Coinbase posted lower-than-expected first-quarter results as crypto prices fell, weighing on one of the company’s key revenue drivers – spot trading of digital assets.
Here’s how Coinbase In its quarter ended March 31, the stock performed compared to Wall Street’s expectations based on an analyst survey by LSEG:
- Earnings per share: Loss of $1.49 versus expected profit of 27 cents
- Revenue: $1.41 billion versus expected $1.52 billion
Coinbase shares fell 4% in after-hours trading.
The company, which operates the largest cryptocurrency market in the United States, recorded transaction revenue of $755.8 million, compared to $805.2 million that analysts had expected. Subscription revenue was $583.5 million versus an estimated $619.3 million.
Severe slowdown
Given the drop in cryptocurrency prices at the start of the year, investors expected a sharp drop in trading volume. Bitcoin rose 12% in March but posted a 22% decline in the first quarter.
Coinbase’s net income is often distorted by accounting rules that require it to value its large crypto holdings based on the price at the end of the quarter, causing its reported profits to fluctuate wildly even when no assets are sold.
Best known for its cryptocurrency trading platform, Coinbase is seeking to diversify its revenue streams through subscription and services businesses, including revenue from stablecoins and staking.
Stablecoin sales totaled $305 million, up from $274 million last year, driven by growth in the USDC stablecoin market cap and a record-breaking average of USDC held in Coinbase products.
The era of easy bargains and hype-driven returns in cryptocurrencies is coming to an end as exchanges increasingly focus on more diversified trading revenues derived from prediction markets and tokenized real-world assets rather than relying on more speculative investments.
“We’re trying to diversify the things that people can trade so that as markets change and behaviors change, we always have something that people want to trade,” Coinbase Chief Financial Officer Alesia Haas told CNBC. “This diversification will help curb some of the volatility we have seen in pure crypto trading.”
Investors are looking for signs that Coinbase can still make money as crypto trading declines. Central to these efforts is Coinbase’s success in strengthening non-transactional operations to offset the cyclicality of transaction fees during downturns.
Beyond crypto
While revenue and profit results fell short of expectations, Coinbase saw promising growth in its diversified offerings, including event contracts and support for trading crypto derivatives and tokenized real-world assets.
The company reported derivatives trading volume of approximately $4.2 billion in the first quarter, up 169% from the same period last year. Despite this year’s collapse in crypto prices, the exchange gained share globally in both spot and derivatives trading, reaching an all-time high market share of 8.6% in crypto trading volume.
Coinbase also predicted that its prediction market business would reach $100 million in annual revenue by the end of this year. The business segment was launched in collaboration with Kalshi at the end of January.
Moves to diversify away from crypto underscore Coinbase’s efforts to create an “everything exchange” – an initiative unveiled a year ago by CEO Brian Armstrong to make the company less dependent on trading tokens like Bitcoin, Ether and XRP.
During Coinbase’s management call with analysts at 5:30 p.m. ET on Thursday, investors listened in for updates on the trading platform’s margins and operational discipline following this week’s announcement that the company will cut about 14% of its workforce, or 700 jobs. Coinbase noted that the layoffs were part of a broader, AI-driven restructuring effort, citing the crypto downturn as a catalyst.
The job cuts underscored Wall Street’s expectations that subdued trading conditions could continue into the second quarter.
Read the full Coinbase shareholder slide Here.
Correction: This story has been revised to clarify that Coinbase’s CEO is Brian Armstrong. An earlier version misspelled his name.
