at 10.7% and SoFi at 8.5% (both SBC-dependent) versus Schwab at 22.8% and CME at 22.4% (near-statutory). As Robinhood's SBC normalizes, its effective tax rate will converge toward the Schwab and CME range.

Robinhood's SBC compression from 10.3% to 6.8% of revenue is genuine operating leverage, but the 10-K reveals a hidden offset: the 10.7% effective tax rate depends on SBC deductions worth $184 million — as SBC efficiency improves, the tax rate will rise, capturing roughly 30% of the SBC savings.

What to Watch

The filing data establishes five testable metrics that will determine whether Robinhood's growth story remains intact in the next quarterly filing. Each metric has a current value and a threshold above or below which the investment thesis changes materially.

Market maker concentration currently stands at 55%. If it drops below 50%, Gold subscriptions, lending revenue, and other non-PFOF lines are successfully diluting counterparty dependence. Above 58% signals worsening concentration.

Options revenue drivers — the key question is whether the 10-Q cites "volume" as the primary growth driver or continues citing "rebate rate mix." Two consecutive quarters of volume-driven growth would weaken the fragility argument for the largest transaction engine at $1,123 million.

NII quarterly trajectory declined from $456 million in Q3 2025 to $411 million in Q4, a 10% sequential drop. Stabilization above $375 million per quarter confirms that balance growth is the dominant force and rate sensitivity is manageable. Below $350 million signals structural NII decline despite $322 billion in platform assets.

Organic customer growth rate was 4.8% in FY2025 — 7% headline minus 2.2% acquired through TradePMR and Bitstamp. Rising above 6% for two consecutive quarters challenges the "maturing growth" thesis. Falling below 3% confirms it. Customer churn at 1.7 million — nearly double the prior year's 0.9 million — is the leading indicator.

Prediction markets litigation outcomes from the RICO cases (Blue Lake Rancheria, Ho-Chunk Nation) could either eliminate approximately $302 million in annualized revenue or validate the business model. Settlement terms would signal the broader regulatory posture toward event contracts.

Robinhood's customer churn nearly doubled from 0.9 million to 1.7 million in FY2025 while organic funded customer growth was just 4.8% — five metrics including market maker concentration, NII trajectory, and prediction markets litigation will determine whether Robinhood's growth story remains intact.

Frequently Asked Questions

What is PFOF and how much of Robinhood's revenue depends on it?

Payment for Order Flow (PFOF) is the practice of routing customer trades to market makers — firms like Citadel Securities — in exchange for per-share or per-contract rebates. Robinhood's 10-K reveals that 55% of total revenue ($2.46 billion of $4.47 billion) flows through market maker counterparties — substantially more than the commonly cited 32% figure that covers only options and equities. The difference represents crypto market maker rebates and other counterparty relationships. Citadel Securities alone accounts for 13% of total revenue, approximately $581 million. These arrangements are "often not documented under binding contracts" per the 10-K risk factors.

How sensitive is Robinhood's net interest income to Fed rate cuts?

Very sensitive. The 10-K's 8-component NII breakdown in Note 5 reveals that 85% of $1,514 million in NII ($1,288 million) is directly rate-sensitive: margin interest ($573 million), segregated cash ($319 million), Cash Sweep ($229 million), and corporate cash ($167 million). Our component-level model estimates a 100-basis-point Fed cut would reduce NII by $230-330 million (15-22%). Corporate cash has already fallen 35% from $256 million to $167 million in one year. The rate-agnostic floor — securities lending ($190 million) plus credit card ($64 million) — grew 110% year over year but represents only 17% of NII.

What is Robinhood's market maker concentration risk?

Per 10-K Note 13, three customer groups accounted for 55% of FY2025 revenue: Citadel Securities at 13% ($581 million), Wintermute Trading at 6% ($268 million), and an aggregate of market makers individually below 10% at 36% (~$1,610 million). This concentration grew from 40% in FY2023 to 55% by FY2025. The risk is twofold: if any major counterparty exits or reduces rebates, the revenue impact is immediate; and PFOF regulatory changes would hit not one revenue line but 55% of the entire business simultaneously.

How did options revenue actually grow — volume or pricing?

Primarily pricing. The 10-K MDA states that options revenue of $1,123 million, up $363 million, increased "primarily due to higher option rebate rates due to the mix of ticker symbols traded as different ticker symbols pay different rebate rates." Volume (+12% contracts per trader) and user growth (+16% users placing options trades) were secondary drivers. This means Robinhood's largest revenue line grew principally because retail traders shifted to higher-PFOF tickers — a cyclical, non-durable driver that reverses when ticker mix normalizes.

What was Robinhood's organic vs. inorganic growth in FY2025?

The headline numbers overstate organic growth across every metric. Funded customers grew 7% to 27.0 million, but the reconciliation shows: 2.5 million new, 0.4 million resurrected, 0.6 million acquired (TradePMR and Bitstamp), minus 1.7 million churned. Organic net adds were just 1.2 million, or 4.8%. Customer churn nearly doubled from approximately 0.9 million to 1.7 million. Platform assets grew 67% to $322 billion, but $51.8 billion (40% of the $129.2 billion increase) was acquired. The "27 million customers, $322 billion in assets" narrative includes significant M&A contribution.

How does Robinhood's SBC compare to peers?

Robinhood's SBC/Revenue of 6.8% is mid-range among fintech and brokerage peers. Interactive Brokers: approximately 2% (mature broker). Schwab: 1.3% (large-scale incumbent). CME: 1.5% (exchange model). SoFi: 7.2% (comparable fintech). Coinbase: 12.2% (high-growth crypto). Robinhood's compression from 46.7% in FY2023 (co-founder awards) to 6.8% is dramatic, but the base $305 million may rise approximately $25 million per year from TradePMR's $100 million in unvested stock vesting over four years.

What is the prediction markets legal risk?

Robinhood's event contracts business generated approximately $302 million in FY2025 (6.8% of revenue, up 260% year over year), with 12 billion contracts traded. The 10-K discloses extensive litigation: Blue Lake Rancheria filed RICO allegations and state gambling statute violations. Ho-Chunk Nation filed RICO claims plus state gambling actions spanning six states. Six additional state gambling recovery suits are pending. RICO is the most severe legal characterization possible for a financial services company. If regulators or courts shut down event contracts, approximately $302 million in annualized revenue would be eliminated.

How does Robinhood compare to Interactive Brokers or Charles Schwab?

Interactive Brokers (79% operating margin, approximately $6.4 billion in revenue, approximately 2% SBC) proves that retail brokerage can be highly profitable without PFOF dependence through its commission-based IBKR Pro pricing. Schwab ($23.9 billion revenue, 49% NII share, 1.3% SBC) shows the scale advantage of an asset-gathering model with $11.9 trillion in client assets. Robinhood's 42% net margin is competitive, but its 55% counterparty concentration and 6.3% customer churn rate are weaknesses neither peer shares. Robinhood's NII ($1.5 billion) is one-eighth of Schwab's ($11.8 billion) — demonstrating the room for balance growth.

What is the SBC-ETR feedback loop?

Robinhood's 10.7% effective tax rate is driven by SBC deductions that reduced the rate by 8.7 percentage points from the 21% statutory rate — a tax benefit of approximately $184 million on $2,094 million in pretax income. The feedback loop works as follows: as SBC/Revenue improves (good for profitability), the SBC tax deduction shrinks (raising the effective tax rate). In practice, the SBC compression from 10.3% to 6.8% saved approximately $100 million in SBC expense but cost approximately $30 million in higher taxes — a net benefit of roughly 70%, not 100%.

What should investors watch in the next quarterly filing?

Five metrics: (1) Market maker concentration — dropping below 50% signals revenue diversification away from PFOF dependency. (2) Options revenue drivers — if growth shifts from "rebate rate mix" to "volume," the fragility argument weakens for the $1,123 million engine. (3) NII quarterly trajectory — declined from $456 million in Q3 to $411 million in Q4; stabilization above $375 million per quarter confirms balance growth offsets rate cuts. (4) Organic customer growth — 4.8% in FY2025; rising above 6% for two quarters challenges the "maturing growth" thesis. (5) Prediction markets litigation outcomes — RICO cases could eliminate approximately $302 million or validate the business model.

Methodology

Data Sources

This analysis uses MetricDuck's quantitative metrics (earnings quality, revenue concentration, NII decomposition, operating leverage) calculated from Robinhood's XBRL-tagged SEC filings. Filing intelligence extracted via MetricDuck's 5-pass comprehensive analysis of the FY2025 10-K (filed February 18, 2026, accession 0001783879-26-000023) and cross-referenced against raw HTML/XBRL filing data (R13.htm for NII components, R41.htm for revenue concentration). The 10-K/A filed February 20, 2026 was evaluated as a cosmetic amendment with no material changes. Q4 2025 press release and earnings call data supplement the 10-K analysis. Peer data from MetricDuck pipeline: Interactive Brokers (Q3 2025), Coinbase (FY2025), Charles Schwab (FY2025), SoFi (FY2025), CME Group (Q3 2025).

Limitations

• IBKR and CME data is Q3 2025 (most recent quarterly filing processed). FY2025 10-K data not yet available in pipeline. Revenue and margin figures for these two peers are TTM estimates.
• PFOF rebate rate data is not extracted from Rule 606 reports. We use the 10-K MDA's qualitative language ("rebate rate mix") rather than exact cents-per-contract PFOF rates.
• The NII rate sensitivity model (Table 5) uses directional estimates based on the actual 10-K Note 5 component breakdown. The $230-330 million impact range is not company-disclosed — it is derived from component characteristics and rate sensitivity classifications.
• Customer churn cross-peer comparison is limited. IBKR, SCHW, and CME do not disclose comparable churn metrics in their SEC filings.
• Market maker concentration benchmarking is unavailable. No peer discloses comparable counterparty revenue concentration, so the 55% figure is framed as unique to Robinhood rather than benchmarked.
• FY2024 net income normalization ($360 million DTA release) is an estimate derived from the income tax footnote, not a company-disclosed adjusted figure.

Disclaimer

This analysis is for informational purposes only and does not constitute investment advice. The author does not hold positions in HOOD, IBKR, COIN, SCHW, SOFI, or CME. Past performance and current metrics do not guarantee future results. All data is derived from public SEC filings and may contain errors or omissions from the automated extraction process.