Robinhood, the trading app that became famous during the pandemic stock-buying boom, cut about 23% of its workforce in August 2022 — roughly 780 jobs. Remarkably, this was the second major layoff in less than a year. The first one happened in April, just four months earlier.

Why lay off so many people twice? The answer is that Robinhood's business collapsed faster than management realized. The company went public in July 2021 when investors valued it at $32 billion. But by 2022, trading activity had fallen sharply. Robinhood makes money when customers trade (it gets paid by market makers for routing their orders) and when customers borrow money to buy stocks using margin (the company earns interest). When the pandemic trading craze ended, both of those revenue streams dried up. The company had hired a lot of people expecting the boom to last, so suddenly it had too many employees and not enough money to pay them.

After the April layoff, management thought they had fixed the problem. They were wrong. Four months later, they had to do it again — and this time even bigger. That tells you the April cuts didn't go deep enough.

Here's a detail worth understanding: when a company lays people off, it has to estimate upfront how much the layoff will cost in severance and other expenses. Robinhood originally estimated high. When they actually executed the layoffs, the real cost came in lower — by $77 million total across both cuts. That $77 million made the company's earnings look better on paper. But let's be clear: that money doesn't replace the lost trading revenue. It just makes the balance sheet tidier.

The broader picture is this: Robinhood had expanded rapidly from 2020 to 2021, hiring engineers, operations staff, and compliance people to handle all the new users and deal with regulatory scrutiny. Unwinding that expansion in two quick cuts is what happens when a company miscalculates how long a boom will last. By August 2022, Robinhood had reset itself for a much smaller business — fewer employees, lower costs, and a hope that whatever trading volumes returned would be enough to survive on.